Aéro Montréal Seminar on Royal Canadian Air Force Defence and Major Projects

Speaking Points

The Honourable Navdeep Bains, PC, MP
Minister of Innovation, Science and Economic Development

Montréal, Quebec

April 3, 2017

Check Against Delivery

Good morning, and thank you, Hélène [Hélène V. Gagnon, Vice President, Public Affairs and Global Communications, CAE and Chair of Aéro Montréal’s Board of Directors], for that warm welcome.

It is always a pleasure to be in the heart of Canada’s dynamic aerospace sector.

Your industry plays a key role in our country’s economy, contributing $28 billion in economic activity every year.

And you create thousands of high-skilled, well-paying jobs.

Nationwide, the aerospace and defence sectors together contribute more than 240,000 jobs to the Canadian economy.

And you lead all manufacturing industries in spending on research and development.

The definition of innovation is continuous improvement to remain efficient and competitive.

That’s why Budget 2017 announced an investment of $1.26 billion to launch the Strategic Innovation Fund.

It will be available to aerospace and automotive firms.

And it will be expanded to allow other high-growth sectors to apply.

In effect, we’re extending our reach to all sectors to better reflect the diversity of Canada’s innovation economy.

In creating this fund, the government is looking to:

• support high-growth sectors in which Canada has world-class expertise;
• expand the role of Canadian firms in regional and global supply chains; and
• attract investments that create well-paying jobs.

The aerospace and defence sectors are well positioned to benefit from this fund.

That’s good news for Quebec’s aerospace industry.

This fund will allow companies in this province to continue collaborating with anchor firms such as Bombardier, CAE and Héroux-Devtek.

These companies are leaders in developing lighter, more energy-efficient and better-performing products.

These advances are shaping the future of the industry.

That’s why our government has introduced the Innovation and Skills Plan.

This plan will help Canadians hone the skills and get the training needed for the jobs of today and tomorrow.

It will ensure that Canadians thrive at every stage of their work lives, whether they are a recent graduate or in mid-career.

That’s how we can ensure that the next job is always a better job for Canadians.

In the aerospace and defence sectors, the government has additional tools to stimulate innovation and skills training.

I know many of you are familiar with the Industrial and Technological Benefits Policy, or ITB for short.

This policy requires companies that win major defence contracts to invest an amount equal to the value of the agreement back into our economy.

It’s an example of how government can use its enormous purchasing power in a smart way to support innovation as well as the start-up and scale-up of new businesses.

The investments made under this policy lead to companies employing highly skilled Canadians in well-paying jobs.

They support the research and development of new technologies.

And they provide opportunities for businesses to participate in the global supply chain for the aerospace and defence sectors.

That’s how defence procurement drives innovation.

And that’s how innovation leads to better jobs and better opportunities for Canadians.

Ladies and gentlemen, I’m an accountant by training, so I like to look at numbers.

So allow me to tell you a story about economic development using a few numbers.

Total ITB obligations are currently worth more than $41 billion.

And I’m delighted to report that all participating companies are meeting their obligations.

To date, more than 90 percent of obligations are either in progress or have been completed.

But that only tells part of the story.

Over the past 30 years, the ITB policy has generated nearly $40 billion in economic activity across the country.

Between 2011 and 2015, nearly 40,000 jobs were created or secured annually as a result of this policy.

Over the same time period, many contractors partnered with hundreds of small and medium-sized businesses.

These partnerships pumped $1.75 billion of work into the Canadian economy.

Other contractors invested $82 million in universities, colleges and public research labs.

Many of them are right here in Quebec.

Here’s one example: Many of you are familiar with Raytheon, the global aerospace and defence company.

Raytheon has made significant investments in projects involving both University of Sherbrooke researchers and a Toronto start-up as part of its ITB obligations.

The projects will advance research and development expertise in quantum key distribution systems.

I don’t know about you, but I’m no expert in the field of quantum mechanics.

What I know is that it’s the physics of how matter and light behave at the atomic and subatomic level.

I hope I got that right.

And this field has the potential to completely revolutionize everything we know today about computing.

That’s about all the science talk I will attempt today.

Ladies and gentlemen, the Government of Canada has changed how companies in this country benefit from defence procurement.

A key component of this is the Value Proposition.

The Value Proposition is the economic commitment made by bidders that is included in their proposals for contracts.

These considerations are now an important factor in the way the government weighs applications when it selects a winning bid.

The requirements for the Value Proposition differ from project to project. This lets us maximize the economic benefits from each procurement.

While the Value Proposition is still new, the early results, based on contracts that have been awarded over the past year, have been overwhelmingly positive.

More than half of the new ITB investments are directly supporting Canadian military projects.

And this number is increasing.

That means Canada is getting larger commitments upfront for research and development projects.

Canadian companies are getting export opportunities and are becoming a greater part of global value chains.

In short, we are seeing a fundamental shift in behaviour as a result of the Value Proposition.

That’s great news not only for Canadians working in this sector but also for the country’s economy.

Let me give you an example.

In December, the contract for the fixed-wing search and rescue aircraft was awarded to Airbus Defence and Space.

The Value Proposition for this project was structured to take advantage of Canada’s technological strengths in the aerospace sector on both its commercial and defence sides.

The proposition was also structured to ensure that the aircraft would be maintained in Canada by Canadians.

Airbus won the contract because its Value Proposition included strong partnerships with Canadian industry.

And it committed to business activities that would create well-paying middle-class jobs for Canadians.

Many of Canada’s top aerospace and defence firms are benefitting from the Value Proposition through opportunities to participate in global supply chains.

Some of them are in the room today.

For example, Pratt & Whitney Canada and Airbus are working together to develop a new engine variant for the fixed-wing search and rescue aircraft.

Meanwhile, CAE will deliver a full training and simulation solution to Canada in support of the program.

Airbus and CAE are also working together to provide simulation and training services and chase the global market for these services in both commercial and defence aviation.

Finally, Héroux-Devtek will provide maintenance, repair and overhaul services for the landing gears of the new search and rescue aircraft.

That’s a lot of spinoff activity for Canadian companies arising from a single defence contract.

Ladies and gentlemen, I’m pleased today to announce the latest investment being made under the ITB policy.

This $10-million investment is being made by Lockheed Martin Aeronautics in Mannarino Systems and Software.

Mannarino, an engineering firm based in this city, supplies mission-critical equipment to your sector.

Lockheed is making this investment as part of its ITB obligations for the in-service support of the transport aircraft known as the C-130J Super Hercules.

Among other things, this investment will support Mannarino’s efforts to develop its own proprietary software systems for aircraft.

Ladies and gentlemen, your industry is poised to benefit from a number of once-in-a-generation opportunities in the coming years.

One of them is the potential purchase of 18 Super Hornet aircraft—and its in-service support program.

Last month, our government announced that the ITB policy would apply to both the acquisition and support of this aircraft.

The discussions that we are having with the prime contractors, Boeing and General Electric, will secure opportunities for Canadian industry to participate in this project.

As well, we will conduct an open and transparent competition to find the permanent replacement for the CF-18 fighter jets.

Finally, the Government of Canada will soon release a new defence policy.

It will outline the level of investment required to ensure that our armed forces have the state-of-the-art equipment to fulfill their missions at home and abroad.

Ladies and gentlemen, the potential is enormous for the ITB policy to drive innovation across all sectors of our economy.

Now is the time for you to forge partnerships with one another and to be ready to seize the opportunities that will create the next generation of aerospace and defence suppliers.

That’s how defence procurement drives innovation that leads to better jobs and opportunities for all Canadians.

Thank you.