Let's Talk about the Defence Industrial Strategy

Opinion

After much waiting, the Defence Industrial Strategy is finally here. Months and months of back and forth, revisions, and delays have led to this moment.

Originally meant to release late last year, the Defence Industrial Strategy had repeatedly been pushed back and brought back to the drawing board as the likes of ISED and the DND went back and forth on what to include.

Interdepartmental rivalry and competing priorities were reportedly the reason the policy took this long to come to fruition. It is a fairly accepted fact to many that this had been the primary holdup with the strategy.

The DIS takes a wide-reaching look not just at procurement but also at the relationship that exists between the Government, CAF, and Industry; a relationship that has often been strained under old relations, an outdated system of doing things, and an overly complex environment that bred mistrust, painful feelings, and terrible habits regarding how we handle things.

The DIS, as we will be referring to it from here on, tried its best to be radical and tackle the core of the system. It wants to tear it apart; it wants to be foundational in its changes. Yet, while it does try its hardest, there is still a lot unanswered and more to question.

The Strategy Itself

However, before I get into it, let's dive into the Strategy itself and identify its core changes and ideas.

The Strategy itself is divided into five sections covering:

• Renewing Our Relationship with Industry

• Procuring Strategically: The Defence Investment Agency & Build-Partner-Buy

• Investing Purposefully to Strengthen an Innovative Canadian Defence Sector

• Securing Supply Chains for Key Inputs and Goods

• Working with Key Domestic Partners, Including in Canada's North and Arctic

The Strategy opens with an acknowledgement of the economic impact of Canada's defence industry, as well as an updated breakdown of Canada's defence exports.

The defence sector is an important contributor to the economy. In 2022, its nearly 600 firms contributed to 81,000 jobs. These companies generated $14.3 billion in revenues that same year and contributed $9.6 billion to GDP. What's more, the industry is a hotbed of innovation.

The Canadian defence sector is one of the most R&D-intensive, spending $440 million in 2022, with the vast majority invested by the industry itself. It is more than three times as R&D-intensive as Canadian manufacturing overall, and its share of employees in high-end STEM jobs is more than 2.5 times as great.

Virtually half (49 per cent) of the defence-related products and services produced by Canadian firms are sold abroad. Of these, the majority (69 per cent) go to the United States and our other Five Eyes partners.

The government has high hopes for the Defence Industrial Strategy to deliver. They estimate that by 2035 the strategy will bring in an estimated $180 billion total direct investment in defence procurement, $290 billion total investment in defence-related infrastructure, and $125 billion in downstream economic activity.

Of course, half a trillion dollars in economic activity is nothing to scoff at; though such investments will require significant contracting and shifts in how we attract investment to be able to secure this within the next decade.

The strategy also sets out the goal to increase the share of defence acquisitions awarded to Canadian firms to 70 per cent. There are some who are asking if this is by value; however, my understanding is that this is speaking to the percentage of contracts themselves.

That of course is very different, and admittedly easier to reach when considering the significant amount of contracts valued at, say, under $10 million for things like goods, services, and infrastructure that also fall into this category.

That allows the 70 per cent number to be significantly bolstered by these small contracts. It is far easier than trying to leverage 70 per cent of the total value of all contracts. Unlike others, I don't think that is impossible; however, it would be significantly challenging.

It also has some significant demands of serviceability. The strategy sets a new bar to raise maritime fleet serviceability to 75 per cent, land fleets to 80 per cent, and aerospace fleets to 85 per cent to meet training and operational readiness requirements.

The last Departmental plan had set the goals at 60 per cent for the Maritime fleet, 70 per cent for the land fleets, and 70 per cent for the Aerospace fleets by 2032. This is technically looking at percentages beyond the estimates of the departmental plan; however, they are still significant increases given the gap.

As of now, the numbers last stood at 45.73 per cent for the Maritime fleet, 49 per cent for the land fleets, and 48.9 per cent for the Aerospace fleets. Both the Maritime and Land fleets suffered decreases over the year while the Aerospace fleet benefited from a fairly decent increase compared to the 2022-23 numbers.

We're obviously in a tough spot at this time; however, I do welcome the ambitious numbers. It does help that almost the entirety of the CAF will be undergoing fleet renewals that will replace all or significant amounts of the existing fleets.

That will naturally bolster percentages as significant amounts of older equipment is phased out. So the percentages, despite their still ambitious goal, might not be as unachievable as one thinks. That is especially true as we aim to rapidly cut older, end-of-life fleets within the next five years.

Anywho, the assessment paints a fairly clear picture though. The Canadian defence industry punches above its weight both in return on investment and in secondary benefits such as Research investment. It represents a significant, growing percentage of Canada's STEM and Innovation capabilities that the strategy hopes can act as a base for rapid expansion of skilled workers and IP.

It also highlights the significant amount of risk the industry has with ongoing trade irregularities with the United States. Not only are American companies significantly invested in Canada, but Canadian industry is very much built on the export of defence-related goods down South; something that the strategy does not necessarily highlight as an issue, but does make note of regarding diversification.

Canada has long benefited from special access to the United States Military Industrial Base through things like the Defence Production Sharing Agreement and Defense Development Sharing Program. These agreements have set the foundation of our bilateral Defence Industrial Base.

Now though, with a mandate of diversification as set out by the Prime Minister, Industry has been tasked to also look for new partners and buyers to wean off of such American dominance. Of course, we will get deeper into that as we go through the policy.

