Flight simulator's CEO says bigger U.S. armed forces budgets are a boon

On the same subject

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  September 10, 2018 | Local, Land

  Canada's arms deal with Saudi Arabia is shrinking

  The LAV sale is being scaled back. Critics want it killed completely. Murray Brewster · CBC News A Canadian defence contractor will be selling fewer armoured vehicles to Saudi Arabia than originally planned, according to new documents obtained by CBC News. That could be a mixed blessing in light of the ongoing diplomatic dispute between the two countries, say human rights groups and a defence analyst. The scaled-back order — implemented before the Riyadh government erupted in fury over Canada's public criticism of Saudi Arabia's arrest of activists and froze new trade with Canada this summer — could make it politically less defensible for the Liberal government, which has argued it's in the country's business and economic interests to uphold the deal. The documents show General Dynamic Land Systems Canada, the London, Ont.-based manufacturer, was — as of spring last year — going to deliver only 742 of the modern LAV-6s, a reduction from the original 2014 deal. The initial order from the desert kingdom was for 928 vehicles, including 119 of the heavy assault variety equipped with 105 millimetre cannons. Details of the agreement have long been kept under a cloak of secrecy. General Dynamic Land Systems, the Canadian Commercial Corporation (the Crown corporation which brokered the deal) and the Saudi government have all refused to acknowledge the specifics, other than the roughly $15 billion price tag. Last spring, CBC News obtained copies of internal documents and a slide deck presentation from 2014 outlining the original agreement. The latest internal company documents obtained by CBC News are dated March 29, 2017, and indicate the agreement had been amended a few months prior, perhaps in the latter half of 2016. The documents also indicate delivery of the vehicles is already underway and has been for months. CBC News asked for a response from both Foreign Affairs Minister Chrystia Freeland's office and General Dynamics Land Systems Canada. Both declined comment over the weekend.. A cash-strapped kingdom A defence analyst said the amended order likely has more to do with the current state of Saudi Arabia's finances than its frustration over Canada's human rights criticism. "Saudi Arabia — in part because of low oil prices and in part because of corruption and mismanagement of its own economy — has a large budget deficit," said Thomas Juneau, a University of Ottawa assistant professor and former National Defence analyst. "Spending $15 billion over a number of years for armoured vehicles that it doesn't need that much, at least in a pressing sense, is an easier target for budget cuts, for sure." The kingdom has projected a budget deficit of $52 billion US this year and the country's finance minister said last spring it is on track to cut spending by seven per cent. When it was signed, the armoured vehicle deal was a way for Canada to cement relations with an important strategic partner in the region, said Juneau. Should Ottawa cancel the sale? He said he wonders if it's still worthwhile, in light of the furious diplomatic row that began over the Canadian government's tweeted expressions of concern for jailed activists — and quickly escalated with the expulsion of Canada's ambassador, the freezing of trade, the cancellation of grain shipments and the withdrawal of Saudi medical students from Canadian programs. "Now, with the dust not really having settled after the dispute from August, is that partnership, in abstract terms, still necessary? I think it is. But is it still possible?" said Juneau. Human rights groups say they believe there is even more reason for Ottawa to walk away from the deal now, given the events of this summer and the declining economic benefit. "We're compromising our position on human rights for even less than we thought," said Cesar Jaramillo, the executive director of Project Ploughshares, which has opposed the agreement from the outset. "Even if it's not a huge decrease, it is still a decrease. It should, at least in political and economic terms, make it easier for the Trudeau government to reconsider this deal, especially in terms of the latest diplomatic spat." Full article: https://www.cbc.ca/news/politics/canada-s-arms-deal-with-saudi-arabia-is-shrinking-1.4815571

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  May 19, 2020 | Local, Aerospace, Naval, Land, C4ISR, Security

