The benefits of strategic Canadian defence procurement to Canada can and should be significantly higher if Canada treats its defence procurements and Canadian defence industrial sector more strategically.
The first two benefits are fundamental needs for Canada’s population – namely sovereignty and security.
Sovereignty refers to the ability of Canada to act completely independently of other nations in its own decision making. In areas that are strategically interesting to Canada’s sovereignty, it simply makes sense to sustain a strong Canadian industrial capability to support Canada’s operational security and defence forces. For example, the ability of Canada to monitor its own territory and the maritime regions around its territory (including the Arctic) is a fundamental capability that enables Canada to make not only security and defence decisions but also to provide support to other applications such as environmental monitoring, transportation and navigation, and natural resource management. Most Canadians would agree that relying on other nations to monitor Canada’s territory is not in Canada’s best interest.
Security is the second fundamental need. The global threat situation today has changed significantly in that threats are far less predictable and can manifest themselves against Canada in many more ways than during past eras. Imagine a case where Canada’s security relies on a technology where the industrial decision making is made in another country such as France, Germany or even countries that are less friendly to Canada. A decision made by corporate decision makers in Ottawa, Toronto, Vancouver, Montreal, Halifax, Calgary, Edmonton or any other Canadian city is much more likely to align with Canadian security interests than a decision made overseas.
For most Canadians, sovereignty and security are relatively easy benefits to understand. Economic benefits are much more difficult to quantify and yet can have very large, multiplicative impacts to Canada and, ironically, save a great deal of money in the long-term for Canada. However, these benefits all come down to a single criteria and that is export. Virtually without exception, long-term economic benefits to Canada from Canadian government procurement rely on the industrial sector’s ability to not only sell to Canada but then resell and continually develop the capability based on a strong and sustained export business.
Once a company or industrial sector in Canada has established a sustainable export business from Canada, the benefits to Canada start to pile up:
• Jobs – clearly direct jobs are created from the original Canadian government procurement; however, many, many more indirect jobs are created based on export business. In critical technology areas to security and sovereignty, the jobs created are highly skilled jobs which in turn create many indirect support jobs both in the industrial sector and in supporting industries such as transportation, infrastructure, etc.
• Supply Chain – Canadian companies that are building in Canada and exporting from Canada are far more likely to buy from and support the development of small and medium sized companies in Canada in their supply chain.
• Innovation – once an export business is established, those international customers demand improvements to products from Canada. This drives innovation which both improves the existing products but also creates spin-off products which, in turn, can create additional export businesses. The innovation snowball starts to roll and simply gains more and more momentum.
• Education – demand for jobs, supply chain and innovation drives the need for more and higher quality education. Better education benefits all Canadians in that it creates a higher standard of living and more and better opportunities for all Canadians.
• Cost Effectiveness – ironically a surprising side effect is that Canada’s long-term costs for technologies and capabilities that come from Canadian industrial sectors with strong export businesses are often cheaper and of higher quality for Canada as the development, sustainment and maintenance costs are now born not only by Canada but also by a broader base of international customers.
There are a number of well-known Canadian companies that have generated numerous successful examples representing the broad suite of benefits listed above. Examples come from all over Canada and include CAE, MDA, Bombardier and Provincial Aerospace.
Let’s take a little known but amazing example from MDA. Headquartered in Vancouver, MDA is a true Canadian company that started in the late 1960s in John MacDonald’s basement (John is the “M” in MDA). From those small beginnings, MDA has grown to have approximately 4,500 employees worldwide with revenues of approximately $1.8 billion. MDA builds a broad range of operational high technology solutions in communications, surveillance and intelligence for both government and commercial markets.
In 1971, MDA won a small contract (no one really remembers how much but likely between $1 and $2 million) for an Earth imaging satellite ground station for the Canadian government. Fast-forward 40 years, Canada’s Department of National Defence has bought another ground system from MDA under a project called Polar Epsilon. Polar Epsilon is the critical Canadian infrastructure that receives and processes data from Canada’s RADARSAT satellites to provide broad monitoring of ships approaching Canada. Most notably, Polar Epsilon detects those ships that are NOT transmitting the required reports and hence may well have less-than-admirable intentions. This capability enables National Defence and other agencies involved in maritime security to respond more quickly as required.
Most Canadians would agree that this capability benefits Canada’s security and is an ideal candidate over which Canada should maintain sovereign control through the Canadian industrial sector.
However, the benefits of that small Canadian government contract in 1971 go well beyond security and sovereignty. From that early contract, MDA has built a significant, long-term (more than 40 years) global leading business selling Earth imaging satellite ground systems to customers and countries all around the world. These ground systems are used not only for defence and security but for many applications that benefit people all around the world including environment, agriculture, natural resources, disaster management and response and land management. The export revenues accumulated by MDA from this business total well over $1 billion with 100-150 sustained direct jobs and many more indirect jobs. From this small start, MDA has grown numerous other successful export-from-Canada businesses, many with Canadian government initial procurements, to where it is today as a globally leading company still headquartered and based in Canada.
Canada needs to build more MDAs. So how to do that? The new Defence Procurement Strategy (DPS) announced on February 5, 2014 is a good start. Based on the DPS, Canada needs to select those Key Industrial Capabilities (KICs) that strongly contribute to Canada’s sovereignty and security and also have significant export potential. By procuring these KICs in a strategic manner from Canadian industry, Canada not only meets its sovereignty and security needs but also forms foundations for long-term, sustainable growth export businesses that result in almost immeasurable multiplicative benefits for all Canadians.
While the key objective is export, the key criteria for export success is strategic decision-making in Canada. The Canadian government should build capability and processes to work with the Canadian industrial sector at a strategic level to select the KICs and structure Canadian defence procurements to strategically support and grow those KICs. Lastly, the Canadian industrial sector should be defined by those companies that make their strategic decisions in Canada and have the infrastructure, human resources, networks and expertise to export from Canada to customers around the world. By following this approach, more companies like CAE, MDA, Bombardier and Provincial Aerospace can be built for the benefit of all Canadians.
David Hargreaves is vice president of Surveillance and Intelligence for MDA.