We will not be going section to section this time around. Instead, we will be working down from the major policies. I find this method works best for context and makes a lot of the smaller changes and such easier to understand.

The backbone of the new DIS is the Build-Partner-Buy framework. This new framework sets out to establish the priority process of acquisitions by the CAF. It lays a staunch, but fairly loose pathway for future acquisition.

The policy sets out to define the roles that each department plays in this process. It is not too dissimilar to the current process. To quote:

"The Department of National Defence leads in determining the capabilities required by the Canadian Armed Forces to carry out its mission to defend Canada. ISED, in turn, works with the Canadian defence industrial base to support its growth, ensuring that it can contribute effectively to defence-related innovation and manufacturing.

ISED is also responsible for the administration of the Industrial and Technological Benefits (ITB) Policy to leverage economic benefits for the defence sector from eligible defence and Coast Guard procurements.

Public Services and Procurement Canada (PSPC) has historically managed procurement to ensure it is fair, transparent, and delivers value for taxpayers."

The policy further reaffirms the Defence Investment Agency as the central organization for defence procurement, acting as the central authority by which to bring everyone together. It also reaffirms the intent for the DIA to branch out from PSPC into its own agency.

Along with this, before we get into each part of the framework, the 17 Key Industrial Capabilities framework that we have long worked off of over the last decade is being retired. Its replacement is the Key Sovereign Capabilities list.

This new list represents "capabilities without which Canada cannot defend its sovereignty or meet its allied commitments."

To qualify, a capability must be critical to the ability to defend Canada; an area of strength in Canada or have the potential to be one; and in demand by our Allies and partners to support collective defence and enable exports.

The initial list includes 10 categories. These are not static and the strategy lays out the expectation that these will obviously shift and change over time. The initial list includes:

• Aerospace: Aerospace Platforms; Avionics; and Aircraft Communications

• Ammunition: Common Ammunition; Battle-Decisive Munitions; Small Arms; Missiles and Bombs

• Digital Systems: Secure Cloud; Artificial Intelligence; Quantum Computing and Communications; Integrated Command, Control and Communications; High-Assurance Communications Equipment

• In-Service Support: Naval; Land; Air

• Personnel Protection: Medical Counter Measures

• Sensors: Marine Sensors; Quantum Sensors; Electronic Warfare

• Space: Space-Based Intelligence, Surveillance and Reconnaissance; Space Domain Awareness; Satellite Communications; Space Launch

• Specialized Manufacturing: Land Vehicles / Surface Ships, including Icebreakers and Marine Systems

• Training and Simulation: Naval; Land; Air

• Uncrewed and Autonomous Systems: Uncrewed and Autonomous Land, Aerial, Underwater and Surface Systems (including Uncrewed Collaborative Platforms)

These form the core group of priority investment areas for which the Government aims to maximize secure strategic autonomy and reduce supply chain vulnerabilities. It also forms the basis for which we get the Build category.

The categories, admittedly, are very broad and ill-defined; more than many other recent examples in the UK, France, and United States. However, I do feel like that is by design. There is admittance that this list will change, and that capabilities will be added and more defined.

My imagining is that they are deliberately choosing to keep things broad and open to gauge reactions and see more what capabilities step up. It is purposefully trying to capture a wide, initial cohort and then specialize and redefine as more time passes.

Of course, that is entirely based on there being significant, valuable followup that can be further leveraged to better support the key capabilities we can do domestically. That requires government to be proactive and willing to treat the list as dynamic.

There is a balance that needs to be struck between being too set, and in turn too broad for too long, and being too dynamic and changing priorities too often; mitigating the positive results one could achieve by allowing time to develop.

Furthermore, I am interested to see how well this works into the idea of strategic partnerships and building established players with proper backing. Something to think about as we go through the new Framework. Speaking of that...

At the top of the Framework, the DIA will prioritize Canadian products and suppliers when it comes to procurement projects. If we have the ability to do it domestically, the DIA will put Canadian companies at the front of the potential suppliers list.

The hope is that prioritizing Designed-Developed-Built-In-Canada solutions will reduce reliance on foreign suppliers, foster national champions, secure sovereign control of our own equipment and IP, and create value across Canadian supply chains.

The Strategy acknowledges that this will take time, and that it will come with sacrifices when it comes to timelines and capabilities at the onset. These are sacrifices that the Federal Government says they are willing to make.

On the National Champions as well, the Government does admit that they plan to engage select companies to act as Strategic Partners in developing certain capabilities; something I was hoping would be more defined but sadly is left fairly vague.

The plan is to publish a framework for the identification and onboarding of select Canadian defence firms as key strategic partners no later than summer 2026.

Until then we won't know how this will work, or how extensive this policy will be. However, relying on singular, strategic companies can be valuable in niche cases; it also has the added risk of pushing out investments, restricting industry-wide innovation, and monopolizing certain key sectors that might otherwise benefit from multiple competitors or outside involvement.

We've seen how similar monopolies across industry can strangle us. I won't call people out specifically, but enforced monopolies have been long-standing in Industry and have almost always presented as bottlenecks across innovation, investment, and supply chains.

There are examples, though, of where this has worked. The National Shipbuilding Strategy, for its faults, has been something that has come into its own through a similar stance of selecting strategic partners.

And as always, I am a happy supporter of the National Shipbuilding Strategy and believe it is finally coming to itself. It is an example of how this sort of mentality can provide long-term results. That is true for many niche sides of defence. Space is another one.

