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Canadian Defence Review

May 25th, 2016

CANSEC 2016: defence stakeholders gather at “critical” inflection point

Defence stakeholders congregated in Ottawa in late May for CANSEC 2016, the sector’s largest annual trade show. The sold-out event, which gathers top public officials, personnel and businesses, took place amidst speculation about Canada’s Defence Policy Review, which is expected to culminate in a report later this year.

Christyn Cianfarani, president of the Canadian Association of Defence and Security Industries, which organizes CANSEC, isn’t taking any chances. During what she calls a “critical,” time in the industry’s future, Cianfarani, the event’s most visible presence, leveraged the media attention it generates, to announce results of The State of Canada’s Defence Industry 2014, a report about the sector’s economic heft. This included a $6.7 billion contribution towards Canada’s GDP during 2014 (the most recent year for which data are available), as well as $10 billion in revenues and 63,000 jobs.

“The defence industry is high-wage, export intensive, (and) technology rich,” said Cianfarani. “With recapitalization of the Canadian Armed Forces currently underway, the government has a generational opportunity, to make the sector a source of innovation-led growth.”

Cianfarani’s not-to-subtle reminder to policy makers about the industry’s crucial role, is just one of several initiatives CANSEC’s head has undertaken since she took over her new post last year. The lobby group also landed Cianfarani’s former employer CAE, as the event’s first “Platinum” sponsor, and has updated its marketing and promotion activities and tools. One noticeable upshot was jump in the number of international visitors. These included 375 foreign participants from 58 countries (up from just 25 countries in 2011).

National defence: a renewal priority
CANSEC provides stakeholders with an excellent occasion to showcase their wares, network with top procurement officials, feel each other out about potential partnerships and, for many, a chance to catch up on industry gossip. The event as usual drew a wide variety of politicians and sector keynote speakers, including General Jonathan Vance, Chief of Defence Staff of the Canadian Armed Forces, who addressed the event for the first time since taking office last year. The Department of National Defence used the event as a platform to release the 2016 version of its Defence Acquisition Guide.

Kevin Page, a former Parliamentary Budget Officer, and the keynote luncheon speaker, was one of the few presenters who was not unduly hamstrung by the government’s ongoing policy review. From his new perch at University of Ottawa, the former government insider provided useful insights into the current economic and political environment, noting for example the government’s turn to fiscal policy to stimulate a weak economy.

This, coupled with Page’s observation that the government will be shifting funds towards infrastructure investment projects, is a crucial insight. If sector stakeholders can make the case that equipment recapitalization investments qualify as “infrastructure investments,” this could speed procurements on a variety of fronts. “National Defence should be a renewal priority,” said Page. “There is fiscal room. The question: is there political will?”

Training and simulations providers confident
Representatives from military training and simulations sector providers, such as Jean-Claude Siew from Bluedrop Training & Simulation, Vincent Malley from Meggitt Target Systems and Mike Greenley, from CAE were, as usual, among the event’s most confident presenters. Almost all sector stakeholders agree that the two areas, both key industrial capabilities, will grow in importance during the coming years.

Greenley, who was honored by key industry figures for his nomination as CDR’s Defence Executive of the Year, at an exclusive dinner, provided a perfect example of why he is so successful. The folks at CAE arranged a demonstration of the A-4 Sky Hawk multi-role combat support fighters, that the company is proposing in its Contracted Airborne Training Services bid, the day before CANSEC opened, thus attracting far better coverage and interest, than if they had done so amidst the blur of opening day activities.

Greenley and Gene Colabatistto, the head of CAE’s defence and security unit, also provided a detailed briefing of the company’s recent developments and strategy going forward, particularly with regards to growing opportunities to build capabilities on the naval front. These could be developed in conjunction with Canada’s National Shipbuilding Strategy and then exported to the company’s global client base.

Boeing and Lockheed Martin: speculation in the air
One perfect example of a program whose future is up in the air pending the release of the Defence Policy Review remains the next generation fighter. Scott McCrady, director in charge of the JSF program at Magellan Aerospace, was on hand at CANSEC, pitching the program’s merits to anyone who would listen from his new perch at the head of the Canadian JSF Industry Group, as were spokespersons from Lockheed Martin Canada and Boeing.

