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OTTAWA — Canada’s new defence industrial strategy won’t apply to the multibillion-dollar procurement process for new fleets of submarines and fighter jets the government is contemplating, The Logic has learned, despite the generational consequences of those decisions.
Those procurements started before the strategy’s release on Feb. 17 and are exempt from the framework it lays out, Nicole Allen, spokesperson for Public Services and Procurement Canada, the department housing the new Defence Investment Agency, told The Logic.
The finalist bidders in both competitions are all foreign—American and Swedish jet makers, South Korean and German submarine companies. But Sweden’s Saab is openly promising to make its jets in Canada and Germany’s TKMS is publicly offering to build at least one shipyard in Canada and teach Canadians how to make submarines; neither of their competitors is doing the same.
Talking Points
- Because the defence industrial strategy came out just last week, well after Canada solicited bids to supply a new fleet of submarines and started rethinking its purchase of U.S. F-35 fighters, the strategy won’t apply to those multibillion-dollar purchases
- In the future, procurements will say up front whether Canada wants bidders to promise domestic production, the government has told The Logic
Though the defence industrial strategy prizes such partnerships, it won’t play a role in Canada’s decisions about the bids.
Industry Minister Mélanie Joly has for months been prefiguring the strategy’s “Build-Partner-Buy” framework. If Canadian industry can meet a military need itself, the government will prefer that; if foreign manufacturers can be convinced to set up shop here, that’s second best; only if necessary will Canada buy military weapons and vehicles and other gear from foreign factories.
Germany’s TKMS and South Korea’s Hanwha are competing to supply the Canadian navy with up to a dozen new submarines. Although both have had teams criss-crossing Canada announcing deals with domestic vendors, TKMS has emphasized that its offer includes building subs at a new Canadian yard if Canada wants that, bringing Canada into an existing submarine-making club with Germany and Norway.
Hanwha promises to teach Canadians how to maintain its subs at home, but the company’s production is in South Korea.
When it comes to new jet fighters, meanwhile, Canada is pitting U.S.-based Lockheed Martin against Sweden’s Saab as it reconsiders its previous commitment to buy 88 American F-35 planes.
Lockheed’s main F-35 production line is in Texas; Canadian companies contribute to the supply chains that run through that factory, but there’s no talk of opening one north of the border. Canadian production is a cornerstone of Saab’s pitch for its Gripen jets. Canada would get planes out of that deal—and the nucleus of an industry capable of making more.
The defence industrial strategy seeks to head off such mismatched bids for future purchases by telling potential vendors what type of bids they should present.
“At the start of all new procurement processes, the Defence Investment Agency will determine the procurement approach based on the [strategy’s] Build-Partner-Buy framework,” Allen told The Logic. The agency will consult with industry, but it’ll make up its own mind about what it thinks is possible before soliciting bids.
Jeffrey Collins, who studies military procurement as a political science professor at the University of Prince Edward Island, said he expects the agency will put the “Partner” category to work in a big way.
“The [defence industrial strategy] is upfront that developing domestic capabilities will take time and I think—just my own opinion—that the ‘Partner’ part of the equation will be instrumental here in enabling more options in the long term for the ‘Build’ side,” he wrote in an email.
The potential weakness of the approach is that the government might not know what the possibilities are, said military procurement and innovation researcher Alexander Salt, of the Canadian Global Affairs Institute. “Allowing bidders to propose domestic production as part of their submissions could surface options that the government might not anticipate in advance,” he added.
By deciding from the beginning that something will be a “Buy” deal instead of a “Partner” one, Canada won’t find out whether bidders might be willing to move production into Canada under the right conditions, Salt said, adding that this was a result of choosing to put industrial considerations at the start of the process.