So we will have to see, but I am worried about the scale and scope of this concept and await with hesitation more details and information regarding how it will work. Let it be known though that I am concerned.

Where it can't be built, Canada will focus on creating strategic partnerships with outside allies and companies to deliver capabilities. This is the area where the Strategy takes its deepest stance on the American relationship, promoting continued cooperation while looking to diversify. To quote:

"Canada has a long history of working closely with the United States and looks forward to a continued strong Canada-U.S. defence relationship. To ensure greater resiliency in uncertain times, Canada is also undertaking efforts to diversify and build new defence-industrial relationships. This includes building a new, ambitious, and comprehensive partnership with the European Union and the United Kingdom—rooted in our shared values and common interests. Canada will also seek similar opportunities to collaborate with partners in the Indo-Pacific, in particular Australia, New Zealand, Japan and the Republic of Korea."

The goal of these partnerships, at the end of the day, is to secure investment and sovereign control of high-valued IP that partners have access to. Acquisitions like JORN, while not mentioned, are a prime example of what the Partner category aims to achieve.

Partnering with allies on the development of critical capabilities while ensuring that Canada also has a buy-in to the Intellectual Property. IP makes up a large part of the policy. One might say it is a bit obsessive in some regards how clearly the Federal Government wants to secure it.

Lastly, we come to the Buy category. This is by far the least desired option, and the strategy pulls no punches in its disapproval of it. Let me give you the whole thing, because I think it's important for this one to give you the direct text:

"Increasingly, defence platforms incorporate very sophisticated technologies. They can be networked and dependent on advanced software, AI, or other frontier technologies. Foreign governments and their national defence contractors want to assert control over these technologies and the IP that goes into them, but such control can lead to restrictions on the end-user having access to the needed IP, schematics and software updates to operate and sustain these platforms. Procurement decisions by the DIA will include steps to mitigate these risks to sovereign control.

Moreover, multinational defence contractors subject to requirements for reinvestment into Canada under the Industrial and Technological Benefits (ITB) Policy frequently privilege their own priorities when meeting ITB obligations, investing into indirect work in their Canadian subsidiaries, for example. Canada can and must do more to ensure these foreign firms do a greater percentage of direct work in Canada on new defence contracts, do more work with Canadian-controlled firms, and reinvest more ITB-eligible funding into activities that deepen key Canadian industrial capabilities."

Not exactly supportive, and for good reasons. These debates on sovereign control and access to critical technologies and infrastructure are a hot topic debate, especially on recent controversies such as the Fighter Review. Here, the concept is put on blast as a risk to Canada's overall security.

Again, access to and Sovereign control make up significant parts of the policy. It is no longer a nice-to-have. Sovereign control of critical technologies and IP are now put front and center as increasingly a demand. While not outright called one, the framework very much looks to punish options that exclude it.

For some this is a blessing, and for others a difficulty. American companies will find the question on IP significantly more concerning than a partner like South Korea, who often builds IP transfer and technology transfer into their bids from the start.

It isn't Anti-American by nature, but will be something that is struggled on by them in particular above many others. Of course, we've had an idea that this was the DIA's mentality for a while. We now have an active Buy Canadian policy separate from the DIS, and it has been a long-standing promise by the Feds to prioritize either Canadian supplied or Companies willing to significantly invest in Canada.

Speaking on the Buy policy, we also have a lot in this Strategy on the ITB policy. The Industrial and Technological Benefits Policy remains the primary tool for extracting value when we have to go outside our borders. The Strategy gives an updated look at the economic output of the policy, estimated to contribute over $5 billion to GDP and support more than 40,000 jobs annually.

Currently, over 700 Canadian organizations, including 400 SMBs and 55 academic institutions, are beneficiaries of active ITB projects. However, the government admits that the policy needs "sharpening" to ensure it isn't just a checkbox exercise for foreign primes, but a genuine builder of the Canadian industrial base.

The policy breakdown remains split into two distinct categories:

• Direct Commitments (Approx. 50%): These are the high-value pieces where Canadian companies actually partner with prime contractors to supply parts and systems for the specific equipment Canada is purchasing.

• Indirect Commitments: This is where the Strategy wants to see more "purposeful" investment. This includes contractors establishing or expanding manufacturing facilities on Canadian soil, transferring critical technology or expertise, developing SMB suppliers, and funding R&D or STEM education initiatives.

The Government has committed to updating the terms of the ITB Policy for all new eligible CAF and Coast Guard procurements. ISED will publish changes to the ITB Policy in early 2026.

The goal is to move away from "passive" reinvestment and toward a model that delivers maximum benefits, specifically by forcing foreign firms to do a higher percentage of direct work in Canada and reinvesting in the newly defined Key Sovereign Capabilities.

The actual policy outlines the broad goals. However, I feel it's better to provide the actual changes. The strategy includes several proposed changes to the ITB policy in the annex. These will not be the only changes, and they aren't set in stone; however, they are changes that we are likely to see when the full reform is published.

The changes outlined include:

Strengthening Canada's Defence Industrial Base

Introduce a new Strategic Investment Transaction to encourage investments that build Canada's defence industrial capacity and strengthen sovereign capabilities, support infrastructure, or involve transfer of intellectual property.

Apply enhanced multipliers for high-impact contributions that advance national defence priorities.

Recognize infrastructure investments to better support long-term capability building.

Supporting Growth of Canadian Companies

Introduce a Canadian Company Boost to increase credits for investments in Canadian firms with 70–100 per cent Canadian Content Value (CCV) at verification.

