Since 2015 major procurements for the Canadian Armed Forces and the Canadian Coast Guard have been completed with the additional requirements of Canada’s ITB Policy.
The Canadian ITB policy requires that the awarded contractor (Prime) is required to input the same value into the Canadian economy as the contract award. This is executed through direct and indirect transactions. Each type of transaction is assigned a multiplier dependant on the industrial or technical need Canada has identified and must fall within the five value pillars Canada has established. The value pillars are:
- Work in the Canadian Defense Industry
- Canadian Supplier Development
- Research and Development
- Exports
- Skills Development and Training
As well as value pillars, Canada has identified “Key Industrial Capabilities” (KIC) as areas needing development and investment to enhance Canada’s economy. There are 11 KIC’s identified in the ITB policy based on emerging technologies and critical industrial services. Each individual contract identifies the KIC’s that are related to the goods being requested.
Direct transactions are business transactions that are directly related to the production of the goods in the awarded contract. Direct transactions are evaluated based on their Canadian Content Value (CCV) – meaning the amount of Canadian Content that is directly input into the production of the required good. For direct transactions Canada normally acknowledges a 1 to 1 multiplier, making it critical to have the highest CCV. Sometimes Canada will increase this multiplier if it is directly related to a specific KIC outlined in the contract. For example supplying vehicle armour components to a military contract may provide a 1.5:1 multiplier so an input of $100,000 of CCV has an offset value of $150,000 in the Prime Contractors obligation.
In Canada direct transactions pose a challenge as often we don’t have the industrial capability to offer 100% Canadian content due to limitations in supply of things such as production materials, furnished goods, or electronic components.
Direct transaction example: A manufacturer is awarded a $1,000,000 purchase order to produce a special cargo container required by the Prime for the resulting contract. The raw material is steel but rolled in the USA, due to the specific nature of alloy required. The steel is sold by a Canadian depot for $400,000 but due to the origin only provides $225,000 of Canadian content. The workmanship that goes into manufacturing the cargo containers is 100% Canadian and totals $600,000. This means that of the $1,000,000 award only $825,000 or 82.5% CCV exists within the direct transaction. This creates a burden on the prime or subcontractor to offset the short coming in other eligible transactions.
Indirect transactions are transactions such as investments, consortiums and R&D projects that fall within the value pillars and/or are related to Key Industrial Capabilities that Canada has identified as a priority for each contract.
Indirect Transaction Example: A Prime is awarded a contract for $500,000,000 to produce a new radar system for the Canadian Armed Forces. During the program execution, the prime has discussions with a university in Canada and discovers a mutually beneficial research topic. The Prime decides to provide $1,000,000 cash to fund the research activity. This turns into a $9,000,000 offset to the primes obligation due to the multiplier for R&D cash funding.
How Dumur adds Value under the ITB Policy: |
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Work in the Canadian defense industry – Dumur has been manufacturing defense components in Canada since 1994 for various OEM’s and have developed industry leading expertise in the manufacture of armor components.
Canadian Supplier Development – Dumur Industries is a Canadian small business (SMB). Canada looks at inputting work to SMB’s favorably within the ITB policy.
Research and Development – Often times we encounter challenges about the best way to solve problems, whether it be a process or new product solution. Dumur has established relationships with testing facilities and academia through previous R&D projects and can leverage this network to innovate on the Prime’s behalf.
Exports – Dumur is an experienced exporter to the USA as well as to international partners around the globe in Europe and Asia. Producing goods in Canada leverages an advanced supply network, as well takes advantage of currency exchange rates - often times making a product cheaper to produce in Canada and lowering the overall landed cost.
Skills and Development Training – We work closely with our customers and supply chain to ensure that all technical skills required for the manufacture of specialized goods are obtained. By accepting a prime’s product specific training, and by our own internal skills development program we contribute to the overall value of the Canadian economy.At Dumur industries we offer the highest CCV in direct transaction for defense procurements by leveraging our Canadian supply network and providing our unique capabilities.
Dumur Industries has expert offerings related to the following key industrial capabilities:
- Advanced Materials
- Remotely piloted systems and Autonomous Technologies
- Aerospace Systems and Components
- Armour
- Defense Systems Integration
- Ground Vehicle Solutions
By partnering with Dumur as your production and manufacturer for a defense product you not only leverage the highest CCV in the industry, but also generate several related transactions which additionally offset the total ITB contract obligations.
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