Gordon Harling is President and CEO of CMC Microsystems, headquartered in Montreal.

Canada’s small and medium-sized businesses face several challenges in defence procurement.

The federal government has committed to spending much more on defence, with the aim of making Canada’s industries more resilient, ensuring sovereignty, and boosting GDP.

Many dual-use projects could provide benefit to the public in emergencies (fire, floods, storms) as well as provide security for Canada. These projects may require a multi-disciplinary blend of technologies from different providers while also providing training for highly qualified personnel.

Defence procurement is long and difficult. The process can include obtaining security clearances and controlled goods registration, as well as cybersecurity and quality systems registration.

According to The Icebreaker defence tech newsletter, procurement processes are so opaque that 38 percent of interested entrants say they plan to hire external consultants just to navigate the processes.

Despite the willingness of the Canadian government to simplify procurement, there is a significant cultural gap to bridge between the industrial – especially small and medium-sized businesses – environment and the Department of National Defence.

A BDC-Icebreaker report released last month found that many SMEs still face significant barriers entering and growing in the defence sector: challenges securing capital, hiring, navigating complex procurement processes, and meeting defence-specific regulatory requirements.

SMEs represent 92 percent of all businesses in Canada’s defence sector and 40 percent of its employment. The backbone is under-resourced and under-supported.

The problems include:

• Military personnel are not in the habit of divulging what their real needs are since it could identify weaknesses in their own capabilities.
• Companies need revenue to sustain their operations while they work through the defence procurement process. Having systems in the field with early adopters will allow them to gather data on their solutions.
• The dual-use funding in place now typically pays for prototypes but not for testing, modifications, or production. Funding is needed to get units in the field and to support product trials.

The solutions

Many of the solutions with the most impact require advanced technologies such as microelectronics, photonics or even quantum. Any growth in the industry must be supported by training highly qualified personnel.

Increasingly, artificial intelligence and advanced sensors are critical components for drone-based systems. Any solution must involve support for training, design, and prototyping of advanced components and systems.

Given that we don’t have a clear description of the needs of the military, we should not select technological solutions, but rather describe a challenge, and then fund several different technological approaches to a solution.

Improving and advancing technologies will always carry benefits, and defence can choose the solution which meets their (unstated) needs.

Examples of such challenges may be how to find people in an environment where visual detection is impaired, how to identify or track objects underwater, or how to harvest energy in harsh environments.

Despite a willingness on the part of government to simplify defence procurement there is a major cultural barrier to open discussions.

Companies that rely on sales to defence must invest heavily up-front prior to a sale. The Defence Innovation Secure Hubs and innovation test programs offer some funding and operational sandboxes with lower barriers to demonstrate prototypes, but they do not pay for the time of the technical staff to demonstrate a prototype or the time and materials required to modify it to the needs of defence.

We must subsidize the development of Canadian products with a view to serving search and rescue and First-responder organizations. Having the projects selected by a third-party committee of industry experts and defence personnel can ensure that they are viable solutions to the challenges and will meet the needs of both. The most effective program would be one that can:

• provide training in the design, prototyping, and manufacturing of advanced technologies to ensure the continued growth of the industry.
• provide technical support to companies that require supplementary expertise to complete their projects.
• provide efficient management of the funds to be disbursed with protocols that are manageable by SMEs, preferably not by a government or defence agency but by a third-party not-for-profit with appropriate resources.

Subsidies that are stackable with SRED tax credits and IRAP grants are the most attractive financing since they are non-dilutive and extend the company's cash runway. Early sales to civil emergency authorities will help the company survive long enough to become a success.

Where appropriate, the defence procurement process should be simplified and made more accessible to Canadian SMEs by providing incentives, and especially by applying the Buy Canadian policy.

We must also support training and prototyping for both academics and small companies so that they can create robust, efficient, and cost-effective solutions.

Canadian SMEs can compete in defence procurement – if there’s a level playing field.

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