Fed budget endorses job-creation plan linked to future military purchases

OTTAWA – The federal budget has endorsed a major report that urged the government to use the hundreds of billions of dollars of projected military spending to a job-creation strategy for the Canadian defence industry.

The Public Works Department commissioned the report by Tom Jenkins, chairman of OpenText Corp., who recommended in February that the government use a “once in a century” opportunity to leverage the $490 billion in defence spending over the next 20 years.

The budget document contains no new funds specifically aimed at the initiative.

But the budget affirms the core message the Jenkins report delivered: that the government must ensure future purchases of military equipment be used to “create economic opportunities for Canadians by developing key domestic industrial capabilities” on future procurement.

“The government endorses Mr. Jenkins’ proposal to use key industrial capabilities as a means of fully leveraging defence procurement projects to support economic opportunities for Canadians,” say the budget documents.

“A key opportunity for doing so is by targeting, as estimated by Mr. Jenkins, the $49 billion in Industrial and Regional Benefits obligations that foreign prime contractors are expected to accumulate by 2027 to support high-skill and high-value opportunities and jobs in Canadian industries.”

The budget document said the overall strategy would “provide Canada with a stronger manufacturing base with a capacity for leading-edge technology and innovation. The potential benefits for the Canadian economy are significant.”

Military procurement has been a political minefield for the Harper government. It was forced to set up a new secretariat within Public Works to oversee big Defence Department purchases after scathing criticism by the auditor general of the controversial F-35 stealth jet fighter procurement.

The Jenkins report said that the production and trade of military goods is “powerfully influenced by governments” that can encourage the development of a country’s defence industry.

“Many of the most highly industrialized countries have thus developed, explicitly or implicitly, strategies that promote their defence-related industries, recognizing that such innovative, dynamic industries contribute importantly both to sovereignty and to growth,” Jenkins wrote.

The budget touts several big spending projects, notably the National Shipbuilding Procurement Strategy, a 20-year, $35-billion plan that will see military and coast guard vessels built in shipyards in British Columbia and Nova Scotia.

The budget says the government will move this spring on Jenkins’ recommendations and will begin an analysis that will look at “selecting a series of interim key industrial capabilities to help guide immediately pending defence procurement projects.”

The budget also commits the government to “strengthened oversight with the use of third-party expertise” to help improve the procurement process — a clear nod to the past criticism of the auditor general on the ill-fated F-35 project, and other long-delayed procurements.