The value of a defence dollar
In late September, the federal government appointed Tom Jenkins as a special advisor to the Minister of Public Works and Government Services, Rona Ambrose, to help improve Canada’s defence procurement process.
That same day, CADSI gave him some ammunition with a study conducted by KPMG on the economic impact of the defence and security sectors in Canada.
According to Jenkins, the chief strategy officer of OpenText and the former chair of a government panel on R&D and innovation, his role will be to engage industry stakeholders “to develop criteria and a supporting process to inform the selection of key industrial capabilities.” He has invited MGen (Ret’d) David Fraser, Peter Nicholson, former president of the Canadian Council of Academies, Ray Castelli, CEO of Weatherhaven, and Christyn Cianfarani, director of government programs and R&D with CAE, to assist him.
CADSI’s report should make that job much easier. The KPMG study found a sizeable defence and security sector of about 2000 Canadian companies, almost half of which are CADSI members. The report, which captures a snapshot of defence and security activity in 2011, shows $7.9 billion of government spending in the Canadian sector and about $12.6 billion in revenue across the 2000 firms. Approximately half of that revenue (49%) came from domestic activity and the rest was from the export market.
“This sector, when it gets a buck at home, will generate a buck of export business,” said Mike Greenley, vice president international for General Dynamics C4 Systems and chair of CADSI’s board of directors. “That is key to the crux of the value of this sector.”
Greenley said that for every dollar invested in defence activity, 70 cents contributes to the gross domestic product, about $9 billion in 2011, and supports 109,000 direct and indirect jobs. Companies and their employees pay about $3 billion in taxes.
“When you take that and look forward…for every billion dollars we spend on Canadian industrial defence and security performers, we’re going to get $710 million in gross domestic product created; we’re going to cause another billion dollars in business from export; we’re going to create or sustain 18,000 jobs; and based on the taxes from the domestic and export activity, we’re going to kick back $428 million in government revenues. It’s a pretty powerful story.”
He added: “We’d like to shift that so that someday [when] we get a dollar of business at home, we’ll get two dollars of exports because we are increasingly working with government…to get that export upside.”
In 2011, about 50 percent of defence spending was in land operations. In terms of GDP contributions, the two largest sectors were in-service support and C4ISR. Armoured vehicles, a key component of modernizing the army, were third.
Greenley called the study a marker that will be repeated and improved “so that we can then measure what the impact and changes are to the defence and security sector overtime. Hopefully, as a result of doing this, we can assist the government on their drive toward a defence procurement strategy.”
Army capability modernization
Much of the media attention for army procurement has focused on new vehicles. But as LCol Greg Burton told an industry audience during a conference hosted by the London Economic Development Corporation in September, the army equipment program is so much more.
New vehicles such as the Tactical Armoured Patrol Vehicle, the Close Combat Vehicle and the Medium Support Vehicle System remain prominent; some are progressing smoothly while others have hit road bumps. But the major projects list goes well beyond vehicle fleets. Burton gave a partial list of projects either near approval or in the options analysis phase, including: Combat Net Radio; Medium Range Radar; Integrated Soldier System Project, which is in test and evaluation; Small Arms Modernization, Urban Operations Training System; and the Land Vehicle Crew Training System.
Looking further out, he highlighted projects that will be coming online soon, including a vehicle for enhanced recovery capability, a midlife upgrade to the WES system, secure waveform optimized radio for the dismounted soldier, 3D dismounted training system, armoured combat support vehicle replacement as well as modernization of capabilities such as joint intelligence, joint signal regiment, bridge and gap crossing, indirect fire, tactical parachute system and night vision system.
“We have a very active program and we are actively seeking the funding and the expenditure authority as quickly as we can,” Burton said. Industry will undoubtedly be watching closely.
Airbus Military signed an MOU with Discovery Air to provide in-service support for the C295 aircraft, should it be the successful candidate in the government’s fixed wing search and rescue program. Other members of the C295 team include Pratt & Whitney Canada, CAE, L-3 Wescam and Vector Aerospace.
The Canadian Army officially opened a new facility for the fleet of upgraded Light Armoured Vehicles (LAV) IIIs at CFB Petawawa. The $21.8 million, 9840 square metre facility will support day-to-day training and driver maintenance.
Despite fears to the contrary, the Canadian government is almost ready to contract with industry for the full-scale development of the Radarsat Constellation Mission, a three-satellite successor to the Radarsat-1 and Radarsat-2 Earth observation spacecraft, according to Steve MacLean, president of the Canadian Space Agency. MDA and Com Dev, the two principal contractors, had indicated layoffs would be imminent if there was no progress on the program.
The Integrated Soldier System Project (ISSP) recently wrapped up testing and evaluation at CFB Petawawa. The RFP for the ISSP closed in June. Selected companies showcased integrated suites of equipment, including weapon accessories, electronic devices, sensors, individual equipment and operational clothing. The RFP is to acquire up to 6,624 integrated suites over four years. A contract award is anticipated in 2013.
AgustaWestland marked 10 years of active service and 50,000 flying hours with the Royal Canadian Air Force for its fleet of AW101 Cormorant search and rescue helicopters. Jeremy Tracy, head of region for Canada, presented a certificate marking the 50,000 operating hours to LGen Alain Parent, the former Commander of 1 Canadian Air Division, just prior to his appointment as Deputy Commander of NORAD.
Boeing has selected General Dynamics Canada to provide Engineering Support Services on the CH-147F In-Service Support program. GDC was previously contracted to provide the Maintenance Training Suite/Contractor Maintenance Support package.
Richmond-based MacDonald, Dettwiler and Associates has signed two contract amendments with the Commonwealth of Australia, one to extend MDA’s Unmanned Aerial Vehicle surveillance service for the Australian Defence Force in Kandahar Airfield an additional two years .
Eco Waste Solutions signed a contract with the Canadian Forces to provide an ECO Mobile waste incineration system for rapid deployment to extreme climates, part of a logistic support plan for increased self-sufficiency within base camps.
Ottawa has extended Top Aces’ interim contracted airborne training services for a further three-year term, beginning in 2013. Top Aces, a subsidiary of Discovery Air, has been the exclusive supplier of fast jet and business jet airborne training services to the Canadian Forces since 2005. The program also supports army forward air controller training in close air support operations, and air force and aavy training in adversary support and live fire target practice.
Canada’s newest Leopard 2A4 tanks were on display at CFB Gagetown as members of the Combat Training Centre’s Armour School showcased the dynamic fire-power and mobility of the latest platform of the Armoured Corps. The government purchased the tanks from Netherlands in 2007 as part of a $650 million tank replacement project.
CAE has won military contracts valued at more than C$55 million, including a contract from Airbus Military to develop a C295 full-flight simulator (FFS) for the Royal Air Force of Oman (RAFO), a contract from BAE Systems to provide maintenance and support services for the Indian Air Force’s Hawk training devices, and contracts from the UK Ministry of Defence to upgrade C-130J and Lynx simulators.
The British Columbia unmanned aerospace sector received an R&D boost in the form of a $670,000 Western Diversification investment for the University of Victoria to undertake R&D to improve the safety, performance and affordability of unmanned aerial vehicles (UAVs) at a scale better suited to commercial, scientific and civilian use.