Defence programs open up new doors

As Canada accelerates efforts to revitalize its defence sector, the resulting procurement shift will open the door for a wider array of companies—not just traditional aerospace and defence (A&D) players—to participate.

The federal government recently announced a $244.2-million investment in the National Research Council of Canada’s Industrial Research Assistance Program (NRC IRAP) to launch a new initiative called Defence Industry Assist (DI Assist) to provide funding and expert advice to help Canadian small-and-medium-sized businesses (SMBs) developing made-in-Canada defence and dual-use technologies.

Through DI Assist, the government aims to unlock hidden potential in the economy. The program is designed to help companies overcome barriers to market entry, commercialize cutting-edge technologies, navigate a highly complex procurement process, become embedded into the defence and security supply chain, and help them scale up their operations in order to meet domestic military needs and compete for global opportunities.

It’s a tall order. And very much needed to ignite growth.

NRC IRAP, in existence over 70 years, supported more than 9,000 innovative Canadian SMBs in the past year.

Getting this right will be vitally important in the coming years.

The program aligns with the objectives under the federal Defence Industrial Strategy that allocates $6.6 billion over five years to develop domestic defence supply chains, expand critical resource supplies and support SMBs entering the defence market.

For companies navigating this sector, it’s worth it to understand how your company could benefit from taking advantage of the various federal and provincial government programs and tax incentives that are available – and all too often underutilized. If governments are willing to subsidize a portion of the cost to retool, purchase new equipment, build or repurpose manufacturing facilities, or expand into new markets, why not take advantage of it? It can help lower the overall cost and make a project or purchase that much more palatable to your company’s board, potential lenders, investors and/or shareholders.

In a post-federal budget survey conducted by Angus Reid Group for KPMG Canada, only 35 per cent of Canadian SMBs said they will take advantage of tax incentives within the next 18 months to help them grow their business. Yet, 70 per cent of that same cohort also expressed difficulty in accessing capital.

They are leaving much-needed money on the table.

For example, here’s another program to explore with a similar objective. It’s the newly announced three-year, $357.7-million Regional Defence Investment Initiative (RDII) initiative administered regionally by the federal government’s seven Regional Development Agencies (RDAs). The objective is accelerate the integration of businesses and regional ecosystems into domestic and international supply chains and increase their industrial and innovation capacity. That means helping companies scale up, improve productivity, and enter the defence market.

Because it’s a three-year temporary initiative, it’s important to discover now how best your company can take advantage of it.

There are other programs, not specifically for the defence sector, that may also support companies requiring financial support. In Ontario, for instance, there are funding programs such as the new Advanced Manufacturing and Innovation Competitiveness (AMIC) Stream, the Southwestern Ontario Development Fund, the Eastern Ontario Development Fund, all of which in their own way exist to help companies scale and expand their operations, invest in technology and create high-quality jobs.

A single project may qualify for support from multiple government incentive and funding programs. With forethought and planning, companies may in fact be able to stack programs to assist with business growth and expansion, although be aware that some programs have stacking limitations.

Approvals hinge directly on how your application is framed, your company’s eligibility and the merits of the project or business case that’s being presented. We have a specialized team dedicated to help our clients identify, match and prioritize relevant government programs to support their business needs and develop thorough and complete funding applications.

The opportunities for companies are immense right now.

It’s not just about building and maintaining military equipment. The defence industry is much broader, encompassing all businesses, technologies and infrastructure that contribute to national security. This includes research and development in cutting-edge technologies and strategic services such as logistics and cybersecurity.

While it’s true, the industry demands strict standards and robust certification procedures, the defence sector has also always been a leader in driving technological innovation. Things that are commonplace today were developed by military like the internet, freeze-dried foods, anti-fog windshield fluids (first developed for service vehicles) or the auto-injector technology that became the EpiPen.

Canada is investing heavily in defence. We have a robust culture of innovation, and we have a newfound, united determination to make it work. It’s time for companies to seek out the capital they need and make it happen.