The House of Commons Industry and Technology committee met to study Canada’s defence industrial strategy. Appearing as witnesses were Jason Jacques, Interim Parliamentary Budget Officer, and Christopher Penney, Senior Advisor, from the Office of the Parliamentary Budget Officer; Robert Asselin, CEO of U15 Canada; Alexander Salt, a Triple Helix Post-doctoral Fellow appearing as an individual; and Richard Borger of ACME Testing and Consulting.
Jason Jacques and Christopher Penney presented the PBO’s analysis of the Industrial and Technological Benefits (ITB) policy, finding that from 2015-19, transactions totalled $18.3 billion, with almost half not directly related to military equipment production and only about one-third going to Canadian-owned firms. Jacques noted that the PBO’s economic outlook did not include the NATO 5% defence spending target due to uncertainty around dual-use infrastructure eligibility, and he warned that Canada faces a challenging fiscal situation with an upward debt-to-GDP trajectory, requiring trade-offs between spending and revenue. Penney added that the PBO is working on a new report on the fiscal impact of reaching the 5% target, and he suggested that metrics like delivery timelines and cost overruns could assess the defence industrial strategy’s success, while noting that only 12% of ITB economic activity goes to SMEs.
Robert Asselin argued that economic and national security are now inseparable, and that Canada’s failure to link research to deployment has been a key weakness. He recommended that the new BOREALIS defence innovation platform be modelled on DARPA, with a focus on high-risk, high-reward research and a clear continuum from funding to public procurement, and he stressed that universities are not designed to commercialize research, so other entities must bridge that gap. He disagreed with the idea that universities should be responsible for commercialization, emphasizing that the ecosystem needs separate institutions to translate ideas into corporate applications.
Alexander Salt observed that civilian tech start-ups, not traditional defence contractors, are driving innovation in dual-use technologies like AI and robotics, and that Canada’s procurement system is too slow and risk-averse to keep pace. He recommended establishing a not-for-profit venture capital fund to streamline investment in dual-use start-ups, reforming or replacing the IDEaS program with a formal defence accelerator, and diversifying international R&D partnerships. He also called for better data on the SME ecosystem and a clearer definition of sovereign Canadian companies.
Richard Borger recommended reviewing the Innovation Solutions Canada testing stream to normalize third-party evaluators, increasing use of NATO DIANA testing centres, repealing the ITB policy, implementing dynamic procurement strategies with delegated authority to lower management levels, and promoting an innovation-forward mandate within DND. He argued that the ITB policy is murky and often exploited by primes, wasting SME time, and that delegating procurement authority would speed up contracting, noting that delays of six to twelve months are common and that service standards should be enforced.
The committee also heard questions on fiscal sustainability, with Jacques confirming that the $68.5 billion deficit projection includes 2% defence spending but not the 5% target, and that the government’s new capital/operating budget approach is a unique made-in-Canada model that raises transparency concerns. No procedural debate, motions, or votes occurred during this meeting.
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