Published in The Ploughshares Monitor Volume 35 Issue 4 Winter 2014
Canada’s military industry received record-breaking orders from domestic and foreign customers during fiscal year 2013-14, according to government sources. Prime contracts placed with Canadian-based companies by Public Works and Government Services Canada (PWGSC) on behalf of the Department of National Defence (DND) and by the Canadian Commercial Corporation (CCC) on behalf of foreign military agencies totalled $19,049,661,420 during the latest period (see Table 1).1 Previous annual totals for military prime contracts with Canadian industry have been less than one-fifth of this figure.
Most reported military orders go to Canada’s largest contractors (see, for example, Epps 2013). In the latest reported year the concentration was more pronounced, largely due to two contracts of unprecedented value. PWGSC awarded a total of $3,589,432,249 in prime contracts on behalf of DND during fy2013-14. As detailed in column 5 of Table 1, 17 of the top 20 Canadian contractors received contracts to supply services and equipment to DND totalling $1,564,629,046 or 44 per cent of the value of all Canadian-based DND contracts for the year.
Foreign orders were exceptionally concentrated for the year. CCC awarded 99 per cent of $15.5-billion in orders for military goods and services to its nine largest contractors (see column 4 of Table 1).
General Dynamics Land Systems Canada alone received 96 per cent of the total in the two largest contracts in CCC’s history. With a combined value in excess of $14.8-billion, these contracts dwarf all Canadian military contracts in living memory (Epps 2014). In fact, more than three-quarters of the value of all military prime contracts—both foreign and domestic—went to GDLS.
GDLS Canada won contracts to supply armoured vehicles and related services to Saudi Arabia. According to the federal government, deliveries to Saudi Arabia will take place over a decade or more, suggesting an average annual production value of at least $1-billion. Consequently, for many years to come the value of Canadian weapons shipments to Saudi Arabia will rival the value of arms exports to the United States, the largest market for Canadian military contractors for more than half a century.
A substantial majority of the top 20 military contractors of Table 1 also appeared in top rankings of the recent past. Twelve were ranked in the top 20 for 2012-13 (Epps 2013) and an additional four appeared at least once in rankings for the previous two fiscal years. Only four—Serco Facilities Management, Canadian Base Operators, Thales Canada, and Kelowna Flightcraft—were new this year.
Just six of the top 20 contracted with both CCC and DND, which suggests that significant distinctions between domestic and export markets remain. In particular, Canadian shipyards—Halifax’s Irving Shipbuilding on the east coast and Victoria Shipyards on the west—are dependent on DND orders; few Canadian shipyards receive orders from other states. Other major contractors, such as L-3 Communications Wescam in Burlington, GT Machining & Fabricating in Napanee, and Cascade Aerospace in Abbotsford, depend on export orders and do not appear to be significant suppliers to Canada’s armed forces.
Half of the top 20 provide primarily aerospace or avionics goods and services. MacDonald, Dettwiler and Associates of Richmond was the sectoral leader during 2013-14, receiving major DND contracts to supply Raven “unmanned aerial vehicles” and to process surveillance data from RADARSAT satellites. L-3 Communications Wescam, the next ranked aerospace company, contracted to supply electro-optical systems for surveillance and targeting in U.S. military aircraft. Wescam was followed by Edmonton’s Canadian Helicopters, which was contracted to deliver helicopter services to the U.S. Air Force for the North Warning System.
A significant group at the top provides “contracted-out” services to DND. Fifth-ranked Calian Ltd of Ottawa provides medical services and sixth-ranked Serco Facilities Management received a contract extension for “site support services” at Canadian Forces Base Goose Bay. Canadian Base Operators will provide support services to military bases across Canada. Discovery Air Defence Services received DND prime contracts to train air force pilots.
The exceptional volume of military contracts is unlikely to be repeated in the near future. Less certain is whether this year represents the beginning of a trend to greater industry dependence on orders beyond North America.
1. Canadian companies received additional military contracts, many unreported. These included subcontracts with foreign (primarily U.S.) military contractors and prime contracts awarded by foreign governments that did not involve the CCC. Although exact values are not known, the additional contracts would add hundreds of millions of dollars to the reported total.
Epps, Kenneth. 2014. New facts confirm unprecedented size of Canadian arms sale to Saudi Arabia. Blog, Project Ploughshares website, July 22.
—–. 2013. Largest Canadian military contractors, 2012-13. The Ploughshares Monitor, Winter, pp. 4-5.