Thank you, Madam Chair.
It's a pleasure to appear before the House of Commons Standing Committee on Industry, Science and Technology, and to share Rheinmetall Canada’s view pertaining to the study of the development and support of the aerospace industry and the defence sector writ large.
Briefly, Rheinmetall Canada is part of Rheinmetall AG, based in Germany, and has been active in Canada for 35 years. The group has over 25,000 employees worldwide, including approximately 450 in Canada. Our workforce is highly skilled and educated, and we are proud that approximately 11% or our employees are former Canadian Armed Forces personnel and active reservists.
As a system integrator, we provide Canada with various vehicle integration capabilities, electronics and weapon systems. In recent years we have expanded to robotics with unmanned ground vehicles and aviation solutions with a newly established business line for air start units, which are used by both military air forces and commercial airliners.
Our current customers include the Canadian Armed Forces and the Canadian Coast Guard. We are also executing contracts in Europe, the Middle East, the U.S. and southeast Asia, all from our Canadian-based facilities.
Rheinmetall Canada has a global supply chain. Over the past five years, we have done business with suppliers from more than 35 countries as well as with Canadian suppliers from coast to coast to coast. In the past year, we have used over 500 Canadian suppliers in eight of the 10 provinces.
Our domestic economic footprint has resulted in over $1.3 billion in industrial benefits to date. We passed the first billion dollar mark in the spring of 2016. At the time, we were only the fifth company to reach that mark in Canada.
So you can understand that we are paying close attention to how the industrial benefits policy is applied. This is why today I will provide suggestions to the committee to help Canada's economic recovery.
Although our industry has to follow regulations from many departments, I will limit my recommendations to the policies that are the purview of this committee.
The value proposition and the ITB policy can be improved. We are the product of an offset obligation dating back to 1986; therefore, we believe in the policy. However, a few tweaks are necessary to maintain the competitiveness of our industry, improve the policy and help kick-start the economy in the wake of the pandemic.
In this regard, the hard cap of a maximum 100% of contract value in obligations should be respected. In recent years, only those who overcommit beyond the value of a contract are awarded the maximum points during bid evaluations. It is our belief that in the medium and long term, Canada will suffer from limited competition as a result, as many competitors will simply not be in a position to partake in the bidding process anymore. A competitive, fair and transparent process is beneficial to all, and we believe it is weakened by the possibility of overcommitment, which can be regarded as similar to dumping practices.
The introduction of new multipliers for points and credits could be temporarily introduced to help specific areas of the economy. Multipliers for SMBs, and more generally the direct components of a bid, could help SMBs and the industry, which have struggled during this pandemic.
Lower the allowed maximum for banked transactions. Currently companies can use previous investment against future or current obligations. Although it is capped, it should be lowered to create new investments instead of having prime contractors completing their obligations with past investments. We believe this would contribute to relaunching the economy with new investments.
New key industrial capabilities should be added to the list of 16 included in the value proposition 2.0. We believe that some of Canada’s KICs that are present are not represented, such as the weapon system capabilities.
Although technical in nature, these four recommendations are simple. We believe these recommendations are evolutionary, not a revolution, and cost-effective solutions for the government to implement. We believe they would greatly improve how the defence industry generates good economic output for the country.
Ladies and gentlemen, I would be very pleased to answer any questions you may have.