Apply a multiplier for direct work with Small and Medium-Sized Businesses (SMBs) to accelerate their scaling and competitiveness.

Update the Future Sales Transaction type to stimulate supply-chain development, including upfront credit for investments that drive future sales by Canadian companies. Credit internal investments under existing terms and conditions.

Enhancing Flexibility and Tools for SMBs

Introduce a Small Mid-Cap category, giving eligible firms five additional years of crediting eligibility to support their transition to larger-scale operations.

Remove the cap on transaction value for SMB credit boosts, enabling larger, transformative investments in growing firms.

Refine and clarify the definition of an SMB to ensure consistent application across projects.

Advancing Workforce and Skills Development

Introduce a new multiplier to incentivize investments in skills development and training for the defence sector workforce.

Increase the multiplier for Indigenous workforce development, strengthening incentives for inclusive talent pipelines in defence industries.

As you can probably tell, the primary desire of these changes is to encourage Primes to invest in direct work for Canadian firms. That, as it exists, can be very difficult to secure in many aspects. Direct work is expensive for companies to invest in, especially dependent on the quantity of work expected.

It's easy to forget that in many cases the actual volume amounts needed are often not significant enough on their own to justify Tier One companies investing in the supply chain. So to complement that, one must find ways to incentivize suppliers to make investments that drive direct investments over indirect ones.

Multipliers are certainly one of those ways to incentivize. The proposed changes focus almost exclusively on finding multipliers to tie into direct investment, be that in the supply chain, SME, training or Research and Development.

Of course, until we learn what exactly these multipliers are and how they'll work, it's hard to analyze them and their potential benefit. On a personal level, I think multipliers are a fine way to encourage direct investment. They are one of the easier, less intrusive ways for the Federal government to intervene in a supply chain they've increasingly decided is not their responsibility to build.

When you download the responsibility to suppliers, you become beholden to playing the game of incentive and encouragement with them. This is an acceptable way of doing that, and obviously this is only a snapshot.

Again, we are getting a proper reform document sometime in the next few months that will no doubt include more details and other changes to the system. For many of these changes, we still need to wait for more details on how they'll work.

I'm curious how the Canadian Company Boost will look in practice and what reforms will come to the Future Sales Transaction. Hopefully both of those will come in details in that future ITB reform. At this time the reforms are out there but lacking the proper details and context.

So sadly there isn't much I can say at this time. It'll be controversial with a few companies, no doubt. I'm sure some of you in industry will have strong opinions on multipliers! More than me at least as someone outside it.

To me it feels reasonable and expected. It's hardly a surprise. We knew these changes were coming, and many of these multipliers were discussed months ago. So perhaps this won't be a surprise for many, more a continued disappointment.

Anywho.

Industry and Supply Chains

Backtracking away from frameworks and the policy side of things, I want to get back to the first pillar of the policy, which itself is focused on Canada's relationship with Industry. To its credit, the Government does levy some criticisms on themselves for their role in handling Industry relations.

To Quote:

“One of the fundamental challenges facing Canadian industry has been the lack of clear and predictable demand signals and commitments from government, making it difficult for Canadian companies to forecast demand and make informed investment decisions. Canada’s Defence Industrial Strategy will provide that clear demand signal.”

Much of the work in this area will fall to the DIA. The Strategy outlined the need for early engagement, regular engagement with Federal authorities, and more opportunities for industry to collaborate on Research & Development, Agile opportunities, and co-development of capabilities.

There is acknowledgement that there needs to be more to assist Canadian firms—particularly small and mid-sized businesses (SMB)—in navigating complex administrative processes in government. That includes ensuring that industry has the proper security infrastructure and systems in place to operate.

This includes the need to accelerate the acquisition of security clearances and the process of accreditation for industry-operated secure facilities. Both of these have been long-standing issues dating back a number of years.

Now the strategy does not outline how this will be done. The current backlog for security clearances is significant and will take time to work through. There is no easy process that allows us to rapidly scale the issuing of clearances, so I am genuinely curious to see how they tackle this.

Secure facilities is another one I am very happy to see, and I know many of you in the CAF will be as well. It's certainly a long-time coming and I commend them for including it.

Outside a promise of investment though, there isn't really anything else spoken on the subject. Future details to come like much else you can expect beyond this point. The DIA will also lead the establishment of a permanent Defence Advisory Forum, co-chaired by the Ministers of National Defence, and Industry, and Secretary of State (Defence Procurement), to provide a regular, scheduled venue to engage with the Canadian defence industry.

This will provide new opportunities for direct engagement including on procurement, participation where feasible in wargames and operational exercises, and industry-government-military staff exchanges.

Other commitments include promising more comprehensive, thorough Industry Days; creating a single-window government service to direct firms to the most appropriate resource in government; putting in place a dedicated ISED "concierge" service for companies working on defence and dual-use technologies; and publishing a regularly updated inventory of anticipated procurements to give industry early visibility on opportunities.

Maybe they could finally update the Defence Capability Blueprint that has sat idle for over a year now. You know, that wonderful resource that's supposed to include an accessible directory of active projects and updates?

That would be a good basis for something like that. Hell, I have debated making my own better version out of spite. Of course, details are again limited. I can't speak to what such a concierge service looks like. It is clear though that there is recognition on the government side to failures in engaging industry.

