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Vanguard DecJan2016_digital

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

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t teCHnology WATCH 36 DECEMBER 2015/JANUARY 2016 fleet's inception. The company's Calgary facility focuses on maintenance, repair and overhaul of the helicopters. Over 85 helicopters continue to be ser- viced. There is a large network of Canadi- an suppliers that continues to benefit from the program. Over 20 years sustaining an entire business maintaining one program is a lot of longevity for Canadian business. I met up with Mike Mallon, CH146 Material Support Lead for BELL Helicop- ter on the same trip. Mallon reiterated that BELL has had a long-term involvement in the local econo- my in Calgary as well as across Canada in order to maintain that fleet. The program has created jobs in order to sustain the supply chain over the last 20 years. And it's a similar story when it comes to Raytheon Canada, which again has been located right down the street for decades. "In-Service Support of DND's equip- ment is a key component to ensure the Canadian Forces can perform their role in a cost and operationally effective man- ner," said Terry Manion, vice president and general manager, Raytheon Canada Limited. For Canadian industry, ISS pro- vides a critical opportunity to participate in the provision of long term support and technology improvements to high tech defence systems translating into long-term sustainable jobs in Canada." Another major foreign OEM, Lockheed Martin, commented on its role as the Sin- gle Point of Accountability for the Gov- ernment of Canada with its performance based In-Service Support (ISS) contract for support of the 17-ship CC-130J fleet. "The experience that Lockheed devel- oped as the original equipment manufac- turer (OEM) over the life of the Hercules program — which is more than 60 years old and has produced almost 2,500 aircraft — provides the company with a unique position to provide unprecedented support with unparalleled knowledge and insight inherent with being an OEM. It's through this knowledge and within these insights that we are able to provide our operators, in this case the Royal Canadian Air Force, with real-time information and solutions that keep its fleet healthy and ready to sup- port any mission, anywhere, at any time," according to Toni Lepone, Head of Com- munications, The Americas for Lockheed Martin. That program has had a wide- reaching involvement with suppliers across Canada including Cascade, IMP, CAE, Standard Aero, Rolls-Royce Canada, GE Canada and Sonovision. Longevity is great and being successful based primarily on "still being around" is good, and I imagine quite profitable. But what else? What about higher margin work, higher tech with unique IP that is exportable? Work to SMEs that are nim- ble, quick and innovative? 2) Profit Besides doing something for a long time, why else would you continue to do some- thing then if it's not for a good time? Could it be possible that In Service Support contracts are equivalent to razor blade sales for Gillette? Do ISS contracts have higher margin and therefore are much more profitable endeavours then standard acquisition contracts? I didn't get into those details with our interview subjects, but based on some pricing models I have personally used in past capture programs that I bid on in my previous life as a capture lead, we often buried most of our profits in the ISS work. Even at OMX, we take big losses up front selling $90/month/user subscriptions to our platform, but after 5 years, it all starts to make sense, which is the same for most SaaS (Software-as-a-Service) subscription models today. Even when the Canadian company is not the prime on ISS work, the numbers show that significant money has flowed to Cana- dian industry from foreign ISS contracts. Boeing contributes more than US$1 billion in economic benefit to Canada each year for instance, and has completed US$6.5 billion in industrial and regional benefits programs in the country, with six major work packages underway as part of the company's commitments for in-service support of Canada's medium and heavy lift aircraft. Boeing also works with Canadian companies for ongoing support including training systems, landing gear and MRO, among other things. Canadian companies like Bluedrop Training & Simulation and CAE offer expertise that complements Boeing's products in support of Canada, which continue to benefit from new op- portunities to collaborate with Boeing. Lockheed I imagine has similar impacts, as well as the other foreign OEMs. 3) Security World Trade Organization (WTO) policy justifies the allowance of offsets as national security exemptions under the premise that every country has the right to protect its own defence industrial base. That thinking would lead me to argue that if a nation state should be self-sus- tainable to develop its own defence equip- ment, then it could be almost more impor- tant for countries to have the capability to service and maintain its existing fleet. By lacking this unique IP and capabili- ties, a country could be smacked at the back of the knees with a baseball bat very quickly, grounding fleets and halting our ability to respond to threats or support al- lies abroad. And so by that logic, can't we argue that a country is safer when it con- trols its own ability to maintain and sustain its defence related equipment? I spoke to Lockheed Martin about its role in ISS in Canada, and the company empha- sized that it was critical for them to have transferred the necessary Intellectual Prop- erty to Canadian industry under license, and receive all relevant export approvals in order for Canadian industry to not only maintain their own fleets, but be positioned as key operators in global fleet manage- ment. This not only promotes long term, successful Canadian industry in ISS, but to protect our ability to operate successfully to keep Canadians safe at home and abroad. 4) Strong value Proposition to Canada: SMe technologies in global value Chains When I started digging for Canadian tech- nologies in In Service Support, it didn't take me long at all. Big and small, from "one of the strengths that we have, and have seen in other Canadian companies, is the ability to stretch out the life of our equipment by addressing obsolescence problems." Jim — Gillespie, Director of Programs, for Harris Canada Systems, Inc.

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