The Harper government is being urged to build more major military acquisitions from scratch in Canada rather than going abroad to buy from foreign suppliers.
A new report prepared for the Conservatives by high tech executive Tom Jenkins calls for Ottawa to take a more Canada-first approach to buying military equipment.
Aside from a huge shipbuilding outlay in recent years, the “Canada First” report says, “there is no evidence to substantiate that Canada has exercised the ’design and build at home’ option for a major platform over the last 50 years.”
Canada is planning to spend $240-billion over 20 years on defence and security procurement and the Tories are trying to use this budget to craft a military industrial policy.
The Jenkins report recommends Canada devote more military procurement dollars to “developing an original product domestically” or “adapting an existing product to Canada’s needs.”
The proposal is certain to draw criticism that the Conservatives are using public funds to pick winners in the private sector – an approach that more laissez-fare advocates would say will mean more costly military buys.
The “Canada First” Jenkins report urges the federal government to funnel as much procurement spending into creating leading companies in six areas: arctic and maritime security; soldier protection; command and support; cyber security; training systems and in-service support of military equipment.
Military suppliers should be required to demonstrate how they would help build up these key industrial capabilities in Canada before winning defence procurement deals from Ottawa, Mr. Jenkins is recommending.
The Conservatives are trying to craft a defence industrial policy for Canada that harnesses military and security budgets in the service of jobs and economic growth.
Foreign companies play a large role in supplying Canada’s military needs yet in the past 30 years this country has shied away from using defence policy to promote and build domestic industries.
In the case of major equipment buys, for instance, it has often relied on foreign contractors to share work with Canadian firms in exchange for winning the job. This has had mixed results and in the worst cases, government officials joke, Canadians have been left with menial work such as building the hangar for airplanes or supplying the fuel to fill a vehicle’s gas tank.
The Harper government’s looking to change this, and will use the advice from Mr. Jenkins, executive chairman of OpenText Corp, to develop a military purchasing strategy that funnel as many procurement dollars as possible to domestic firms with the potential to be leaders in their field.
European and U.S. defence suppliers are believed to be stepping up their efforts to sell military goods to Canada now that military spending in the United States and the European Union membership is squeezed by hefty deficits and staggering debt.
Mr. Jenkins’ report Tuesday noted that the United States’ $700-billion defence budget is expected to be cut by more than 30 per cent as Washington tries to repair its red-ink soaked books. The Jenkins report also calling for Ottawa to be far more direct and up-front about what sort of spin-off benefits it expects for domestic businesses from the major defence contracts – referred to as industrial-regional benefits– Canada expects from military suppliers.
The Canadian government has until now tended to wait too long to negotiate the industrial benefits from military contracts, only finalizing them after it’s picked a supplier.
Mr. Jenkins is building on a different report headed by former Harper government cabinet minister David Emerson last November called on Ottawa to extract clear industrial benefits while it’s still holding all the cards.
“Negotiating clearer, more specific industrial and technological benefits plans earlier in the procurement process – when the government’s leverage is greatest – will almost certainly produce quicker and more tangible results,” the Emerson report on aerospace and space sectors recommending last fall.
In recent years Ottawa has been inundated with ideas on how to build its industrial base using defence spending, including contracting out more of the billions of dollars of research and development the federal government conducts in-house.
This new approach, which Ms. Ambrose has championed throughout government, has its risks and its critics. Some Department of National Defence officials worry it will end up adding costs and delays to military spending. Others in the Industry department feel the current system of extracting spinoff contracts from foreign suppliers is adequate.
Over the past five years, though, the Harper government has become more focused on protecting and fostering a home-grown expertise in defence and security technology. It is an evolution in thinking for the Conservatives, who have tempered their laissez-faire approach to business since they took office.
In 2008, for instance, the Tories blocked the sale of MacDonald Dettwiler and Associates Ltd.’s space technology division to Minneapolis-based Alliant Techsystems Inc., saying the unit was of strategic interest to Canada.
In 2011, the Tories unveiled a 30-year plan to build the next generation of military and government research vessels in Canada, a long-term commitment to support jobs and talent in shipyards .
Ottawa’s been advised to adopt a Canada-first procurement strategy as a means of levelling the playing field for Canadian companies who find themselves competing globally for business against foreign firms that enjoy strong and steady support from their respective governments.