While many will moan at the lack of concrete plans, I am happy to see that even relatively small details such as the frequency and scale of Industry Days, which play a significant role in Industry-to-government engagement on projects, are not forgotten and actively mentioned as needing improvement.

Similarly, while I would have loved for more details on tackling security clearances—and yes it's been an admitted issue for a long time; I know many of you are frustrated at it—I also know this isn't what this document is for. And while I will moan at the lack of movement over the years on the file despite its notable complications, yes there is criticism deserved, I am happy to see the acknowledgement that there is a significant communication breakdown between industry and government, especially when multiple, often competing departments are involved.

Speaking of Industry, if you want to talk about innovation then this strategy is certainly for you. Out of all the Pillars (and not counting the ITB list) Innovation and Research gets the most love.

To keep up, the Government is pushing for a "comprehensive approach" that stretches from fundamental research in the lab all the way to commercialization and fielding.

The centrepiece of this new approach is BOREALIS. BOREALIS is positioned as the key mechanism to fast-track development. The Strategy admits that developing cutting-edge innovation requires speed, agility, and risk tolerance—things the current system lacks.

Backed by its initial investment of $68.2 million over three years starting in Budget 2025, BOREALIS will coordinate defence research, specifically targeting frontier technologies like AI, quantum, and cybersecurity. It is separate from DRDC, and the strategy repeatedly makes that clear.

BOREALIS has admittedly already been starting work through the DISH network. These Defence Innovation Secure Hubs will be physical sites where security-cleared academic researchers can collaborate directly with government and industry in a secure environment, bridging the gap that has long existed between open academia and classified defence needs.

Maritime DISH is the first of these announced with $29.4M in funding committed back in November. This first hub will be based at COVE in Halifax. The strategy lays out the roadmap for standing up BOREALIS and the selection of the first round of funded projects is expected by Q3 of 2026.

Supporting this new agency is the creation of a Science and Research Defence Advisory Council, also slated to be stood up in 2026. This body will bring leaders from the post-secondary sector together with the DND, ISED, the NRC, BOREALIS, and the three federal granting councils (NSERC, SSHRC, CIHR). Their goal is to align university research with defence priorities and integrate incubators into the national pipeline.

Details, like most of the strategy, are again limited. I am very much happy to see a direct commitment to engaging with universities and the academic system. However, Advisory Councils have a mixed reputation, and for good reason.

The strategy relies a lot on councils and forums to try and spur engagement. That's fine, they certainly have a role to play; however, Canada is full of dozens of similar groups at the federal, provincial, and industry levels. While one can argue all play a role, I am inherently skeptical of the benefits of any sort of advisory or engagement tool until it shows its value.

It doesn't feel like the proper solution to the numerous communications issues many complain about. It provides, ideally, a more direct source for industry and academia to engage directly with government; however, that is reliant on everyone being willing to play the valued participant, something that can be tenuous at best.

So while I am happy to see the effort, an overreliance on grand engagement without fixing the core issues feels like a step in creating more bloat, more places for beings to be shuffled to, more layers to have to navigate around to try and get messages across. At a time when we prioritize speed, such things are less than desirable.

On the better side, the strategy finally admits that we don't have the proper procurement pipelines for industry, especially SMEs, to participate and gain valuable recognition for their products.

To quote:

"Where needed, with the leadership of the DIA, we will establish or strengthen innovative procurement pathways within flagship industrial support programs—including the Defence Innovation Program (IDEaS), and Innovative Solutions Canada (ISC)—to enable the Canadian Armed Forces to rapidly acquire newly developed Canadian-made defence technologies.

There are also opportunities to improve access for Canadian firms to existing federal supports through the prioritization and acceleration of defence projects under the Strategic Response Fund, the Canadian Space Agency’s Space Technology Development Program, and NRC-IRAP."

Access to proper contracts has been one of the biggest issues for SMEs, and has long been a source of bottleneck. Existing programs like IDEaS currently operate more as incubators than as proper pipelines to capabilities. They do not provide industry the opportunities to secure contracts that they often need for validation.

It isn't a financial issue. It's one of recognition. If your own government lacks the support to provide contracts, how can industry go abroad and sell themselves? IDEaS, and I don't want to hate on it because it has value, creates a system of dependency for many SMEs; chasing what IDEaS asks, securing just enough to get to the next stage, or even just to survive a bit longer, yet with no pathway to contracts and no guarantee of future support.

Primes control the supply chain. They dictate what people play with them. It is inherently a Prime-controlled system where they are in charge of securing the requirements laid out in whatever way they can. For many SMEs it's impossible to wait for Primes to come to them, and even if they do, the time it takes to go through procurement to actual contracts can be a years-long process that many can't survive.

You can survive off IDEaS funding. You can survive off grants. However, at the end of the day you need contracts, even if small. Even if it's enough to just go abroad and say that you've been validated by your government.

It's a sign of commitment; of certification that your host government believes and has supported your development. We can't expect SMEs to wait for Primes or go abroad and sell themselves on a product that has never been acquired, especially if you've been denied by your home.

SMEs need validation. They need long-term support and validation. That comes from having the pathways to at least prove oneself and demonstrate they can secure business. Acknowledging that they need those pathways is good; however, there needs to be more to it.

Things like Launch the North are a step in that direction, as it has commitments built into it. It has end goals and contracts lined up for those that win. That is the step in the right direction, and maybe not every IDEaS contest needs that contracting, but most do. Even if it is on a trial quantity. That is enough for many who otherwise would have nothing.

Beyond the high-level governance, there is significant money moving into specific innovation gaps, most notably for UAS.

