CANSEC 2015

Speaking Notes for The Honourable Diane Finley, PC, MP
Minister of Public Works and Government Services

Ottawa, Ontario
May 28, 2015

Check against delivery

Thank you, Eduardo, for that kind introduction.

Hello folks!

It’s great to be back at CANSEC.

Before I begin, I’d like to thank CADSI for putting on another great event this year. I’d also like to thank Airbus and L3 for sponsoring this luncheon.

I would also like to take this opportunity to recognize Christyn Cianfarani, and the CADSI Board of Directors, for all their hard work and for continuing to be an invaluable resource to me and my office.

It’s my second time here and this time around I was hoping to do something special.

The traditional gift for first anniversaries is paper but I think between all the LOIs, RFIs, RFPs, RFREs… we’ve exchanged quite enough paper over the last year.

The alternative gift for this anniversary is a clock but I didn’t think that would go over well either.

So, I thought maybe we could do something fun. I was hoping we could all watch Pentagon Wars together. For those of you who haven’t seen it, it’s a film about what happens when someone tries to challenge the entrenched bureaucracy surrounding military procurement.

Sadly, my staff objected. They said it is too close to the truth to be funny.

I understand; sometimes I feel the same way about Yes, Minister.

But seriously folks, it’s been a busy year.

We’ve got a lot done and there’s a lot more coming down the pipe.

Last year, I spoke about our Government’s Defence Procurement Strategy—the most significant transformation in the area of defence procurement in the last 30 years. You heard me say that changing the conversation is not enough; we have to change the outcomes. And it is outcomes that I want to focus on today.

Over the past year, we have been applying DPS to a number of procurements that were already partially underway. We’ve made some decent progress there, but the real opportunity to change outcomes is at the very front end of new procurements.

It all begins with the established Defence Procurement Secretariat which is, in a way, a clearing house for expediting military procurement while achieving better economic outcomes for Canada. It is the job of the Secretariat to start the discussion by asking two key questions.

First—What are the outcomes we want to achieve? That question is answered by determining what key industrial capabilities we want to stimulate and identifying what work can and should be done in Canada. Second, what tools should we use to achieve those outcomes?

These questions—and more importantly, the answers to those questions—will then impact a number of downstream issues, including the procurement strategy.

Today, I would like to discuss the DPS in the context of a very important and practical case study—the Canadian Surface Combatant project. For those of you involved in this project, you will hear some information that may help your early thinking on how to structure your bids. For Canadian SMEs you will learn how to get involved and take advantage of this opportunity. And for those not involved, you will learn a greater appreciation for what our government values when structuring your bid on other procurements.

So, we’ll all learn a little something.

Right now, we are at the beginning of the biggest procurement in Canadian history—the Canadian Surface Combatant Project. To put it in context, this is the largest shipbuilding program currently underway anywhere in the world. It is a once in a lifetime opportunity for government, in partnership with industry, to facilitate significant, long-term investments in Canada.

So, today I’d like to give you some insight into our early discussions about the outcomes we’d like to achieve. Before I begin, I want to be clear that we are in the early stages of this process and our viewpoints will evolve overtime.

I think it’s important to start by telling you who is at the table for these discussions. By knowing who is at the table, you will get a feel for the kind of investments we value. None of these will be a surprise to you.

You’ve heard me say it before: companies that demonstrate a willingness to invest in Canada through the transfer of intellectual property, the creation of skilled jobs, innovation-related activities and export and international business development, will now have a competitive advantage when bids are evaluated.

Of course, as our client, the Royal Canadian Navy will always be at the forefront of these discussions. And, as you would expect, we have key officials from Industry Canada, Public Works, International Trade and National Defence at the table.

We are supplementing their expertise by bringing in partners from organizations like the Canadian Commercial Corporation, Defence Research and Development Canada, Sustainable Development Technologies Canada and the Regional Development Agencies. We also have your industry association representatives at the forefront of the discussion. Their collective work will ultimately be supplemented by a defence analytics capability which was funded by our Government in Economic Action Plan 2015.

Together, and led by Industry Canada, the process is underway to gather all of our collective data to really determine where Canadian capability or the potential for Canadian capability exists.

 Now we want to be careful to manage expectations here. DPS was never intended to create new capability in Canada when the global market is not big enough and the cost of doing so would be prohibitive. The goal is to support or create a domestic capability that is sustainable in the long term.

Identifying existing Canadian capability, potential Canadian capability, and global defence market opportunities will be crucial in making these key decisions.

And, at the end of the day, because we want to incentivize bidders to maximize their Canadian industrial output and grow the number of Canadian companies in your supply chains, we will share this data with you as it becomes available through our scheduled Industry Days.

That work is ongoing but here is a glimpse of what we know so far. When we’re talking about direct investments and work in the Canadian marine sector, there is a lot of expertise or budding expertise already in place. As a starting point, we’ve identified strong national capability in the following fields:

  • Sonar, acoustics and antisubmarine sensor systems;
  • Navigation and communications systems;
  • Control systems;
  • Combat systems management, integration and testing;
  • Training systems, learning environments and courseware;
  • Integrated logistics support and life cycle management; and
  • Maintenance, repair and overhaul.

Let’s consider some other key investments that we value. I know what I’m about to say is a sensitive topic, but I will tackle it anyway.

