Canadian Defence Review
July 1rst, 2013
Title: New Brunswick’s growing defence cluster
Subtitle: Spurred by aggressive public policy and a range of innovative players, this Atlantic Canada province is slowly building a critical mass of capabilities.
With Canadian provinces competing hard to attract defence sector installations and businesses, you’d hardly expect puny New Brunswick, with its 750,000 residents, to be a major player. However this small Atlantic province has been punching far above its weight lately.
If you believe one expert, that trend is likely to continue.
“The federal government is projected to invest close to $490 billion in defence over the next 20 years,” says Mark Haines-Lacey, executive vice-president at Invest NB. “By properly leveraging Canada’s industrial and regional benefits policy, New Brunswick’s defence sector should continue to grow at a decent pace.”
The good news is that New Brunswick will be building from an envious base of talent, favourable geography and other competitive advantages. These start with a pool of dozens of defence-related contractors, which includes big names such as DEW Engineering, CAE, and Irving Shipbuilding (whose head office is located there).
Envious competitive advantages
New Brunswick also houses CFB Gagetown, Canada’s second largest military base, which is located about 20 kilometres from Fredericton, the provincial capital. The base, which employs 4,500 military and 1,500 civilian personnel (and up to 5,000 more during the peak summer training months), is a major asset, in part, because at one point in their careers almost all CF personnel have passed through it.
CFB Gagetown provides incalculable collaboration opportunities which New Brunswick defence contractors are leveraging. These range from an ideal location for testing new equipment to access to an enormous talent pool. Retiring base personnel, soldiers whose initial enlistment periods expire, reservists and civilian defence personnel, all provide a great body of potential industry recruits and contribute towards stimulating an enthusiastic and innovative local defence culture. As if that were not all enough, New Brunswick also boasts sea access and hosts the Miramachi Aiport where the Miramachi Air Base once operated, which as Haines-Lacey notes can be re-opened, if the need arises.
New Brunswick officials acknowledge that the business and defence worlds are all about people, which however highlights another of the province’s major competitive advantages. New Brunswick’s existing workforce is buttressed by a strong network of universities, trade schools and community colleges, all of which are open to developing training programs to meet specialized needs.
Invest NB: getting serious about attracting new business
In fact Invest NB’s founding just over two years ago provides and excellent sign of the province’s seriousness in attracting new investment. The agency’s mission is to promote New Brunswick as an attractive investment locale, to pursue viable opportunities and to provide financial assistance when warranted. As Haines-Lacey notes, lately, a good part of the agency’s focus has been on defence.
“We have identified numerous core capabilities that we can build a cluster around,” says Lacey. “These range from land systems to training and shipbuilding. There are numerous opportunities coming down the pipe which New Brunswick companies are well-positioned to do sub-contract work on. These include the Close Combat Vehicle (CCV), the Medium Support Vehicle System (MSVS) as well as more Leopard tank projects.”
FFG-Industrial Rubber: Canadian talent, German training
One player which has been quick to capitalize on these opportunities has been FFG Canada, a new international joint venture between New Brunswick-based Industrial Rubber Company Ltd. and FFG Flensburger Fahrzeugbau Gesellschaft (FFG) a German military vehicle maintenance, repair and overhaul provider. The group was set up to convert 18 Leopard 2 main battle tanks into WISENT 2 Armoured Engineering Vehicles (AEVs) for Canada’s Department of National Defence.
“Assembly will be done New Brunswick by Canadian personnel trained in Germany,” says Ulf Behrens, the company’s general manager in Canada. “It’s an ideal teaming that lays the cornerstone for future projects.” New Brunswick’s government and Invest NB were key players in the deal, providing a $700,000 payroll rebate and $300,000 in forgivable loans, from a new provincial economic development and innovation fund. These spurred a $1.5 million investment which is expected to create between 25 and 30 new jobs. Behrens could not be happier. “New Brunswick and the people in the Bathurst region received us with open arms,” said the German national who will be taking up residence in the area. “I am looking forward to connect even more with the local, regional companies and institutions.”
Cormer Defence: retrofitting military vehicles
New Brunswick’s commitment to boosting its land platform capabilities got a great shot in the arm earlier this year when Cormer Defence announced that it will create 80 new jobs at a new facility that is being set up Miramachi, where it will retrofit military vehicles. Cormer Defence, which is one of Canadian Defence Review’s Top 50 Defence Contractors, is a long-time supplier to General Dynamics Land Systems, and thus brings considerable heft to the province’s defence sector.
New Brunswick, which will be kicking in $5.2 million to help finance the project during the next ten years through Invest NB and the Miramachi Regional Economic Development and Innovation Fund, gets considerable credit for helping set up the deal. The federal government will also be contributing $1 million, through the Atlantic Canada Opportunities Agency. New Brunswick officials say the fact that Cormer Defence, which is owned by Manitoba-based Cormer Group Industries, decided to locate the facility so far away from its home turf is highly significant, and bodes well for the possibility of future work being done there.
Bluedrop Performance Learning: simulations and training
Michael O’Rourke, Bluedrop Performance Learning’s defence and aerospace unit’s chief operating officer, who knows New Brunswick well, is also highly-optimistic about its future. Through partnerships with players such as CAE, Rheinmetall, the Department of National Defence and international export clients, Bluedrop boosted its aerospace and defence revenues to $8 million in 2012, from just $5 million the year before.
