Policy
December 13, 2012

Industrial and regional benefits: Helping the defence industry in the global marketplace

The environment in which Canadian firms do business is ever-changing. Companies are facing increasing competition to improve production and invest in innovation. Canada’s Industrial and Regional Benefits (IRB) policy assists Canadian industry in meeting these challenges and helps them succeed in the global marketplace.

Most other countries of Canada’s size and position in the defence and security marketplace have similar requirements for industrial participation, referred to as “offsets.”  

Canada’s approach to industrial benefits is focused on providing business opportunities for Canadian firms. Businesses, many of them small- and medium-sized enterprises (SME), want to grow and become globally competitive.  Government defence and security procurement typically obligates contractors to engage in activities with Canadian industry to promote domestic capabilities and competitiveness. The IRB policy requires contractors to place business activities with Canadian firms of equal value to the purchase contract.  

Over the past decade, more than $20 billion of new government defence and security contracts have included IRB obligations. These large commitments facilitate competitive opportunities for Canadian firms and encourage partnerships with defence contractors. With planned new procurements for navy projects in particular, the IRB portfolio could double in the next several years.

 The IRB policy approach has the following key characteristics:

•    Market-driven. Defence contractors are encouraged to find business relationships that make sense for both sides – the contractor and the Canadian firm receiving the work. In this way, the industrial benefits can be long-term, sustainable and founded on sound business principles.   

•    Promotes value-added activities with Canadian firms. The policy, through its focus on innovation, encourages defence contractors to provide valuable supply chain and export opportunities to a Canadian firm.

•    SME focused. Over 300 SMEs across Canada have received IRB work, representing about one third of total recipient firms. Defence contractors are required to submit plans on how they will work with SMEs when bidding on government contracts. Those plans then become part of the contract for the winning defence contractor. This approach is intended to open new business opportunities for Canadian firms, which can translate into long-term supply arrangements.

•    Regional focus. To balance work across Canada, the policy encourages capabilities that exist in various regions across the country to be reflected in the business activities. For example, large amounts of aerospace activity take place in Ontario and Québec, as well as across the West and Atlantic Canada.    
 
•    Successful in having defence contractors fulfill their obligations. More than 75 percent of the required business activity (by value) has occurred or is underway and the balance is being identified. Canadian companies are reaping the broad economic benefits of the policy’s approach that focuses on sustainable, long-term outcomes. This level of business activity also reflects the capabilities of Canadian industry to provide goods and services that are globally competitive.

As the aerospace and defence industry evolved over the years, so too did their needs. The IRB policy has adapted to meet these changing dynamics. In 2009, the government announced enhancements to the policy to encourage more strategic investments and higher quality outcomes. New measures also provided contractors with the time, flexibility and incentives to develop these types of activities. For example, the policy encourages defence contractors to make investments into the creation of public/private consortia for research development through incentives.  

Canada’s IRB policy is focused on supporting industry, ensuring it continues to adapt to the changing nature of the defence sector, while promoting long-term economic benefit for Canadian companies.

This article was written by Industry Canada’s Industrial and Regional Benefits Branch.

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