The Strategy acknowledges that UAS are changing the nature of war, citing the conflict in Ukraine as a primary example. It's also part of the new list of Sovereign capabilities, so like, you shouldn't be surprised.

To ensure Canada becomes a leader in this space, the Government is establishing a Drone Innovation Hub at the National Research Council (NRC) in early 2026.

This comes with an investment of $105 million over three years, plus an additional $460 million over five years to acquire a new R&D platform.

This will be supplemented by other drone hubs across the country such as those at Foremost, Area X.O or Volatus' future facility in Mirabel.

For the broader industry, the Government is also looking to open up Canadian Armed Forces ranges, training areas, and operational environments to be used as testbeds for Canadian industry "wherever feasible."

That is something that I know has been on the table a while. Suffield is one often discussed; I know the Alberta government has been pushing the CAF to open up the space to broader industry use and development. While not said officially, Suffield is one I have heard most of recently in this context and there is active engagement on it.

To help companies actually get to that stage, the Strategy outlines a $244 million investment into a new Defence Industry Assist stream under the NRC’s Industrial Research Assistance Program (IRAP). This funding is specifically aimed at helping small and mid-sized businesses advance defence and dual-use technologies.

Speaking of Small and Mid-Sized Businesses (SMBs), the Strategy dedicates a fair amount of text to them, noting that they account for 92 per cent of the industrial base. That's a fun fact I forgot above.

The strategy then goes into a few other programs that have already been announced and committed. This includes launching the Defence Platform at the Business Development Bank of Canada (BDC). As announced in Budget 2025, this is a $4 billion program designed to provide venture capital, loans, and advisory services to help SMBs scale up and sell into defence supply chains.

On top of the BDC funding, there is the $357.7 million committed to the new Regional Defence Investment Initiative that was originally announced in December. Delivered through Canada’s Regional Development Agencies, this is intended to help integrate SMBs into domestic and international supply chains. Funding has already been opened for it.

This ties directly into the Strategy's aggressive stance on Intellectual Property (IP). You thought we were done with IP? Nope. Never.

Along with all the changes with the Build-Partner-Buy policy, the Federal government will be further enhancing support through existing "Elevate IP" programs to help firms secure their data. The goal is ensuring Canadian industries gain the technical know-how to operate and maintain technologies long-term, rather than being locked out by foreign OEMs.

However, building it here isn't enough… we also need to export. The Strategy admits that Canada’s support for defence exports has been "limited" and that we haven't always succeeded in allied markets.

To fix this, the Government is standing up a dedicated unit to lead a new whole-of-government export strategy.

This includes the establishment of "Deal Teams"—specialized groups tasked with pursuing high-value international contracts.

They are also promising "more boots on the ground." This means funding for more Trade Commissioners specifically in the UK and key EU markets, and directing Canadian Defence Attachés to take a more active role in trade promotion.

Finally, we get to people. The Strategy introduces the Canada Defence Skills Agenda, which focuses on four priorities:

• Building the talent pipeline: Modernizing federal upskilling programs and creating a new Apprenticeship Service where defence firms will be a priority.

• Investing in urgent needs: Using the $383 million (over five years) sectoral alliances fund to bring employers and unions together to develop workforce strategies.

• Growing the supply: Using the Federal Skilled Worker and Global Talent Stream programs to target defence-related skills in immigration.

• Partnering: Working with provinces, territories, and Indigenous rights holders to align training pathways.

The Government is also leveraging the $5 billion Strategic Response Fund to help businesses adapt to workforce challenges, with a specific priority on defence-related skills upgrading.

You'll of course never hear me complain about education and training funding. I stand by the skill and international recognition of Canada and her education system.

It is a net benefit to have at our disposal and should be leveraged in as significant a way as possible. That includes encouraging industry to be collaborative and cooperative with educational institutions. TKMS CDDE is a perfect example, as is Niagara College’s new Defence Systems Engineering Technology programs

You get all that? Yes, there is a metric ton of commitment to try and build a proper innovation pipeline and pump funding to SMEs. There is commitment to reforming how programs like IDEaS can create proper contracting pipelines, and a desire for the federal government to be more directly involved in supporting defence exports through leveraging federal assets and existing personnel to play the promoter role.

All of this is fine. I wanna say that. Hell, it's good. None of these are inherently bad among themselves. However, as I said before, while the document wants to be radical, it does run into the issue of not necessarily stepping out of its role of a foundational document.

Advisory councils are nice, but are they the best method we have to fixing the breakdown of communication and engagement between government-academia-industry? The strategy ignores a lot of the industry communication side of things despite the fact that industry does control significant leverage in the innovation space.

Primes like Lockheed, Boeing, shipyards, etc. are all engaged in building their supply chains. They are the ones with the mandate to take requirements and help support and build Canadian industry. That is something we delegate to industry.

Yet their role in innovation is almost ignored here. Their role as the builders of defence supply chains is ignored, and it feels like a significant missing piece to everything. There is little on how to fix communications, how to better leverage private capital to support innovation, and how government can better align things like ITB obligations to support innovation.

It's a significantly glaring miss of the strategy to not really dive into this, because to me it misses a large part of the financial ecosystem available, despite it being a major issue for everyone. Primes certainly want more communication and direction, at least those I talk to. SMEs want more involvement in the process and for the government and Primes to be more involved together on fostering innovation.

