As a prosperous and stable country, Canada faces few direct security threats either internally or from overseas. Canadian foreign and security policy is focused on the promotion of international peace and stability through the fulfilment of its commitments to NATO, the United Nations, and other multilateral bodies. The government regards a stable world order as central to the physical security of Canada and essential for the domestic prosperity of a country heavily dependent on international trade, especially with the United States.
Canada’s defence industry is extensive, although indigenously owned companies tend to be small and medium-sized enterprises (SMEs). This can be attributed to the extensive acquisition of larger Canadian firms by major international companies and the resultant influx into the country of their subsidiaries . Conducting business in Canada is generally straightforward, given the mature and stable nature of the country, although defence market entrants may face some challenges.
The strategic military investment plan detailed in 2008’s Canada First Defence Strategy document was aimed at eradicating funding shortfalls experienced in the past and recapitalising the military.
However, the plan’s ambitious proposals were modified as a result of funding constraint during the global economic downturn and expenditure is now not expected to substantially recover until 2017, leaving the solidity of procurement plans in some doubt. Procurement has not always proceeded smoothly and the government has faced criticism over transparency, cost increases, delays and uncertainty on a number of projects. The release of the country’s Defence Procurement Strategy in 2014 was designed to address these problems, as well as to respond to input from industry. Part of the new strategy was the introduction of an annually published Defence Acquisition Guide (DAG), which details Canada’s expected requirements and ongoing acquisition programmes. DAG is due to be released in May at CANSEC 2015 in Ottawa.
The Canadian approach to offset also changed significantly in 2014 with the shift from Industrial Regional Benefit (IRB) programme to a one based on Industrial and Technology Benefits (ITBs).
While the Canadian economy has benefited from the IRB, the policy had been criticised by industry for lacking flexibility. Under the ITB Policy, winners of defence contracts are obliged to ‘undertake business activity’ in Canada, the value of which must be at least the same as the value of the contract awarded. Although procurement expenditure is expected to remain flat until after 2017, Canada is still currently investing substantially in new and upgraded military capabilities across all three of its armed services. Programmes are under way for new aircraft, armoured vehicles, and naval vessels.
Major procurement programmes
Canadian Surface Combatant The Canadian Surface Combatant (CSC) programme will replace the navy’s three Iroquois-class destroyers, which entered service in 1972-73 and reached the end of an extended service life in 2012, and the 12 multirole Halifax-class patrol frigates, which are currently undergoing major modernisation and are projected to reach the end of their service lives in 2020.
The CSC project stems from the navy’s earlier Single-Class Surface Combatant study. The first ships to be built will replace the Iroquois class destroyers in the command and control and area defence role.
At a later stage, a general-purpose variant will be built to replace the Halifax-class frigates.
Joint Support Ship Intended to replace the navy’s two ageing Protecteur-class auxiliary oiler replenishment vessels, the Joint Support Ship (JSS) will combine core afloat replenishment capabilities with additional capacity for sealift and logistic support to forces ashore. Impetus was added to this procurement following a serious fire aboard HMCS Protecteur in early 2014, which may lead to the vessel’s early retirement. The two ships – with an option for a third – are classed as non-combat vessels under the government's NSPS. Their primary role will be to support the navy’s task groups.
While the ships will be built by Vancouver Shipyards, their design will be provided by ThyssenKrupp Marine Systems Canada, which is modifying its German Navy Type 702 Berlin-class design baseline to meet Canadian requirements.
The government previously announced that it expects to award a production contract in 2016. Full operational capability for both vessels is projected from 2020.
CF-18 Replacement Project In 2002 Canada became a Level 3 partner in the US Lockheed Martin-led Joint Strike Fighter (JSF) programme and in 2006 it signed the Production Sustainment and Follow on Development (PSFD) Memorandum of Understanding (MoU). However, in 2012 Canada’s auditor general Michael Ferguson issued a highly critical report of the programme’s decision making and cost-control. In the wake of the report responsibility for the replacement fighter programme was transferred from the Department of National Defence to a new F-35 secretariat in the Department of Public Works. In January 2013, Canada decided to ‘reset’ the NGFC project, funding was frozen and a review of the potential alternatives was initiated.
Part of the plan to move forward with replacing the CF-18 includes commissioning an independent review of the government’s fighter acquisition processes so far.
Boeing, Dassault, and Eurofighter have all approached Canada to offer alternatives to the F-35. The programme was included in the Defence Acquisition Guide 2014 with an anticipated final delivery period of 2026 to 2035.
Fixed-wing search and rescue aircraft The Fixed Wing Search and Rescue (FWSAR) programme aims to replace the Canadian fleet of DHC-5 Buffalo transport aircraft which were initially earmarked for retirement in 2010 as part of the official Canadian DND aerospace capability plan.
A FWSAR project office has been established in order to facilitate the acquisition and in 2004 a Statement of Requirements (SoR) was drafted. The programme was subsequently delayed by more pressing needs within the defence budget such as the conflict in Afghanistan and large acquisition programmes such as the C-17 and 130. A draft request for proposals (RfP) was released in August 2013 and the final RFP was expected to be published in 2014. However, further delays pushed the final document release back to 31 March 2015. Alenia’s C-27J and Airbus C-295 remain the two most likely contenders for the requirement although Viking Air with the DHC-5 Buffalo and Bombardier with the DHC-8 remain interested in the programme. The total cost of the programme is expected to be over CAD1.5 billion, although support agreements are likely to push the potential contract value closer to CAD3 billion. The programme was included in the Defence Acquisition Guide 2014 with an anticipated final delivery period of 2021-2025.
Source: IHS Jane’s Navigating the Emerging Markets Series. For more information please go to www.ihs. com/products/janes-emergingmarkets- intelligence.html