SADI to ramp up aerospace and defence assistance with $200 million in new funding

The Conservative government has followed through on its 2008 election pledge to inject $200 million over four years into the Strategic Aerospace and Defence Initiative (SADI) program, boosting the funding available annually to as high as $300 million. The cash infusion begins in 2010 and complements existing funding of $900 million that was allocated for 2007 to 2011.

To date, SADI has committed about half of its initial funding allotment ($424 million) to 12 projects, with more than half going to CAE Inc to support Project Falcon, an ambitious $714-million, five-year R&D program to diversify the Montreal aerospace firm's product and service lines (R$, April 16/09). To date, that investment has leveraged approximately $700 million in private sector funding for a total of more than $1.1 billion in investment.

While no funding has been repaid as yet, the program is now firmly entrenched in the innovation cycle of Canada's aerospace and defence as well as the space and security sectors, with a healthy pipeline of large and small projects currently under consideration.

SADI is designed to increase innovation within the aerospace and defence sectors, leading to commercialization of key technologies and enhanced competitiveness by bridging private sector R&D with research emanating from academic institutions and research centres.

"The pipeline has grown over the years … With this $200 million, we are able to help even more as we're forecasting more demand," says SADI executive director Sylvain Laporte, the fourth executive director in as many years. "The table is set for those benefits to be realized. "

SADI was established in 2006 following the cancellation of Technology Partnerships Canada (TPC) which served as Canada's premier business assistance program for a decade. From its inception in 1996 to its cancelation, TPC invested $2.9 billion in hundreds of projects in a wide range of sectors, which specialized in programs targeting the early adoption of hydrogen technologies, biotechnology and smaller firms in conjunction with the Industrial Research Assistance Program. While those programs are no longer active, the projects they helped to fund remain ongoing. As of May/09, 241 TPC projects remained active and total repayments have now reached nearly $470 million — $84.3 million in FY08-09 alone (see chart). Repayment revenue streams are anticipated for decades to come.

"The (sunsetted) programs are going to be in play in the work or benefits phase up to 2035," says Laporte. "

TPC came under intense criticism, particularly from the Conservative Party (then in opposition) and its predecessors, the Canadian Alliance Party and the Reform Party. The criticism prompted changes, the most significant of which was the calculation of repayment terms. TPC adopted the practice of basing repayment on gross business revenues as opposed to revenues from relevant product sales. Repayment period s were also moved up, from the time products began to generate sales to the end of the R&D projects being supported.

SADI continued applying the new terms and introduced other minor changes to accelerate payments from its investments (like TPC, SADI assistance is made in the form of interest-free, repayable loans). Laporte says that while repayment of SADI loans is obviously a major component of the program, there are other aspects which take priority.

"It's more about impact and the benefits we create," he says. "The mandate of SADI is … improving and increasing innovation in Canada. This leads to commercialization and companies become more competitive."

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