Some want aggression in federal policy, some want more proper direction and communication channels. Nobody has quite the same idea for how to leverage industry to build the innovation ecosystem, but there is acknowledgement that the fractured, decentralized system isn't cutting it.

This isn't to go after larger companies. Quite a few do contribute significantly to innovation and research; however, the strategy doesn't really feel like it wants to tackle that at a severe level, at least not yet, and unlike many things it doesn't set the conversation to happen.

Maybe it's just me but I do believe industry can and wants to do more and needs to be an active participant beyond forums and councils in the conversation. At the same time, the Federal Government needs to be more aggressive in setting expectations and leveraging requirements and available tools to press Primes to support more innovation and risk with SMEs.

There is desire there. I would know because a lot of people ask me to connect them with people these days, and I'm happy to do it; however, it's clear that the current system is too fragmented, uncontrolled, and too apathetic to really tackle this.

If you want Primes to be the ones to help build supply chains, we need to have a stake in how they build them, and in turn Primes need to have a proper ecosystem to contribute. There is a proper balance here I think can work, but lord knows if I fully know it. Perhaps the ITB reforms will help support that, maybe, but my hope is limited.

Overall the innovation section is fine. It takes a financial heavy approach, and lacks details on reforms. I am skeptical heavily on more groups and such; however, I am happy that the Federal Government recognizes it needs to be a more aggressive player both in marketing and providing infrastructure, and that money can't solve everything in the long-term, even if it's the immediate go-to. I just hope there is significant follow-up here.

The last major section we will jump into today is supply chains. The strategy admits that global supply chains are too fragile to be left to the "just-in-time" whims of the market.

At the center of this is a new program: the Canadian Defence Industry Resilience (CDIR) initiative. Launching in 2026, the CDIR is designed to provide targeted support to domestic firms to scale up production of defence-critical goods. Its immediate, high-priority focus is ammunition and explosives.

Specifically, the government has set a hard deadline to establish a domestic nitrocellulose production capability, with production slated to begin in 2029.

Nitrocellulose is the foundational propellant for everything from small arms to artillery, and by domesticating its production, Canada aims to insulate itself from the global "shell hunger" that has plagued allies recently.

This, along with a domestic supply of fuzes, are two things that I have been hopeful to see progress be made on for honestly a few years now. There are obviously more, but these two I have obsessed a little with… (dont judge me)

We did have an RFI out for a domestic line of fuzes; however, I have not heard progress on it for a while.

Of course, no mention of the ongoing Munition Supply Program study nor really the program in general. While Munitions are considered a key capability, the lack of mention of the MSP is insanely weird.

Of course, everyone knows my disdain of the current state of the MSP. It has its value, but the existing program is due to be revamped and reopened. The current format is archaic, outdated, and only exists to act as a restrictive club for a few key suppliers that can't be relied on themselves to provide our needs in a modern conflict.

No hate to guys like GD, Magellan, and IMP. They do what they can but it isn't enough, and the MSP should be a regularly updated, dynamic list of requirement munitions and equipment that can be leveraged to build up industry.

MSP isn't an issue. It's the fact it's ancient as fuck and needs to be better aligned to modern demands and the needed munitions. An updated MSP opens the door to new, innovative suppliers, a better roadmap for the type of munitions Canada needs, and can help support attempts to attract domestic munition production by setting out firm guarantees for industry.

That is a subject for another time, but how can this whole strategy just ignore MSP for better or worse? Like, it isn't that it's downplayed. It has one mention! A single line at the annex. Might as well have been excluded. No mention of the study either...

And like, the MSP does kinda exist in its own world. It is its own weird thing. It is outside the purview of a lot of other policies and oversight. So maybe they decided it was too much in its own space to fit here.

However, you kinda put yourself in a corner when you throw munitions into the Sovereign Capabilities list. It becomes unavoidable to talk about it from my point of work because it's the existing framework we have that could be leveraged.

It's begging to be acknowledged. It's sitting there taunting me. Unless there's no grand plan for the program and they would rather just not mention it. Who knows there. I just think it's a massive omission from the overall strategy. Anyways. I digress. Back to the info before I rant more.

To back this up, the government is leaning on two massive funding tools. The $5 billion Strategic Response Fund is being utilized to help heavy industries—specifically steel and aluminum—pivot, with the hope this will help these producers retool their facilities to manufacture the specific high-grade alloys required for military platforms that we currently have to import.

Meanwhile, the Life Sciences Fund will be used in tandem with the newly minted Health Emergency Readiness Canada to treat medical countermeasures as a branch of national defence, including investments in biodefence, vaccine platforms, and stockpiling essential medical supplies.

Then there is the strategic leverage of Critical Minerals. Canada currently produces 10 of the 12 minerals NATO has deemed "defence-critical," including tungsten, germanium, and gallium. By Q2 of 2026, the government has committed to publishing a formal strategy to expand the production, processing, stockpiling, and procurement of these minerals.

The strategy tries to set a path towards moving into high-end processing and supporting coordinated action with allies through initiatives like the G7 Critical Minerals Production Alliance and NATO-led stockpiling efforts.

Finally we have more IP discussion! The strategy lays out the plan to securing IP through a more aggressive application of existing laws. Expect to see the Investment Canada Act, the Export and Import Permits Act, and the Bank Act used with much more frequency to block "malign actors" from acquiring Canadian defence-related know-how or sensitive technology research.

This includes strict adherence to the National Security Guidelines for Research Partnerships to safeguard our most sensitive research from hostile state actors.

