Vanguard Magazine

Aug/Sept 2014

Preserving capacity, General Tom Lawson, Chief of the Defence Staff, Keys to Canadian SAR

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Page 24 of 47

e eXeCuTIVe INTERVIEW AUGUST/SEPTEMBER 2014 25 Q Does an emphasis on value proposi- tions and ITBs change the nature of partnerships? Could it force OEMs to delve a little deeper into the SME com- munity to fi nd that high value Canadian content? I think so. That's why I look at it in a very optimistic way. But we don't really know yet and the devil is always in the details of the execution. I fi rmly believe we need to have this discussion within industry early. This is not specifi c to anyone com- pany, this is applicable to everybody. As a Tier 3 SME, when I look at this process, I see a good opportunity if the thought leadership is there and the response to that discussion is accepted by the OEMs and by the procurement agencies. Then I think you will see the OEMs do exactly has you've highlighted – dig deeper, fi nd those value propositions – which is exactly what we need as SMEs. Q What is your ideal model for that? The most valuable thing that an OEM can do for an SME in Canada is help get them into their global supply chain. It's very hard for anyone except the Tier 1s and the OEMs to go international directly. Selling to NATO countries directly for SMEs is very diffi cult. So the ideal model in my world is one in which a service or product is developed to satisfy a Canadian requirement and is then applicable to the OEM or supplier's business opportuni- ties, and it becomes part of their supply chain. In our instance, it will be building a simulator that solves a Canadian problem that also has applications for an OEM's aircraft training elsewhere. To me, that is the highest value creation. The DPS talks about leverage; that is the ultimate lever- age. But to get there you need a lot of co- operation. Q What gets you to that ideal? I think this kind of discussion we are hav- ing now is what needs to happen. We can't expect the government to do all the work for us. We in industry have responsibilities to articulate what we think should happen and how it should be shaped. I think the government has given us the framework. We always complain when they get too specifi c and don't listen, so now they have said, here's the framework and I believe their consultative process is asking, what do you want to do with it? Now is the time for thought leadership, for discussion, and we as industry representatives need to set aside our personal corporate interests and think about the right things to do for the industry as a whole. Q If the DPS is about early engagement, can you leverage your existing IRB rela- tionships to defi ne what ITBs will be? I think we are still operating under the old IRB framework; we can't forget that there are about $23 billion worth of IRB com- mitments still out there. So we should be using those IRB programs as an early step transition into ITBs because ITBs are go- ing to take a little time to come through. ITBs are a positive step, but it will be complicated and slow. As a company, right now we are thinking IRBs more than ITBs – getting that early engagement with OEMs, learning how to work together in a complex world of IRBs, and then together shaping the relationship for ITBs – so I think it is time to get the ITB framework discussion active. Q You have seen the fi rst iteration of the Defence Acquisition Guide. Is it useful? For a small supplier like us, I don't know that it is that helpful yet. We are more fo- cused on making sure we are on the right teams. The practice of pushing everything to the right on procurement is probably more of a concern to us. But I think it is a bold statement by the government and the right direction. It will be an evolutionary process. Q Does knowing a bit about the programs of interest to the Forces help identify potential partners and relations you need to pursue? It is extremely useful on that front. We are seeing a shift. The air force was very active for a number of years and, in our instance, we were very active on the C-130 pro- gram, the Chinook program and now on the maritime helicopter program. Now we are seeing a shift to naval procurement – some of the biggest in Canadian history – so our strategy and our partnerships have, no question, shifted toward that. Q As an SME, what else would you like to see? I think we are still missing the boat on technology demonstration programs. That is what gets exports. You need to have demonstrated your technology or product at home and it needs to be certifi ed and tested. There are a lot of good projects out there that are not huge, that don't fall un- der major procurement programs, that I think are getting overlooked. Q Would an increase in the delegated authority above the current $25,000 level, as indicated in the strategy, help with that? I think that should be expedited. Smaller projects need more fl exibility in procure- ment. These are not a lot of money, and they are often export oriented. You need millions, not tens of millions. It is not go- ing to upset the marketplace, it's not go- ing to skew anything. It is going to give smaller companies the opportunity to sell their fi rst product. As important as the sale and revenue are, it is more important in many ways to having that customer refer- ence, to have your product installed, test- ed and validated for foreign sales. Q What needs to happen next for this to be successful? The engagement process the government has initiated is important. I also think that industry has a responsibility to get their act together and take advantage of the op- portunity. Finally, there needs to be some kind of OEM arrangement that maybe connects the OEMs with the SMEs to try and fi gure out what this means. I think the work that CADSI does is critical, but I also think people like myself need to get out there and communicate, communicate, communicate what we need.

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