  Canada’s defence industry positioning for life beyond COVID

  Posted on May 15, 2020 by Chris Thatcher In an appearance before the Commons finance committee on May 12, Parliamentary Budget Officer Yves Giroux suggested the federal deficit could vastly exceed the $252 billion he projected in mid-April as the government continues to unveil relief measures to help Canadians and businesses withstand the economic impact of the coronavirus pandemic. Most admit it is to too early to tell what that will mean for future military procurement and the government's 2017 defence policy, Strong, Secure, Engaged (SSE), but think tanks and defence analysts are nonetheless forecasting turbulence ahead. “Over the past generation, recessions and the fiscal consolidation that has followed them have had a seriously negative impact on DND's (Department of National Defence) budget,” wrote Eugene Lang, an adjunct professor with the School of Policy Studies at Queen's University and Fellow with the Canadian Global Affairs Institute, in a recent policy paper for CGAI. “The future for SSE and its associated funding does not look bright. National defence probably has a year or two before the crunch hits.” Christyn Cianfarani is more cautious, but the president and chief executive officer of the Canadian Association of Defence and Security Industries (CADSI) admits the “rumblings are there that we are naturally concerned. Anybody who knows their history will tell you that when federal governments have been in these deficit spending situations — and this is the largest since the Second World War — they typically will be looking for strategies to reduce that deficit in the long term and DND unfortunately is a target.” But pulling government funding from a sector that has weathered the COVID-19 storm reasonably well might be “counterintuitive,” she suggested. The sector “right now is one of the few that is able to contribute to the economy under this persistent pandemic environment ... If there are multiple waves of [the virus], defence will be one sector that actually can shoulder the ups and downs and return to remote operations if we get to that stage again.” “Pure play” defence companies with few or no ties to commercial aerospace and the travel industry have managed the risks well, she said. Most have so far avoided the workforce layoffs and temporary downsizing experienced in other sectors, though manufacturing has slowed to meet provincial health regulations. Some, in fact, have been hiring. “Aside from some localized instances of companies facing real challenges, I would say the overall health [of the sector] is not too bad,” she said. Following what she called a “choppy” roll out of COVID-19 related policies that cut across federal and provincial jurisdictions, defence companies have adapted. Some have retooled shop floors and supply chains to manufacture critically needed personal protective equipment (PPE). Others with government contracts have continued operations where possible, albeit at reduced levels to match restrictions at government facilities. Maintenance on some platforms such as submarines has halted. The federal government has been “very conscious of trying to keep the contracts moving and executing,” said Cianfarani. “For example, if you are in the Canadian shipbuilding program, you are still pushing forward. If you are part of that supply chain, that hasn't seen any tangible change in the expectations.” Furthermore, many smaller defence firms specialize in software development and cyber security, both of which remain in demand as governments and companies try to protect expanded networks that now include thousands of employees working from home. The greatest concern for members has been liquidity, she said. CADSI encouraged the Business Development Bank of Canada and Export Development Canada to set aside their traditional risk aversion to the defence sector as they work with private sector lenders to support access to capital. The Business Credit Availability Program includes loans of up to $60 million and guarantees of up to $80 million. “We are quite proud of making a big intervention on that,” she said. “It was supposed to be open for all businesses and, irrespective of ... whether you characterize certain businesses as higher risk than others, it is an incentive program at the federal level.” An essential service At the outset of the COVID-19 economic slowdown, CADSI was a vocal advocate for defence as an essential service and greater harmonization of federal and provincial policies, including the rules that allow embedded contractors to access Canadian Armed Forces facilities. As provincial governments now begin easing restrictions and take the first tentative steps to open their economies, the association is calling for guidance and common standards, especially for the use of protective masks, gloves and other clothing. Of particular concern are the rules for employees of companies that embed on Wings and Bases to provide training, platform maintenance, healthcare and other services. “Who has to wear protective health equipment in a DND facility and is it the same [federal standard] across different provincial jurisdictions?” said Cianfarani. “If Ontario decides you have to stand two metres apart and Nova Scotia doesn't have the same policy,” it will create confusion. “If you need a particular face mask to go onto a DND base to perform maintenance on their aircraft, what does that look like? If it is so specialized, can you help us procure it? Or, if it is not so specialized, can you give us a specification so we can ensure that we do have it when we get spooled up to work?” Likewise, what PPE do companies need to provide when DND and other government employees visit their facilities? DND has released some information on “what they are starting to classify as health equipment versus PPE,” she said. “If companies have that information, they won't get to a DND facility and be surprised by a piece of PPE they need or a standard of working they need to accommodate.” Made in Canada The economic repercussions of the pandemic likely won't be felt in the defence sector for some time. Cianfarani noted that some companies have found opportunity in the crisis and will increase investments in automation, big data and other elements of Industry 4.0 as they position for the future. “This is probably an acceleration of something that has been going on slowly in the background for quite sometime,” she observed. But the pandemic has opened the door to a renewed discussion about a national defence industrial strategy, an issue CADSI has been flagging for over a decade. Buying made-in-Canada defence and security platforms and systems is more expensive, but the past months have demonstrated that protectionism is “alive and well.” President Donald Trump in early April asked U.S.-based 3M to stop supply N95 masks to Canada. “The crisis has certainly given us and the government, and Canadians in general, a renewed interest in the concept of having sovereign capability,” she said. Shifting to a procurement culture that accepts the risks and costs of Canadian-built equipment won't happen quickly or easily — it took about seven years to study and adopt recommendations for Canadian key industrial capabilities, she noted — “but I really do think if there is any opportunity, it is probably now, because the shock is still very prevalent in everyone's mind.” https://www.skiesmag.com/news/canada-defence-industry-covid

