Canadian Armed Forces members at the Adazi Military base in Latvia in August. Ottawa has launched a government agency for major defence procurements valued at $100-million or more.Christinne Muschi/The Canadian Press
Major defence procurements in Canada will now go through a single agency as part of the federal government’s plan to reform a process that industry has long lamented as a bane of Canada’s defence industrial base.
Prime Minister Mark Carney announced the official launch of the new office, the Defence Investment Agency, on Thursday in Ottawa. It will be overseen by Secretary of State for Defence Procurement Stephen Fuhr, and newly appointed chief executive officer Doug Guzman. Previously, Mr. Guzman served as deputy chair of Royal Bank of Canada as well as managing director at Goldman Sachs.
The action is part of a larger effort by the federal government to bring Canada’s defence spending to 2 per cent of its GDP this fiscal year, and to 5 per cent by 2035. The latter is the new target for NATO members brought in under pressure from U.S. President Donald Trump.
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The lengthy timelines and layers of red tape throughout Canada’s defence-procurement system have plagued it for decades, putting the country and its armed forces at a disadvantage in modern warfare.
“Our defence procurement under many governments before this one has been too slow to meet our needs. And that now has become even more problematic, because technology is speeding up so fast,” Mr. Fuhr said in an interview.
The goal of the new agency is to equip the Canadian Armed Forces at the “speed of relevancy,” he said.
But some in the industry are concerned that a lack of details in Thursday’s announcement and a concentration on major procurements may result in the agency leaving behind the emerging technologies Canada desperately needs to develop.
To maintain efficiency and not be waylaid by smaller contracts, Mr. Fuhr said the agency will only oversee procurements valued at $100-million or more. Smaller contracts will continue to go through standard processes.
While it’s not yet clear how many staff the new agency will take on, it will include personnel consolidated from other departments and agencies that previously shared responsibility for defence procurement, such as National Defence, Public Services and Procurement, and the Canadian Coast Guard.
“You have a massive duplication of effort that’s resolved with one single point of accountability,” Mr. Fuhr said.
Procurement requirements will continue to come through from the armed forces, he said. But contracting authority will now lie with the investment agency, which is housed within Public Services and Procurement Canada.
Stephen Fuhr, Secretary of State for Defence Procurement, in Helsinki in August. Mr. Fuhr will oversee the Defence Investment Agency with chief executive Doug Guzman.Markku Ulander/The Associated Press
During the first phase of the agency’s rollout, which will take about eight to 12 months, some continuing procurements will be shifted under its purview. For example, Canada’s procurement of up to 12 new submarines will now be managed by the Defence Investment Agency.
At the end of about 12 months, the agency will enter into its second and final phase, and be ready to take on even more procurement responsibility.
Until more details are released about how exactly the agency will work with existing government departments and policies, Christyn Cianfarani, president and chief executive officer of the Canadian Association of Defence and Security Industries, said she’s agnostic on it.
For example, she’d like to know how the country’s Industrial and Technological Benefits Policy, which is housed within a different department and ensures large contracts awarded by Ottawa result in investment back into Canadian industry, will be used by the new agency.
Questions have also arisen around how the agency will use the forthcoming Defence Industrial Strategy, which will identify Canada’s defence priorities and is being overseen by yet another federal department.
“These pieces have to be tied together, and the industry right now has anxiety around the lack of clarity on the plan to have those things work in concert with one another,” Ms. Cianfarani said.
Defence procurement in Canada is often particularly difficult to navigate for small-to-medium-sized enterprises (SMEs) that don’t have the resources or capital to withstand lengthy processes.
Mr. Fuhr said he has been very clear with large contractors and original equipment manufacturers that he expects them to support Canadian SMEs, which account for more than 85 per cent of the industry according to a 2024 federal government report.
However, for now, there’s no specific mechanism in place within the agency to support SMEs.
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The $100-million threshold announced by Mr. Carney on Thursday is disappointing to the startup community, said Ian Whytock, managing partner and co-founder at Tidal Venture Partners, as well as co-founder of national defence accelerator Vimy Forge.
If Canada is serious about working with defence startups developing technologies such as quantum computing, artificial intelligence or drones, it needs to include contracts in the $5-million to $20-million range as part of its procurement reform, he said.
“That is how you build a defence industrial base. It’s not shovelling really large contracts out the door to existing primes,” Mr. Whytock said.
Domestic capabilities such as shipbuilding, aerospace, advanced manufacturing and infrastructure that serves both military and civilian needs, were highlighted by the federal government in the announcement as investment priorities through the new agency.
But Mr. Whytock said the launch left him wondering where supporting Canadian technologies factored into the plans, and what kind of defence industry it aims to help build.
“Is our goal just to meet the 5 per cent and build airports, and that’s why they’re saying $100-million is the cap? Or is the goal to actually develop a homegrown Canadian technology ecosystem? I think you can do both,” he said.
The government also touted its new dedicated defence procurement body as a way for Canada to align itself more closely with allies. This includes Britain, Australia and France, which have similar agencies, as well as the European Commission’s ReArm Europe Plan/Readiness 2030. The move also reinforces Mr. Carney’s desire to diversify major procurements away from the U.S.
When Mr. Carney initially announced his intention to create Canada’s newest procurement body in June, he had called it the Defence Procurement Agency.
The name has since changed, in part owing to the federal government’s recognition of the need to transform its massive boost in defence spending into investment in its own backyard, Mr. Fuhr said.
“The Prime Minister is sensitive to, and so am I, and so is everyone that I work with, giving the CAF what it needs. But where we can, we need to parlay that into stimulating ourselves economically, and we’re going to do that.”