Current speculation is that the government plans to use the policy review as a tool to partially back away from Prime Minister Justin Trudeau’s plans to scrap Lockheed Martin’s proposed F-35 Lightning II fighter jet. A consensus appears to be emerging that given the large investments made in the program and the Royal Canadian Air Force’s clear preference for the aircraft, Lockheed should at least be allowed to participate in the “fair and open,” competition that the government promised. The Liberals could finesse this backtracking by including “new information,” in the policy review report that justified the policy reversal.

Irving throws a curve
Few developments better illustrate CANSEC’s suitability as a platform for getting news out than Irving Shipbuilding president Kevin McCoy’s use of the event to propose a new Canadian Humanitarian Assistance and Disaster Relief Vessel. The new “duel-use” ship, be equipped with many of the same refueling, replenishment and hospital capabilities projected to be included on the Joint Support Ships, scheduled to be built by Seaspan Shipyards.

Under the proposal Irving would obtain an existing commercial vessel and modify it for use in non-military disaster relief mandates. Modifications would include fitting the ship with a ramp, so that ambulances, supply trucks and the like, could be rolled off quickly in time-sensitive situations. The ship, which preliminary estimates suggest could cost as little as $300 million, would also have a six-bed hospital,

“The Minister of National Defence requested new ideas about how Canada can meet its traditional commitments – here is one,” said McCoy. “The growing frequency and severity of natural disasters has brought with it a growing need for support from the CAF. Particularly as these generally take place close to coastlines, where a majority of the world’s population lives.”

Davie cuts steel, Seaspan partners up
Alex Vicefield, Davie Shipbuilding’s chairman lost no time in responding to its rival’s proposal. “Irving is confirming what has been universally recognized over the past few months, including in the Canada Transportation Act Review: that there are several classes of ships that Canada urgently needs and that the current shipbuilding program is not capable of delivering,” said Vicefield. “This is a great initiative – these kinds of unsolicited proposals, where industry takes what it has learnt, in how to provide fast-track, cost efficient solutions to address critical operational gaps, is exactly what is needed right now.”

Davie Shipbuilding had a lot to talk about too. Vicefield arrived in Ottawa jet-lagged after hosting a large media event in Quebec City the previous day, marking the cutting of steel on the Resolve Class Auxiliary Oiler Replenishment Vessel, that it is refitting for the Royal Canadian Navy

Canada’s shipbuilding prime and lower tier contractors, for the most part strived to make the most out of the current uncertainty. Seaspan Shipyards attracted attention by announcing its partnering with Thales Canada and its award of electronic systems work related to the construction of four Canadian Coast Guard Vessels that the company is building.

Jake Jacobson, vice-president (defence and security), at Babcock Canada, which allocates most of its efforts to Canada’s Victoria In-Service Support Contract, is starting to prepare the ground for when upgrade and overhaul work is completed on the final submarine. Jacobson took advantage of CANSEC to seek out partners for a possible proposal to the Canadian government related to providing in-service support on the country’s proposed Arctic Offshore Patrol and Joint Support Ships.

Putting the industry’s best foot forward
As Cianfarani alluded to in her opening press conference, the key takeaway from CANSEC 2016 is that now is a crucial time for industry to put its best foot forward, by showing policy makers, and the public at large what the defence sector can do for the country. Irving’s Canadian Humanitarian Assistance and Disaster Relief Vessel proposal is a perfect example of one such effort.

However several other companies are also getting the message. For example Halifax-based Metamaterial Technologies Inc. demonstrated a new layering technology that it developed, which can protect pilots from eye damage caused by lasers, a growing aerospace sector challenge.

Military UAV supply chain players also battled to get their messages out amidst Canada’s growing interest in accessing this key capability. These included Kongsberg Geospatial, which is pushing its Iris UAS and ISR Viewer platforms. Rheinmetall Canada’s Alain Tremblay for his part cut down to brass tacks, by announcing that the Saint-Jean-sur-Richelieu based company had completed more than $1 billion in Industrial and Technical Benefits transactions during its 30-year life.

How Canadian defence sector players will fare in the government’s policy review process, will also depend in large part on how well they put forward their individual cases. Judging from early impressions at CANSEC 2016, the industry appears to be off to a good start.

CANSEC 2017 will take place on May 31rst and June 1rst, 2017, at the Ernst & Young Centre, Ottawa.

Photo caption: Irving Shipbuilding’s proposed Canadian Humanitarian Assistance and Disaster Relief Vessel, would have duel use capabilities and could also be used to provide refueling and replenishment capabilities to support military operations.

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peter@peterdiekmeyer.com

Peter Diekmeyer Communications Inc.