Bluedrop, a major simulations and training provider, employs more than 60 skilled professionals in its aerospace and defence group, housed in its Ottawa, Halifax and Fredericton locales. “Fredericton is our largest staffing location,” explains O’Rourke. “Close proximity to CFB Gagetown and access to a skilled workforce make the area an ideal location for this type of work.”
Its large footprint in the area has pushed Bluedrop to take a leadership role in spurring collective action among eastern Canadian defence sector stakeholders. “Atlantic Canada needs to operate as a single region, if it wants to really compete to be a Canadian simulation and training center,” says O’Rourke. “We have already taken on numerous initiatives, but see this as a team effort with government partners.”
New Brunswick government officials, who are enthusiastic backers of the Atlantic Alliance, agree. This collaborative organization includes the New Brunswick Aerospace and Defence Association, the three other Atlantic provincial aerospace and defence organizations, industry members and government partners. Its major roles include representing the interests of Atlantic-based aerospace, defence, space and security industry stakeholders locally, nationally and internationally.
Apex Industries: turning to aerospace and defence
As New Brunswick’s defence industry picks up breadth and steam, it inevitably brings along sub-contractors like Apex Industries, a diversified facility that specializes in steel doors, architectural hardware and contract equipment manufacturing. “While the firm operates in a variety of sectors, our defence business continues to (progress),” says Keith Parlee, the company’s chief operating officer. “We expect that it will be one of our larger growth areas over the next five years and are prepared to add resources to pursue that end.”
Apex, a privately-held firm, employs about 250 people. Its defence work includes the supply of parts and assemblies for the Chinook Helicopter, Bell-Boeing V-22 Osprey and the US military. The work is done in the company’s milling, paint shop, processing and assembly facilities, all of which Parlee hopes to further leverage.
Apex has also added significant plant capacity and is working to boost operation efficiencies as well as to acquire various quality and sector certifications. One main goal is to land National Shipbuilding Procurement Strategy-related business and other orders that come up for grabs during the coming years. That said it’s not all easy. “There are challenges related to being on the East coast,” admits Parlee. “We are not always top of mind to firms that are closer to the larger centers. This has meant more travel for our business development teams. But it is something we are willing to do to secure opportunities.”
Malley Industries: branching out into defence work
Another New Brunswick business that is does not operate directly in defence, but which has been a big beneficiary of the industry’s rise is Moncton–based Malley Industries. In 2012 the company, which employs 60 highly-skilled fabrication specialists, design engineers and other professionals moved to a new facility. The 92,000 sq. ft. plant, which tripples Malley Industries’ capacity, is near air, rail and highway links– a must for a company projected to do work on 1,500 specialized vehicles during the coming year
According to Terry Malley, the company’s president, much of the growth is defence related. Malley Industries, a transportation systems integrator, overhaul and manufacturing services provider operates six business units. These include an ambulances division, adaptive mobility vehicles, light commercial vehicles, heavy commercial vehicles, plastics design engineering and production and most recently: defence security and vehicles.
“The Canadian defence industry has a large inventory of commercial vehicles,” explains Malley. “Our proximity to both CFB Gagetown and Halifax put us in an ideal position to provide services to both those fleets.”
Fleetway Facilities Services: growing with Canada’s navy
One rarely-discussed geographic advantage favouring New Brunswick is the province’s location adjoining Nova Scotia, home to Halifax Shipyards, winner of the recent competition to build 21 combat vessels planned as part of Canada’s National Shipbuilding Strategy. The win, coupled with owner Irving Shipbuilding’s New Brunswick-based head office, positions provincial players well to bid on work from the project. One contender is Fleetway Facility Services, which is also a member of the J.D. Irving Limited group of companies.
According to Will Doyle, Fleetway’s director of business development, the fabrication, machining and technical services provider, which is already doing considerable work on the FELEX Frigate Life Extension project, also recently began working on a land based program. This well-timed move helped boost employment at Fleetwood by 30 staff members during the past year to 170, almost all of which are New Brunswick-based.
“We are pursuing business with prime contractors and Tier 1 sub-contractors associated with the $8 billion land based procurement strategy that will continue over the next ten years,” says Doyle. “Programs included in this strategy are TAPV, CCV LVM MSVS and so on.” Doyle also credits Invest NB and the Atlantic Canada Opportunities Agency for helping build bridges by connecting Fleetway with defence sector personnel that they can do business with.
Moving into export markets
Despite initial positive results, it’s hard to say at this stage of the game how New Brunswick’s defence move will progress. Invest NB officials admit that the province has a lot of catching up to do relative to other provinces. That said they cite New Brunswick’s strengths, particularly its strong core capabilities in companies as justifying their optimism.
Also key is New Brunswick’s reputation as one of the most cost-competitive aerospace and defence regions in North America, a fact which KPMG acknowledged in recent analysis as part of its Competitive Alternatives initiative.
That competitive edge has been a key driver of the province’s move into aerospace defence, which in turn has boosted exports from $10.6 million in 2001, to $42.6 million by 2010, a trend that is slated to keep growing. According to research done for the New Brunswick Aerospace and Defence Sector Strategy 2012-2016: “IRB contributions owed or paid to Canada exceeded $11 billion for 28 projects, with a projected future contribution of $16.9 billion for 27 additional contracts.”
Invest NB officials say New Brunswick’s chances of sharing in those benefits could be extremely attractive for defence businesses located there and for companies thinking about investing there. “Come talk to us about setting up shop here,” says Hanes-Lacey with a smile. “We have got an excellent business case that just might surprise you.”
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