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Archived - Industrial and Technological Benefits Policy Enhancements

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A number of enhancements to the Industrial and Technological Benefits (ITB) Policy are being made to align it more closely with the overarching goals of the Defence Procurement Strategy: delivering the right equipment and services to the Canadian Armed Forces, leveraging economic benefits for Canada and streamlining the procurement process.

The Government of Canada is introducing changes to the ITB Policy to attract earlier investment in Canadian firms, particularly small and medium-sized enterprises (SME), while reducing red tape and improving transparency.

Industry Canada, in keeping with a core principle of the Defence Procurement Strategy, consulted industry stakeholders on opportunities to strengthen the ITB Policy.

Attracting earlier investment in Canada

The ITB Policy's banking provision allows companies to undertake business activities in Canada prior to the procurement and to bank these investments for later credit against their ITB obligations once they secure a defence contract.

The government is changing the banking provision in order to enhance the attractiveness of investing in Canada in advance of a contractual requirement. This change will also motivate prime contractors to extend successful business relationships with Canadian suppliers above and beyond their contractual requirements.

The changes to the ITB Policy will:

  • allow banking for up to 10 years before the procurement;
  • eliminate depreciation of banked activities;
  • allow banking on overachievement of contractual obligations; and
  • allow credit for banked activities when these investments are made in Canada.

The ITB Policy's pooling provision allows companies to get credit against multiple procurement obligations for investments over $100 million that they make in Canada.

To encourage companies to make more large-scale, high-value investments in Canada, the government is changing the pooling policy to:

  • decrease the threshold for a pooled activity from $100 million to $50 million;
  • allow all prime contractors to pool transactions; and
  • allow banked transactions to be pooled.

Encouraging investment in SMEs

The Investment Framework encourages prime contractors to invest in SMEs' research and development as well as commercialization undertakings in Canada by crediting their investments in SMEs at multiples of their face value.

To encourage prime contractors to give work to SMEs and enhance their participation in supply chains, the government is changing the ITB Policy's Investment Framework to:

  • increase the cap on investments in SMEs that qualify for multipliers under the Investment Framework from 5 percent to 25 percent of contract value;
  • permit bidders to submit Investment Framework transactions at bid time as part of their value propositions; and
  • streamline the Investment Framework application process.

Reducing red tape

All proposed investments in Canada under the ITB Policy must meet eligibility criteria to be credited against a contractor's ITB obligation.

Contractors must also report annually to Industry Canada on their progress in meeting their obligations under the Industrial and Regional Benefits (IRB) Policy and ITB Policy. Clarifying what documentary evidence is required to demonstrate that an investment meets incrementality and causality eligibility criteria, as well as electronic reporting, will significantly reduce the administrative burden of the program.

To ease this burden, the government will:

  • provide a simple incremental checklist and causality certification form, giving companies guidance, reducing uncertainty and speeding up decision making;
  • provide contractors with an electronic template for annual reporting, clarifying the information required and streamlining reporting; and
  • put in place a six-month departmental service standard for undertaking due diligence in verifying transactions and awarding credits.

Increasing accountability and transparency

To increase transparency and enable Canadian companies to more easily identify opportunities with prime contractors, Industry Canada will report annually on contractors' progress in meeting their IRB and ITB obligations while respecting commercial confidentiality. This will include the size of a prime contractor's IRB/ITB obligation, the amount fulfilled, the amount for which plans have been identified, the outstanding obligation and the company's contact information.

The terms and conditions of the ITB Policy have been adjusted to reflect these changes and will be included in future requests for proposals. In addition, Industry Canada is undertaking an administrative review of the terms and conditions to further streamline and simplify the policy. An updated version of the model contract will be posted on the Industry Canada website in the fall.

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Hon. James Moore Innovation, Science and Economic Development Canada Economics and Industry

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