Canadian Defence Review

 

January 28, 2014

 

Title: Alberta aerospace and defence report 2014

Subtitle: Defence stakeholders in Harper Government’s Alberta base are looking for new ways to fully leverage their capabilities.

 

It should come as no surprise that Alberta, which gave the Harper Government 27 of a 28 possible seats in the 2011 general election, should have a strong defence industry presence. Despite the federal Conservatives’ repeated program cuts and procurement delays, the party is at least notionally defence-friendly. However concrete initiatives in the province have been few and far between recently.     

 

“It’s kind of ugly out there right now,” says one highly placed Alberta defence industry source. “Many people underestimate how hard some of us were hit by the floods last year. The recent scrapping of the Close Combat Vehicle initiative didn’t help. I hate to say this because I am a Conservative, but it’s not an election year so they don’t worry about us.”

 

Yet, as our 2014 Alberta Aerospace and Defence Report once again makes clear, Alberta has considerable geographic and human resource advantages, which makes it a natural regional leader. These include expertise in robotics, unmanned vehicle systems, defence electronics and logistics support, coupled with important bases and great training areas. In fact the quality of these facilities received an independent seal of approval late last year, when the commander of the British Army Training Unit Suffield (BATUS) announced that the UK would continue to train thousands of soldiers in Southern Alberta.  What many of the province’s defence sector stakeholders are trying to figure out is how to best leverage those capabilities.

 

WCDIA: Pulling the industry together

The Alberta government estimates that the province’s aerospace and defence sector comprises 170 companies. These employ 6,000 skilled workers, who generate $1.3 billion in revenues, of which 40% come from exports. Judging from the increasing number of head offices that make Calgary their home, the province is also a great place to do business. Alberta boasts that it has the lowest corporate tax rates in Canada: just 10% for general businesses and large manufacturers and 3% for small businesses. In short, defence sector providers, ranging from General Dynamics Land Systems, to Raytheon, Viking Air, Pelican, Novatel and many others, have had considerable incentive to locate there.

 

That said, according to James Cox, chairman of the Calgary-based Western Canadian Defence Industries Association and president of the Edge Group, a key challenge facing Alberta and Western aerospace defence contractors is their remoteness from each other and from decision centers in Ottawa. WCDIA is trying to help remedy this. “Through events such as WestDev, the country’s third largest defence show, we provide a forum for collaboration and cooperation,” says Cox. “The goal is to bring together SMEs and larger contractors who otherwise would have a much harder time tagging up due to the size of the Western Canada region.”

 

The WCDIA board also recently met with Michelle Rempel, Minister of State for Western Economic Diversification, whom they found quite open. “In the past we would meet up with the WED people at one or two shows and that would be it,” says Cox. “But she wants to make them more available.” WCDIA has also offered to leverage its local knowledge by partnering with the Canadian Association of Defence and Security Industries, which was recently awarded $618,000 to manage a western defence industry presence at international defence and security trade shows.

 

Meggitt Canada/ Canadian Center for Unmanned Vehicles

Among the most important defence assets located in Alberta are 3rd Canadian Division Support Base Edmonton, CFB Wainwright, CFB Suffield, and CFB Cold Lake. The latter is among the Royal Canadian Air Force’s largest bases and a premier fighter training facility, which is also home to the Aerospace Engineering Test Establishment (AETE) and the Canadian Flight Test Center (CFTC). These key installations naturally attract a number of aerospace defence sector contractors and providers around them.

 

For example according to Spencer Fraser, president of Meggitt Canada, one leading edge technology that Alberta businesses, military agencies and educational institutions, have been pushing relates to the research, testing, development, and manufacturing of Unmanned Vehicle Systems, an increasingly important capability in modern warfare. This process got a big boost in 2006 after Fraser and others pushed for the establishment of the Canadian Center for Unmanned Vehicles in Medicine Hat.

 

Led by Meggitt Canada itself, which produces world class targeting drones, Alberta businesses today provide UVS expertise in a range of specialized sectors. These include avionics, navigation, control and global positioning systems, systems integration and wireless communications. The sector is backed by  highly skilled workers, trained at world class educational institutions such as the University of Alberta, the University of Calgary and several local colleges. It’s a powerful mix that can produce impressive results.

 

For example Meggitt recently shipped its 250th Hammerhead targeting drone, which it has now exported to a dozen countries, making the company one of Canada’s most innovative original equipment manufacturers.  Late last year the company also delivered the first three of its newly designed Mosquito helicopter drones. 

 

Novatel: innovation in Calgary

Novatel, which according Lori Winkler, a spokesperson, employs 350 professionals at its Calgary head office, is another innovator on the UVS front. All of Novatel’s product hardware, software and ASIC design is done in Calgary and nearly of the company’s products, including UVS capabilities, ship from there she notes.  “There is growing awareness of the multitude of products and services available in this country for unmanned vehicle systems,” she notes. “This is leading to opportunities for defence contactors to participate in the civilian market and vice-versa.”

 

In addition, late last year Novatel announced that Public Works and Government Service Canada was planning to test its GAJT-700ML antenna on certain armoured vehicles. Novatel, which is located in Calgary, and part of the Swedish Hexagon Group, bills the system as “the world’s first single unit GPS anti-jam antenna.”

 

Harris Canada: leveraging CF-18 avionics support

In fact several innovative aerospace players have a significant Alberta presence. These range from Viking Air, which does final assembly of the iconic Twin Otter 400s at its Calgary facility, to Bombardier, which delivers military aviation training services at CFB Cold Lake. Another prime example is Harris Canada which has been leveraging infrastructure it has built up to support Canada’s F-18 program, in the hope of growing its export base.