Intellectual Property is a critical enabler of long-term, high-tech and high value opportunities - not only in acquisition, but also for the purposes of in-service support. The simple fact is that work performed in Canada that does not include the transfer of IP is just not sustainable in the long-term.

That is why I can safely assure you that IP transfer will form part of this project. IP transfers can take various forms—through a purchase, transfer from a parent to a subsidiary, joint venture and shared royalties—there are lots of ways to achieve this. We will also encourage firms to take a hard look at emerging technologies in Canada.

There will be a big emphasis on export opportunities. Again, our goal is to identify opportunities that are sustainable for the long term. That’s why markets matter.

It will make sense for you to look for strong, export ready partners that can contribute to the Canadian economy beyond the end of the project and whose value chain benefits will remain in Canada.

Regional development opportunities also remain a priority under DPS. RDAs will take a hard look at determining whether it makes sense for Canadian companies, who have commercial quality products, to expand their product base to military applications. RDAs are also an excellent resource for Canadian SME’s that are interested in being part of this project.

Finally, research and development investments will be a core part of the CSC project. OEMs should not be only looking at technologies that currently exist in Canada but should be considering how targeted investments in R&D can allow the development and incorporation of new and potentially disruptive technologies and processes.

Given that the CSC work will last for a generation, there is a lot of opportunity here for creativity—especially where new technology can lead to improvements in operational effectiveness and cost reduction over the life of the build. And while we will work to maximize direct work in Canada on the project, there will be opportunities for investments in technologies with dual applications to support work in adjacent markets.

I know that is a lot to take in. But this exemplifies how DPS will work in practice. In order to demonstrate our commitment to this, weighted and rated value propositions will be a key component in this procurement.

And it should be made clear that value propositions are only one tool we have to meet the outcomes we will set. We will also get there by using mandatory requirements and Canadian Content Policy where it is appropriate.

In the end, this is a $26 billion investment on the part of taxpayers. And they have every right to know that we are getting what our troops need, at the best value, while creating jobs and economic growth here at home.

In equipment alone, our Government is investing $240 billion dollars for the Canadian Armed Forces.

As my colleague, the Minister of National Defence, has pointed out National Defence spending increased from $14.5 billion in 2005-06 to $20.1 billion in 2014-15, on a cash basis.

That represents a 38% increase!

But, it’s not only about what we’re spending, it’s what we’re doing.

Military procurement is a tough business.

I am not going to pretend, pardon the expression, that it’s all smooth sailing.

But, the bottom line is that our Government is delivering.

This year, 2015, will be a great one for our men and women in uniform and for our defence and security sectors.

Our Government will be awarding contracts for military equipment, large and small, for use in the air, on the ground, and at sea.

We will also be receiving equipment for both the Canadian Coast Guard and the Canadian Armed Forces.

This spring we will be starting the first phase of the Integrated Soldier System Project, we will move forward with the contract for Medium Range Radar project, and will receive the prototypes of the new Ranger Rifles.

We will put the final piece of our Medium Support Vehicle System project in place. With “Militarized” Commercial Off-The-Shelf trucks; Special Equipment Vehicle Shelters; and related shelter kitting all contracted for, and intend to advance the remaining component 1500 Standard Military Pattern vehicles, this summer.

In March, the RCAF accepted delivery of its fifth C-17 Globemaster and in June, we expect to accept delivery of the first ‘Block 1’ C-148 Cyclone Maritime Helicopters! The arrival of these helicopters will enable the RCAF to train their pilots and technicians. And, it will mark the beginning of the long awaited retirement of the Sea Kings.

The Canadian Coast Guard is also receiving much needed equipment. In April, my colleague, Minister Denis Lebel, announced the award of a contract for seven Medium-Lift Helicopters. And, this spring, we will see the delivery of the first Light-Lift Helicopter and move forward with the requirement for new Search and Rescue Lifeboats.

Speaking of shipbuilding, two more Halifax-Class frigates will complete their mid-life refit and we will cut steel on both coasts—on the Arctic Offshore Patrol Ships in Halifax and the Offshore Fisheries Science Vessels in Vancouver.

And it doesn’t stop there. I can assure you that this fall is going to be just as busy!

The Request for Proposals for Fixed-Wing Search and Rescue Aircraft and Headquarter Shelter Systems will close. The Request for Proposals for Contracted Airborne Training Services and Canadian Surface Combatants will be opened.

And finally, I’d like to announce one more piece of great news for your industry.

Last year, I announced that we had amended the Schedule under the Defence Production Act so that the list of items controlled in Canada is aligned with those covered under the US ITAR Munitions List.

But, we’ve gone one step further.

Today, with a continued focus on supporting the competitiveness of Canadian industry, I am very pleased to announce that there will be no user fee imposed on you this year.

As you can see there are a lot of great opportunities for businesses in the defence and security industries on the horizon.

And I hope you will seize these opportunities and, by doing so, create jobs, growth and economic prosperity here in Canada.

Before I close, I’d like to thank you for continuing to work with us as we move forward on the Defence Procurement Strategy and many other files.

We know that engaging early and often with you, industry, is best way to achieve our goals and I look forward to our continued partnership.

Thanks again for having me here today.

Associated Links