Government rolls out new repayable fund to assist aerospace and defence sector

Extends tradition of government-industry partnership

Intense speculation over what the replacement for the Technology Partnerships Canada (TPC) program will look like have finally been answered with the launch of the Strategic Aerospace and Defence Initiative (SADI). The Harper government is investing $900 million over five years in a slimmed down, re-focused program with a new emphasis on collaboration with academic institutions and research institutes and tougher repayment provisions, some of which were introduced by TPC just prior to its demise.

Up to $225 million will be available annually through SADI for pre-competitive R&D projects in the aerospace and defence sectors, but also including homeland security and space technologies.

The program will be managed within Industry Canada by the new Industrial Technologies Office (ITO), a special operating agency also tagged to handle the projects of several legacy programs including TPC, the Hydrogen Early Adopters Program and the Program for Strategic Industrial Projects. The latter was established to support the automotive industry. ITO's executive director is Jeff Moore, who held the same position with TPC for its last year of existence.

Industry Canada has not set a funding range for successful projects and SADI's contribution average of 30% is the same as TPC. Projects will be assessed on a first-come, first-served basis and repayments begin once the project is finished, not when the product or process starts to generate revenue. Most important is the basis upon which repayments will be calculated — gross business revenues of the company as opposed to revenues generated by the project itself. The maximum repayment period is 15 years.

"TPC experimented with it (calculating repayments based on gross business revenues) at the end of the program. We've now formalized that approach," says Moore. "It's a standardized approach to collect repayments more quickly, upfront."

grandson of dipp

Despite the new provisions, Moore says companies will find SADI attractive, and firms are already signalling their support. Not the least of its attractions is the ability to access capital which is interest free while the project is in the work phase. Given the focus of SADI, Montreal-area aerospace firms stand to benefit the most from the government's continued support of the sector.

"I salute the government initiative to launch this program that will allow us to compete internationally and maintain a high level of R&D," says Nancy German,VP communications for Pratt & Whitney Canada (P&WC).

Longueuil QC-based P&WC has had a long relationship with the federal government, securing more than $1 billion from TPC and $677 million from its predecessor, the Defence Industry Productivity Program (DIPP) (R$, December 22/06).

"These programs are key," says Nathalie Bourque, VP global communications for CAE Inc, Saint-Laurent QC. "SADI is only focused on aerospace and defense so it's not much different from TPC (funding) levels."

The government is also highlighting SADI's transparency and accountability provisions, including public disclosure of project assessment criteria, assessment process, program performance and accomplishments and regular updates on project results. Like TPC, SADI will also publish an annual report although TPC's has not released a report since FY04-05.

industry-academic collaboration

One of SADI's notable new features is captured within the program three objectives. In addition to encouraging strategic R&D and providing enhanced opportunities for industry, SADI is also designed to foster collaboration between industry and research institutes, colleges and universities.

"This is a new facet of the program that we're pretty excited about. The degree of collaboration could range from informal … to formal. I like the idea of collaboration between the private sector and learning institutions. We will ask applicants to include collaboration plans (in their applications)," says Moore, adding that it is not a mandatory requirement. "A company has to satisfy two out of three objectives. Not all projects will have a collaborative element to them."

With a limited industry focus, SADI offers nothing for companies in areas such as biotechnology, information and communications technologies and environmental – sectors supported under TPC. Those in the environmental space can look to programs such as Sustainable Development Technologies Canada, while others must rely on enhancements to the general corporate environment designed to make firms more productive and competitive.

SADI's focus on the aerospace and defence sector is an acknowledgement that, in an an intensely competitive global environment, Canada has little choice but to offer assistance to firms competing against companies that receive some form of subsidy from their host countries.

Subsidiaries of global aerospace and defence firms engage in intense competition to win global product mandates for their operations. National governments are invariably approached to provide incentives for maintaining and expanding company presence within their jurisdictions to ensure a supply of high-paying jobs and associated economic benefits. Curiously, SADI press materials don't mention this critical aspect of the aerospace business environment. Instead, the government has opted to explain the need for government intervention by emphasizing the role that these companies play "in supporting national security and sovereignty".

central management

The decision to situate the management of SADI within ITO bodes well for firms seeking to partner with government in technology development and commercialization. Moore says that concentrating many of Industry Canada's R&D programs within one office will lead to greater efficiency of operations and improved service delivery.

"We want to make this a best practices centre of excellence for the delivery of programs of this type," he says, adding that it could take on additional programs in the future. "We will also be able to apply lessons learned from other programs to improve service quality."

With 112 full-time employees, ITO will also draw on expertise resident within government on an as-needed basis. Accountability lines are also clear, with Moore reporting to Guy Bujold, ADM science and innovation, while Bujold reports to DM Richard Dicerni.

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