The Industrial and Technological Benefits Policy: A primer on a key feature of the Canadian national security and defence landscape

Recent announcements by the Canadian federal government to invest billions of dollars to modernize the Canadian Armed Forces, build a self-sufficient domestic defence and security industrial base, and reduce reliance on the United States for defence capabilities signal Canada’s renewed commitment to national defence and security and a diversification of its strategic alliances. 

This clear strategic shift presents significant opportunities for Canadian businesses to grow and for European and other defence and security companies from allied nations to expand their businesses in, and create meaningful partnerships with, Canada. Central to this new strategy is Canada’s Industrial and Technological Benefits Policy (ITB Policy), which mandates that companies awarded major defence contracts generate equivalent economic and technological benefits for Canada. 

The ITB Policy is an essential tool to enable partnerships, innovation, and long-term market integration in the Canadian defence and security sector. Understanding the ITB Policy is a key advantage for any company hoping to seize new opportunities in a rapidly expanding Canadian defence and security sector.

ITB Policy objectives and overview

The ITB Policy has five primary objectives:

• support the long-term growth of the Canadian defence sector;
• support the growth of contractors and suppliers across Canada, including small and medium-sized businesses;
• boost innovation through research and development in Canada;
• increase export potential of Canadian-based companies; and
• identify skills development and training opportunities for Canadians.

The ITB Policy applies to all defence and Canadian Coast Guard procurements over $100 million that are not covered by trade agreements or for which a national security exception is invoked, though defence procurements below that threshold can be subject to review for possible application of the ITB Policy. 

The ITB Policy aims to increase Canadian jobs, innovation and economic growth through national defence and Canadian Coast Guard procurements by requiring that any company awarded a defence procurement contract must engage in business activity in Canada of a value at least equal to the value of the awarded contract. As part of any bid on major defence contracts, companies must submit a value proposition, which describes the proposed economic contribution to Canada. This value proposition is considered as part of the overall bid on a contract-by-contract basis and allows Canada to drive specific economic outcomes. 

While Canada may consider other factors based on industry consultation, the following general criteria are used to evaluate a value proposition, each having different weight based on market research and industry engagement on a contract-by-contract basis: 

• Work in the Canadian defence industry;
• Canadian supplier development;
• Research and development in Canada;
• Exports from Canada; and
• Canadian skills and development training.

It should be noted that, following contract award, the successful contractor will be required to fulfil its ITB Policy commitments and identify further business activities in Canada that may be required to achieve the overall ITB Policy obligations of achieving an economic contribution to Canada at least equal in value to the value of the awarded contract.

ITB Policy compliance is regularly monitored by Canada. Contractors must produce and submit annual reports describing, among other things, the achievement of ITB Policy and value proposition commitments. 

Conclusion

The ITB Policy is a fundamental element of defence and security procurement in Canada and a critical tool in achieving Canada’s objective of creating a resilient, self-reliant Canadian defence and security sector. Companies interested in doing business in the Canadian defence and security sector must understand the ITB Policy in the context of Canada’s shifting defence and security strategy in order to be competitive. At Norton Rose Fulbright, we leverage our deep knowledge of Canada’s defence and security procurement landscape, including the ITB Policy, to support our clients’ ambitions and position them for success.