Industry Committee on Oct. 26th, 2016

[Desmond Gray]

Thank you for that.

I can certainly answer some of them; I may have to come back with a response on some of the others.

In terms of the Build In Canada innovation program, that was begun, as I mentioned, five years ago as a pilot.

Essentially, if you think about procurement traditionally, procurement says, “Tell me what you want. We'll write a statement of work and we'll go out and buy that thing that you know you want.”

This was just the opposite. We did it on an annual basis; we had an annual call. We essentially said, if, as a Canadian business, you have an innovative idea, bring forward your innovation. We do it now for both military and non-military goods and services. You apply online; it's all electronic, with no paper, and now it's 24/7, you can apply any time. Innovation never sleeps, so you shouldn't have to wait a year on the cycle of procurement to bring your innovation in. We changed the program because innovators told us that's what we had to do, and they're absolutely right, so we've done it.

The other thing is that when they come in, they have highly specialized technical people. We work with IRAP, which is part of the NRC. They look at it and we challenge it to see if it is truly innovative. Software that goes from version 6.1 to 6.2 is not likely to be innovative. It has to be a really significant innovation.

Then, once we have reviewed it and we say it's innovative, we move you forward in the process. You've been identified as an innovation and accepted into the program. The next step is we have to work with that company or innovator to find a champion department. It's like a harmony program. We try to match a company, an individual, with a government department. We post it on our website, where it's all very public as to who's in. We work very strongly with the other government departments through the people in our office to find matches. Sometimes it's very obvious as to where it would go.

To give you a sense of the scale after five years, I can essentially give you the numbers for all the companies that have come in. Since we were launched, we've had 272 pre-qualified innovations come through. We've awarded 205 contracts worth $72 million; 96% of these were SMEs. Many of them have never done business. They're smart in innovation. What they're not smart at is business, finance; they never did a business plan. For many of them, their first introduction to the business model is coming to our program. Our program is designed not to be critical, but to provide support, help clarify, give examples, and make it easy for them to get through, and to help them find a match.

Then when they get into the program itself and they're actually in the test, we buy that innovation. We buy it and we place it in that testing department. We establish a test plan with both the testing department and the innovator, and we also do the procurement, because we're actually buying that product for the department. They do the test plan. I can give you examples.

It was mentioned earlier that the impact of first sale to a Canadian government is huge. We've had companies that, even though they hadn't actually completed the test, have been literally able to get opportunities abroad because, in fact, the Government of Canada had already taken this product this far. I can give you examples of companies that have grown into a tremendous success story, and they've told us this. One of them I'll just raise for you. It's called Aeryon Scout, from Waterloo, Ontario.

[The Chair, Liberal, Dan Ruimy]

Actually, could I get you to send that to us, to submit it?

[Desmond Gray]

Yes, I will. I'll send you a lot of these. It's pertinent information.

[The Chair, Liberal, Dan Ruimy]

That would be great, because we're out of time. We're going to move on.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Perhaps you could also send the information on the carbon tax implications as well.

[The Chair, Liberal, Dan Ruimy]

Send it to our clerk, and we'll get it to the whole committee.

Thank you very much.

Mr. Sheehan, you have five minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much.

Thanks to all the presenters.

My first question is for Mr. Halucha. Throughout the manufacturing study, we heard in particular steel witnesses talk about dumping, and you talked about trade.

What can Canada do to strengthen our response to unfair trade? In your opinion, what has happened, and what could be done?

[Paul Halucha]

That's a very good question, and I think it's a really important question. I had the opportunity to meet with representatives from Canada, the United States, and Mexico in Ottawa the week before last who were here to discuss exactly what we can do in a coordinated way, because it's obviously not just a Canadian problem. In fact, if the steel comes into Mexico and enters the North American market that way or through the United States, it's as big a problem as if it landed in Canada.

In the last two budgets, the governments identified that it will be making improvements to the rules around CITT. There have been challenges with the speed, and that's what I've heard. It's the speed of the response from the federal government once it has been identified, and also what the level of harm is. In both cases there have been changes made to the CITT to reduce the level of harm that actually triggers a response to keep the product off the Canadian market and the speed at which they can move.

I frankly think there's more to do in this space, and we've been active internationally as well in the OECD and in other forums to work with other countries that are suffering from the same kinds of issues to put pressure on those countries. The only real solution here is actually reducing the supply on the market, particularly from countries that can dump it onto the market, not have to worry about the profits, and not have to worry about making the money back because their objective is actually just to keep those plants operational. They never have to worry about what the bottom line is, and so that's the real focus.

I think it's going to be an ongoing challenge, and I believe the government will continue that focus throughout its mandate.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much.

My next question is for Mr. Gray. You mentioned the Build in Canada innovation program in your opening remarks. Of course, our government is very interested in the innovation agenda and helping small and medium-sized enterprises to succeed. How can we grow this program to help more SMEs grow and succeed, and what kind of outreach does your office do to inform SMEs about this program?

