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Ottawa urged to demand more from defence contractors

Tom Jenkins, shown in 2008 as executive chairman of OpenText Corp., now also serves as a special adviser to federal Public Works Minister Rona.

Jim Ross/The Globe and Mail

Military suppliers should be required to demonstrate how they would help build up key industrial capabilities in Canada before winning defence procurement deals from Ottawa, a special adviser to the Harper government is recommending.

High-tech luminary Tom Jenkins, now serving as a special adviser to federal Public Works Minister Rona Ambrose, is tabling a report in Ottawa Tuesday morning that will help the Conservative government craft a defence industrial policy for Canada – one that harnesses military and security budgets in the service of jobs and economic growth.

In the future, Mr. Jenkins is recommending, Canada should make defence purchasing decisions that help promote and develop domestic expertise in the following "key industrial capabilities": Arctic and marine security; protection of the soldier; command and support; cybersecurity; training systems; and in-service support.

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The Jenkins report also calls for Ottawa to be far more direct about what sort of spinoff benefits it expects for domestic businesses from the major defence contracts – referred to as industrial-regional benefits – that Canada expects from military suppliers.

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 companies 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 Canada-first military purchasing strategy that funnels as many procurement dollars as possible to domestic firms with the potential to be leaders in their field.

Canada wants to be smarter about backing Canadian industry, where possible, as it spends about $240-billion over the next 20 years on military acquisitions.

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.

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.

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Mr. Jenkins is building on a different report headed by former Harper government cabinet minister David Emerson last November that 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 recommended 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 homegrown 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.

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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.

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About the Authors
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

Parliamentary reporter

A member of the Parliamentary Press Gallery since 1999, Bill Curry worked for The Hill Times and the National Post prior to joining The Globe in Feb. 2005. Originally from North Bay, Ont., Bill reports on a wide range of topics on Parliament Hill, with a focus on finance. More


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