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  October 21, 2018 | Local, Naval

  Feds give Lockheed Martin first shot at $60-billion warship contract

  By Canadian Press OTTAWA — The federal government is giving U.S. defence giant Lockheed Martin the first crack at inking a contract to design Canada's $60-billion fleet of new warships. Government officials say Lockheed's proposed design beat out two rival submissions in what has been a long and extremely sensitive competition to design replacements for the navy's entire frigate and destroyer fleets. While the announcement marked the start of an important new phase in the largest and most expensive military purchase in Canadian history, it could also prove to be extremely controversial as some had questioned why the bid was allowed in the first place. Still, Lockheed executives may not be popping the champagne just yet. Negotiators for both sides as well as Halifax-based Irving Shipbuilding, which will actually build the vessels, must now work out details — including the final cost — before an actual contract is awarded. The stakes will be high for both sides, with hundreds of millions of dollars in play as well as pressure to make up for lost time as numerous delays — including in the design competition — have pushed the schedule for construction. Irving has warned that it could be forced to lay off hundreds of employees if work on the warships is not ready to start by the time it finishes building the navy's new Arctic patrol ships in 2021 or 2022. The Defence Department's head of military procurement, Patrick Finn, acknowledged the need for urgency. But he also noted the need for care as whatever decisions are taken during the negotiations could have ramifications on the navy and taxpayers for decades. “So it behooves us to stop and make sure we do the final checks in all of the areas,” Finn said this week in an interview. Lockheed's victory is likely to be contentious as the federal government had originally said it wanted a “mature design,” which was widely interpreted as meaning a vessel that has already been built and used by another navy. But the Type 26 frigate, upon which Lockheed's proposal is based, is only now being built by the British government and has not been used on operations. The federal government has reserved the right to walk away from the talks — if Lockheed drives too hard a bargain — and negotiate with the second-place bidder, which was not identified. However, officials hope that won't be necessary and a contract will be signed this winter. “We have notional time frames allocated,” said Andre Fillion, who oversees military and naval projects with Public Services and Procurement Canada. “And should everything go according to plan, we're looking at winter 2019 for the award of the contract. If it doesn't go according to plan, then we go to Plan B — and obviously that would take longer.” Lockheed's design was up against a pitch by U.S.-based defence company Alion, which proposed a design based on a Dutch frigate, and Spanish firm Navantia's proposal, which was modelled on a frigate used by the Spanish navy. One of the big questions heading into the negotiations will be how much of Lockheed's design will need to be changed to reflect the navy's needs and how much the navy will have to shift its requirements because changing the design will take more time and money. Government negotiators are also facing a potential battle over the amount of intellectual property that Lockheed will be required to hand over, which Ottawa wants so it can operate and maintain the vessels on its own after they are built. Companies had originally been told that the winner would be required to turn over the full blueprints, but after significant resistance the two sides agreed the matter would be negotiated before a contract is awarded. Officials remain focused on getting “the intellectual property access and rights that we need to not only build the ship but also to operate and maintain it for its entire life cycle,” Fillion said. — Follow @leeberthiaume on Twitter https://ipolitics.ca/2018/10/19/feds-give-lockheed-martin-first-shot-at-60-billion-warship-contract/