Sadly, there is no mention of how to secure existing IP that might be lost outside acquisition. One idea I had frequently seen brought up was the idea of a dedicated IP bank or through supporting a system in which valuable IP can be shopped around to Industry before being lost through things like expiry and closures.

Again, no mention there. Of all the sections I think the supply section is the most disappointing. It is mostly dry, has notable gaps, and feels lacking. It has some commitments, and lays out the government's obsessive, aggressive stance to IP but really just feels like a mostly nothing burger. I like the mention of domestic nitrocellulose production, but would have loved to see a lot more here, and at least a general mention to the MSP. That's just me though.

There are several sections that I am skipping in the Annex. There includes a very detailed breakdown of the responses given that I highly recommend you read. I have elected not to include it for length reasons.

Last Minute Thoughts

You now have the general idea of what is included in the strategy. I have already given most of my thoughts on the strategy throughout; however, I did want to give some closing, overall thoughts on the strategy as a whole.

The Defence Industrial Strategy is... fine... it's a bit dull to me honestly. It sets big goals in terms of economic output, diversification, and serviceability that will be challenging to reach but I applaud the effort to set high goals.

They'll never have to reach them. The current government will be gone or heavily shifted in a decade, but hey. If those high numbers encourage them to stick to the strategy? If it encourages them to be proactive because they truly believe in that light at the end of the tunnel? Then by all means, let them believe whatever numbers they want. No matter how ambitious.

Building an Industrial Base, bringing the CAF back up to a metric standard that hasn't existed in decades, and rapidly acquiring new equipment with expedited timelines are counteractive to each other. There will always be sacrifices to make. There will always be a loser on that equation.

Admittedly, the strategy does acknowledge this sacrifice and the Federal government is seemingly prepared to make it. However, they might be willing, but others might not be so excited. That can quickly lead to strained relations and complications as Industry is mandated to maximize Canadian content and also deliver in increasingly quick timelines.

In many cases that can be possible; however, there will be many where the existing policy, being fairly broad and open, runs into complications of policy and interpretation between everyone. Not much different I guess, but now with added layers of framework and policy to toss on top of everything.

This also isn't to speak to the fact that, as of now, we don't know how this strategy will translate to policy. Projects are rarely build or partner or buy. Often times they are an unholy mix of all three, and while the proposed ITB changes as they exist do try to fix the system to help create a balancing act to how each three are measured, it does create an additional layer of complication and confusion for me as an analyst. That is especially true if more projects are leveraged to the scale of CPSP as merely anchors of broader economic packages.

Yes, that also isn't new. However, my hope was that we would move away from that mentality, and while this government has made clear their beliefs, I still held out some belief that things would shift overall. That I think gets to the core of the strategy.

It very clearly wants to be radical. It wants to rip apart the system and rebuild it. It wants to be more but that isn't what it's meant to do. It's a foundational document that subsequent policies and documents will build and expand upon. We have the cake, but not the icing or toppings. We know the base of the policy, and the general idea of what's coming, but there is still lots missing, lots that are coming but ain't here yet.

It makes this weird feeling where you know the strategy is missing things, but it also doesn't want to act like it. It wants to rip it all up, but it still needs to wait on the rest to catch up to it. That includes things like the new ITB policy itself. That includes reforms to things like IDEaS. These things are coming, but they're vital components to the strategy that we don't have right now.

There is also a lot of minor stuff that I hope to see changed. There's lots of funds, lots of money, but money doesn't fix the communication issues. It doesn't fix the difficulty. In some aspects they're there; more forums and councils, commitment to doing better on Industry Days.

But more needs to be done at a 'Nuts & Bolts' level as well to complement this and make the process easier to participate in. Canadabuys is a broken mess, SAP Ariba is frustrating as hell to keep up with, amendments and documents can get to a point so out of control in terms of scale and overall size that it can make them intimidating and difficult for folks like SMEs to jump into.

And hey, we have things there. There's a concierge service, a new single-window government service for industry, and attempts to address bottlenecks like security clearances. There is work being done there, and I hope those new systems coming in are valuable to SMEs.

There is still more on the nitty-gritty that will need to be done. There is still more on the day-to-day processes that will need reform down the road. That all might feel minor, little things, but their significance adds up as they build up.

I think the policy is fine mind you. Dull, expected in many aspects, and as a foundation it's fine so long as there is significant followup. I love that there are proper timelines given to many things. That is nicer than that vague "It's coming buddy" that I usually get to hear about with this stuff.

It again has high hopes. It has high hopes for industry and its output. It hopes that industry can keep up and quickly catch up. It hopes it can secure significant amounts of IP from abroad. I don't think they'll get to the serviceability levels they want in the time they want.

I do think Canadian content will run headfirst into the demand for speed. I do think the strategy is missing several things I would have liked to see included. It isn't perfect by any means. However, I do think it is good for what it is, which is better than nothing because an acceptable strategy is still a strategy that can be used. It can be recovered, expanded, and made into something great. You can't build a temple from a rotten foundation.

This isn't the case. This is something that can be successful, and for most of us I hope it is; from the bottom of my heart I really hope it is. It has what it needs. Yes there could be more. Yes we should demand more. It does a lot right, but not all right.

That's okay though. It's the first such strategy Canada has released, and firsts are always gonna be a bit weird. It serves as a good, fairly detailed, ambitious foundation. It gives us a start and right now that might be what we need. Not the perfect strategy, but the one that gives us the helping hand to lift ourselves back to our feet.