 

“We are currently in discussions with the US Navy, to provide similar services to them,” explains James Gillespie, the company’s director of programs. “Harris is also chairing an international working group that is determining long-term solutions for all countries that operate an F/A-18 fleet.” Any new work would be a perfect fit for Harris, which currently supplies avionics services, including program management, maintenance support and engineering capabilities to DND as part of a $273 million CF-18 Avionics optimized weapon system support contract which is expected to extend through to 2020.

 

To do this, Harris has set up a full supply chain, including warehouses at the two main CF-18 operating bases, where it manages support equipment inventories. Harris Canada is also expanding its existing facility in order to streamline efficiency of its production processes. The new facility, which will include a fully secure lab to test electronic warfare systems, could also be used to do international work.

 

General Dynamics Canada: Working smarter to get a bigger bang

As a land-locked province, Alberta is not surprisingly home to many providers that specialize in ground systems. Many are adjusting to the new realities, budget challenges and priority reallocations stemming from the Canadian Forces’ drawdown from its Afghanistan mission. “Our feeling is that DND’s focus in coming years will be more on and navy and air side,” says Eric Newman, who took over as vice-president (Land and Joint Solutions) at General Dynamics Canada in August of last year. “This is increasingly forcing us to provide value for money, so that our customers can defend the sums they spend on our equipment and capabilities.”

 

Cyber security is one example where Newman, a former regular forces and militia officer, believes that General Dynamics Canada can make a difference. The unit’s Calgary experts are a key part of GD team that won a number of cyber security contracts during the past year.  The scope of these contracts ranges from tactical to enterprise level. According to Newman, these will help secure and protect government networks and information across multiple departments within the Canadian government.

 

General Dynamics Canada’s sister division General Dynamics Land Systems has also been active on the land front in Alberta during the past year. According to Ken Yamashita, a GDLS spokesman, the company has beefed up its Edmonton operations, in order to help fulfill its LAV upgrade contact. These facilities, where 100 people now work, include complete vehicle final assembly, component assembly, turret assembly and final test capabilities. In all, 40,000 square feet have been added to the original 104,000 square foot building.

 

Teledyne VariSystems: adjusting to the Afghanistan stand-down

Like most industries, quantifying Alberta’s defence sector is not easy, as industry lobby groups naturally want to inflate their prowess, to gain special privileges, treatment or status. However defence players in particular have special challenges in this area, as the sector is supplied by a variety of companies that sell dual use capabilities. One of these is Teledyne VariSystems, which supplies cables and harnesses and other parts, much of which is built at its three facilities, including those in Medicine Hat and Wainwright.

 

During recent months, VariSystems, which has been operating in Alberta for more than 40 years, has been “working to develop a closer relationship,” with its sister company, Teledyne Cable Solutions, says Kevin Pelletier, the company’s product line manager (cable assembly). “The fact that (Canada is) standing down (its) combat mission in Afghanistan has naturally had an impact on procurement priorities and spending focus,” said Pelletier. “However we have been keeping busy. We are involved primarily in land systems so obviously we’re excited about the awarding of the TAPV program to Textron. Of course we are also exporting a lot and bidding or working on equipment for ISSP and other programs.” 

 

Raytheon Canada for its part is counting on the maintenance, repair and overhaul capabilities, which its 140 Alberta-based employees, supply to the army, navy and air force, to stand out in today’s demanding marketplace. Raytheon, which bills itself as an in-service support specialist, recently lead a WestDef conference on the subject. “The Prairie provinces have played a leading role in in-service support over the years and have the experience to raise the bar on how this is done in Canada,” says Valerie MacDonald, a Raytheon spokesperson. “We were particularly pleased to see ISS recognized in the Jenkins report as a key industrial capability.”

 

C4i Consultants: a new focus on training

One of the few defence industry sub-sectors that benefit in tough budgetary times is training and simulation.  A key player in the field is C4i Consultants, which designed and markets the MILSIM land, sea and air, battle simulation technology. “We thrive in this kind of environment, says Bruce Gilkes, its founder and president. “Many governments are facing the same challenges as Canada’s and we are seeing decent demand in overseas markets.”

 

Gilkes, who got his start working at General Dynamics, is a big backer of Canada’s industrial and regional benefits program, which he credits as the ultimate source of C4i’s success. “It’s a long line to draw,” he jokes. “But if the Canadian government had not given GD the IRB work, I would never have had the training and know-how to start my new business and the two dozen or so personnel we now employ in Calgary would be doing something else.”

 

Pelican Products is another example of a company that represents a large line of products developed in the United States, but which also tailors its value proposition to the realities of Canadian market.  The company also does a significant amount of research and development here in Canada. That includes the design of a new line cases to handle the transportation of temperature sensitive materials such as pharmaceuticals and vaccines. 

 

Overcoming challenges

Despite wariness about the Harper Government’s rampant defence cuts and its uncertainty about its commitments to sticking with its capital acquisition programs, one reason that few Alberta sector stakeholders, are willing to speak out is that they know things could get worse.

 

One has only to look at how Quebec, which returned relatively few Conservative members of Parliament, has been treated. The province has been left high and dry on major land (LAV upgrades) sea (NSPS) and air (JSS) contracts that been awarded recently. If the Justin Trudeau Liberals, which are currently leading in the polls eventually do take power, they are likely to have few or no seats from Alberta (where the Liberals have been traditionally weak for decades).

 

What that would mean for the province’s defence industry is anyone’s guess.

 

peter@peterdiekmeyer.com

 

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