Industry Canada

Industry Canada

March 25, 2010 10:42 ET

Minister of State Lebel Welcomes Investments in Quebec

LONGUEUIL, QUEBEC,--(Marketwire - March 25, 2010) - The Honourable Denis Lebel, Minister of State (Economic Development Agency of Canada for the Regions of Quebec), on behalf of the Honourable Tony Clement, Minister of Industry, today welcomed the news that Lockheed Martin is providing contracts worth more than US$619 million to businesses in Quebec for work on the C-130J Hercules tactical airlift fleet as part of its commitments to Canada under the Industrial and Regional Benefits (IRB) Policy.

Minister of State Lebel and representatives of Lockheed Martin made the announcement in Longueuil, Quebec, at Héroux-Devtek Inc., a leading landing gear, aerostructure and gas turbine components firm that will be providing landing gear assemblies for the CC-130J.

"The contract for the Super Hercules fleet is good news for Quebec's aerospace and defence industries," said Minister of State Lebel. "The combination of work generated by the acquisition of these airlift and the in-service support translates into jobs, investment and access to global value chains for Quebec companies."

This is one of many Lockheed Martin announcements for contracts related to the C-130J Hercules, under the IRB commitments. To date, Lockheed Martin has provided eligible work transactions totalling US$1.5 billion in all regions of Canada. The aerospace company will be announcing the remainder of its IRB obligation — for a total of US$2.3 billion — in the ensuing years.

For Quebec, the US$619 million represents the combined identified acquisition and in-service support contracts to date. Announcements are planned in the days ahead to highlight similar benefits to all regions of the country.

"Quebec-based firms have been major beneficiaries of the IRB Policy, and we fully expect that to continue," said Minister of State Lebel. "My colleague at Industry Canada will continue to work with Lockheed Martin to maximize benefits to Canada for years to come."

These contracts will provide the Canadian Forces with maintenance for its new C-130J aircraft and generate further high-value work for Canadian industry. The contract for the 17 C-130J aircraft was originally awarded to Lockheed Martin in December 2007. Deliveries of the aircraft fleet to the Canadian Forces are expected to begin in June 2010, six months ahead of schedule.

Backgrounder

Canada's Industrial and Regional Benefits Policy

CC-130J Hercules Airlift

A Cornerstone of the Government's Procurement Process

The Industrial and Regional Benefits (IRB) Policy is an important element of the Government of Canada's overall procurement process for major defence and security purchases. The IRB Policy enables the Government of Canada to leverage major investments in military equipment to encourage long-term industrial development and significant economic activity here in Canada.

Industry Canada is responsible for the administration of the IRB Policy, in collaboration with Canada's Regional Development Agencies. Industry Canada works in partnership on procurement projects with Public Works and Government Services Canada, which oversees the procurement process, and with the Department of National Defence, which establishes the technical requirements and is the end user of the procured equipment.

IRB Objectives

The IRB Policy requires prime contractors to work with Canadian firms or make investments in the high-tech sectors of the Canadian economy, in an amount usually equal to the value of the defence contract they have won. The Policy operates on two guiding principles: first, to ensure that the requirements of the Department of National Defence are met, and second, to ensure that IRB transactions make business sense to the prime contractor.

The IRB Policy strongly encourages prime contractors to select their Canadian partners based on what makes the best business sense, with the goal of generating long-term, sustainable business relationships in Canada. These strategic relationships stimulate the Canadian economy while helping to ensure a more competitive Canadian industry. The long-term focus of the IRB Policy provides Canadian companies with an opportunity to develop and apply their own strengths and competitive solutions and to take advantage of real business opportunities that will last years beyond the initial IRB commitment.

Experience has shown that the IRB Policy is a good catalyst in exposing large defence companies to the capabilities of Canadian companies, particularly small and medium-sized enterprises. The IRB Policy creates opportunities for Canadian companies, of all sizes, to display their capabilities and offer their products to international customers.

IRB Requirements

The IRB Policy states that, as a condition for being awarded a major defence contract, winning bidders must provide Canada with new business activities equal to 100 percent of the contract value.

The IRB Policy recognizes both "direct" and "indirect" types of business activities. Direct IRB are goods, services or investments that relate to the item being procured by Canada under the contract and direct global value chain work on strategic international fleets. Indirect IRB are goods, services or investments related to the contractor's other product or business lines or other approved investments that meet the established eligibility criteria. Both are measured for their Canadian content value (i.e., Canadian labour, goods and services).

The Government of Canada does not force winning bidders to do business with specific Canadian companies. The government asks them to identify and undertake high-value business opportunities in Canada that make good business sense to all parties involved.

Improvements to the IRB Policy

On September 24, 2009, the Minister of Industry announced improvements to the IRB Policy to better seize opportunities and drive more investment into Canada's aerospace and defence sector:

  • Attract substantive investments, global product mandates and world-leading research and development activities
    To attract more strategic investments to the country, the government will require prime contractors with major IRB obligations to develop a strategic plan for achieving their IRB obligations in Canada.

  • Promote Canadian firms' participation in global value chains and allow banking of IRB credits
    The new approach will leverage Canada's defence procurements to provide Canadian firms with access to ork on global value chains by acknowledging in some instances the value of work on foreign assets as equivalent to work on the assets purchased by Canada. Recognizing that private sector business planning and production cycles may not align with Government of Canada procurement cycles, banking of IRB credits will also be allowed to secure new business opportunities in a timely manner.

  • Recognize the value of innovation-based business relationships
    More emphasis will be put on innovation and commercialization-related activities.

CC-130J — Hercules Tactical Airlift

Tactical airlift is the lifeline of deployed forces, transporting equipment, troops and supplies to, within and from a strategic area of operations.

Strategic airlift is different in that it is the rapid transport of a large number of passengers and/or oversized heavy cargo over long distances within Canada or between Canada and a theatre of operations. For example, the Canadian Forces Disaster Assistance Response Team requires the use of strategic airlift to deploy on humanitarian aid operations.

Lockheed Martin

CC-130J IRB Announcements

The Government of Canada recently adopted an in-service support package for the CC-130J Hercules, which will provide high-value work for Canadian industry through the IRB Policy, while providing the Canadian Forces with maintenance for one of its most valuable fleets.

The IRB requirements for in-service support are 100 percent of the eligible contract value, measured in Canadian content value. For the in-service support amendment to the contract, Lockheed Martin has provided, to date, eligible work transactions totalling US$617 million as part of its IRB commitments.

The contract for the acquisition of 17 C-130J Hercules Tactical Airlift was originally awarded to Lockheed Martin in December 2007 and valued at approximately $1.4 billion. In January 2008, four regional Government of Canada IRB announcements were made highlighting regional benefits generated by the Lockheed Martin C-130J contract.

In-Service Support (ISS)

The ISS amendment includes high-quality work for Canadian companies such as third line (heavy) maintenance; engine maintenance, repair and overhaul; warehousing and management of inventory; maintenance training and engineering support. This package is complemented by global value chain business for Canadian firms in areas such as simulation and training, among others.

For more information on Canada's IRB Policy, a description of ongoing and future federal procurements subject to the IRB Policy, and the phase-in plan for the enhancements to the IRB Policy, please visit the IRB website (www.ic.gc.ca/irb).

Contact Information

  • Office of the Honourable Tony Clement
    Minister of Industry
    Lynn Meahan - Press Secretary
    613-995-9001
    or
    Industry Canada
    Media Relations
    613-943-2502