[Desmond Gray]

Thank you for the question.

To be honest, the program has grown slowly but surely since it was established in 2005. When we first began, we had a very moderate amount of money. It was $15 million. Last year we had $30 million. This coming year we'll have $40 million. Of course, part of our review was to ask what the right amount of money is.

We're working with our colleagues in ISED. We're working with NRC and seeing what the opportunities in Canada are more broadly.

I guess my comment comes down to looking at the American model. The advantage of the American model is—and I'm just reading back into it 35 or 40 years ago—that when they looked at spending, they recognized the need to align R and D to economic output or commercialization. They're not afraid of failure. You cannot do innovation without having failure. The Americans have lots of it, but they also have huge successes.

For example, one of their programs that began in SBIR was a very small company called Qualcomm. They began with an SBIR grant, and today they have a capital value of $140 billion in the marketplace, a global leader.

Out of these programs there are many that don't succeed, that don't get past phase one. Some go through phase two. The great opportunity in the American model is that once they get to phase two, that good or service can then be purchased without any further competitive process by U.S. government departments, which means it becomes hugely attractive both for the company or the department that sponsored them, but also it then allows them to leverage economically both in the United States and globally.

It attracts partners because they're at the point of commercialization. Angel investors come in and say, “Okay, the risk is down.” We're looking at these kind of things to see how we can advance this in Canada.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Can you provide some examples of some of the companies that have scaled up because of the BCIP?

[Desmond Gray]

Yes, I can.

The one I was just speaking about, Aeryon Scout, has told us that since participating in the BCIP, the company increased from about 25 to 75 employees. They also said they're testing with DND, the sponsoring department. It enabled their business to open new markets for their technology with recent sales to the United States military, South Korea, and several other countries.

Another one is ULG-100, by 2G Robotics, again from Waterloo, Ontario. Through the BCIP, they developed an underwater laser scanner. It was successfully tested by Defence Research and Development Canada for them.

This is another example of being in the midst of something and somebody else says they think it's a great idea. In the midst of all of this—I don't know if you remember when the Costa Concordia sank—the Italian government asked for this innovative company to bring over this product, and it was used to help salvage the Costa Concordia.

[The Chair, Liberal, Dan Ruimy]

Thank you. I'm going to have to cut you off there.

Mr. Garrison, you have two minutes, please.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Thank you very much, Mr. Chair.

It's strange when we have only two minutes here.

I want to talk some more, and hopefully we have enough time—

[The Chair, Liberal, Dan Ruimy]

You have five minutes.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

—for me to get five minutes again, probably.

I want to ask about one piece of the shipbuilding strategy, which is going to be out of context here.

When it was originally being done, there was talk of somehow allocating some work or some of the subcontracting so that smaller shipyards could participate so that we were not just developing two big shipyards, but we were also keeping that capacity.

I know the Victoria Shipyards in my riding have done a very good job of attracting cruise ship refit in the gaps between the military work they do.

What's happened with that discussion on the shipbuilding strategy about trying to make sure that shipyards like Point Hope, which is just outside my riding, or Nanaimo Shipyard, can participate in some way in the manufacturing?

[Jeff Waring]

I'll start.

The national shipbuilding strategy is a package that will work for large vessels, and that's been awarded to Irving as well as Vancouver Shipyards. All small ships will go to all other shipyards in Canada, meaning not to Irving or to Vancouver Shipyards.

In addition to that, competition for the long-term and service support contracts for the federal fleet will go out to Canadian companies, so those are other opportunities for all shipyards to potentially compete for future work.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Is there any barrier to some of the shipyards being subcontracted in the large packages?

[Jeff Waring]

Into the existing contracts...?

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Yes, like the Seaspan contract. Is there a restriction on them if they choose to subcontract some of that work? In my riding, if Victoria Shipyards or Point Hope has technology to install in a ship and can do that, is that completely Seaspan's decision?

[Desmond Gray]

We think the answer is that you're correct and there is no restriction, but I'd like to double-check and I'd like to bring a clear answer back to this committee.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

That's great. Thank you.

[The Chair, Liberal, Dan Ruimy]

We would very much appreciate that.

We have enough time for five minutes for two people.

Mr. Garrison, you have five minutes, and you guys will have five minutes.

We're going to move to Mr. Baylis for five minutes.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Mr. Chair, I'll split my time with Mr. Longfield.

I have three or four questions, moving completely to another area: international treaties for intellectual property.

Mr. Halucha, this is an area that could have tremendous impact on the productivity of our companies. I'm speaking specifically about the Madrid agreement with respect to trademarks in the PLT, the patent law treaty agreement.

I believe 98 countries are signatories to the Madrid agreement. Why is Canada not a signatory yet, and what can we do to expedite that?

[Paul Halucha]

We haven't signed the treaties because we're not in a position to implement them at this point. This principally comes down to the IT changes that need to happen at our intellectual property office to allow them to connect into this global network.