Industrial and Technological Benefits Policy: Frequently Asked Questions (FAQs)

1. What is the Defence Procurement Strategy?

The Defence Procurement Strategy (DPS) was announced February 5, 2014. The objectives of the DPS are to:

  • deliver the right equipment to the Canadian Armed Forces and the Canadian Coast Guard in a timely manner;
  • leverage purchases of defence equipment and services to create jobs and economic growth in Canada; and
  • streamline the defence procurement process.
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2. What is the Industrial and Technological Benefits Policy?

The Industrial and Regional Benefits (IRB) Policy has been transformed into the Industrial and Technological Benefits (ITB) Policy. Under the ITB Policy, companies awarded defence procurement contracts are required to undertake business activity in Canada equal to the value of the contract. The ITB Policy is a significantly more powerful government lever than the IRB Policy because it includes a Value Proposition that requires bidders to compete on the basis of the economic benefits to Canada associated with each bid. Whereas before, winning bidders were selected on the basis of price and technical merit, under the Defence Procurement Strategy the Government will now also assess the Value Proposition, which will be weighted generally at 10 percent of the overall bid score.

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3. What is the Value Proposition Guide?

The Industrial and Technological Benefits Policy: Value Proposition Guide is a document that describes the approach that will be used to assess Value Propositions. The approach described in the Guide will serve as a framework and starting point for discussions with industry on a procurement-by-procurement basis.

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4. Why has the Industrial and Regional Benefits Policy been transformed into the Industrial and Technological Benefits?

At a time when many nations' defence procurement spending intentions are stable or declining, Canada's are expected to grow. The Industrial and Technological Benefits Policy will ensure that Canada's significant investment in defence-related goods and services:

  • supports the long-term sustainability and growth of Canada's defence sector;
  • supports the growth of prime contractors as well as suppliers in Canada, including small-and medium-sized enterprises in all regions of the country;
  • enhances innovation through research and technological development in Canada; and
  • increases the export potential of Canadian-based firms.
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5. What is a key industrial capability?

Under the Industrial and Technological Benefits Policy, the government will incent bidders to maximize the amount of work done in Canada to produce the good or service being procured. This approach will support the development of industrial capability in Canada directly related to the procurement. The Government may also incent bidders to develop industrial capabilities in other sectors of the economy. Over the coming year, the Government will consider the advice of an interim board for standing up a permanent Defence Analytics Institute to refine its understanding of key industrial capabilities that would position Canada well for export-driven economic growth. In addition the Department of National Defence will develop a list of key industrial capabilities required in Canada for operational and security reasons. The Value Proposition Guide may be amended in the future to reflect the results of this collective effort led by the departments of Industry; National Defence; Foreign Affairs, Trade and Development; and Public Works and Government Services.

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6. How can Industrial and Technological Benefits, including Value Proposition, benefit small and medium-sized Enterprises?

It is particularly challenging for small and medium-sized enterprises (SMEs) to participate in global value chains, as prime contractors are increasingly seeking to work with larger companies that have the capacity to undertake R&D and share in risks. SMEs account for significant job creation in Canada and their participation in global value chains can result in strong growth potential. Prime contractors will be expected to involve SMEs, in fulfilling generally 15 percent of their ITB obligation and may be incented to exceed this floor. SMEs can ensure their capabilities are known by taking advantage of early engagement opportunities such as Industry Days, following the government procurement website, reviewing the Defence Acquisition Guide put out by the Department of National Defence, and engaging with their Regional Development Agencies.

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7. Is there a regional requirement to the Industrial and Technological Benefits Policy?

The Industrial and Technological Benefits Policy will require that bidders submit regional plans in order to ensure that efforts are made to generate benefits across all regions of Canada.

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8. Are the procurement processes announced since the release of the Defence Procurement Strategy in February 2014 indicative of what is to come?

Only selected elements of the approach set out in the Value Proposition Guide have been applied to procurement processes announced since February 2014, so as not to delay procurements at an advanced stage and disrupt significant efforts that companies may already have undertaken to create partnerships and draft bids.

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9. Which procurements will be subject to the Industrial and Technological Benefits Policy?

The Industrial and Technological Benefits Policy, including the Value Proposition, will apply to all eligible defence procurements over $100 million and to all eligible Canadian Coast Guard procurements over $100 million and for which the National Security Exception applies. All eligible defence procurements with contract values between $20-100 million will be reviewed for the use of Value Propositions. The review will determine whether the application of a Value Proposition is consistent with achieving the appropriate balance between capability, cost and benefit to Canada.

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10. How will we know if the Government has reached the goals of the Industrial and Technological Benefits Policy?

The Government has established aggressive targets to increase by 40 percent over ten years:

  • revenues earned by Canada's defence sector;
  • revenues earned by Canadian suppliers in the defence sector from sales to other firms;
  • research and development spending in Canada in the defence sector; and
  • export revenue earned by the Canadian defence sector. 

The government will measure progress against these targets, starting in 2015–16.

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11. Are there more changes to come?

Policy features and administrative processes that are associated with the Industrial and Regional Benefits Policy and that have been retained within the Industrial and Technological Benefits Policy (i.e. banking, multipliers, and verification) will be reviewed and streamlined as may be necessary to ensure that the goals of the Defence Procurement Strategy are fully realized.

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12. How will the Government's approach evolve over time?

The Government of Canada is committed to the successful implementation of the Industrial and Technological Benefits Policy. Innovation, Science and Economic Development Canada will take stock of lessons learned as it gains experience with the approach laid out in the Value Proposition Guide, invite regular feedback from industry, and make adjustments as required, to ensure that government defence procurement leverages significant economic benefit for Canadians.

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13. Why were changes introduced to the Industrial and Technological Benefits Policy?

On May 28th, Innovation, Science and Economic Development Canada introduced ITB Policy Updates .
The improvements are part of a commitment in the Value Proposition Guide to review the ITB Policy to ensure that policy and administrative features carried over from the Industrial and Regional Benefits Policy align with the goals of the Defence Procurement Strategy and further encourage long-term sustainable investments in Canada.

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14. Are there more Industrial and Technological Benefits Policy updates to come?

The Industrial and Technological Benefits Policy Updates are effective as of May 28, 2015. In the spirit of continual improvement, Innovation, Science and Economic Development Canada welcomes ongoing feedback from industry stakeholders.

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