Rumblings of trouble are already starting as the federal government aims to shave $4 billion in annual savings by 2014 from a program spending budget that currently tops $80 billion.
Further, in 2010 the Department of National Defence began a strategic review as part of an ongoing process by which the government examines how each of its departments and agencies spends their money ,and how funds can be saved.
Given a contract Thales Canada recently received, the firm has an interest in the results of the DND review, said Dave Spagnalo, the company’s vice-president of defence and security. Thales has 140 employees in Ottawa.
Thales was awarded a nearly $11-million contract in March to create a new command, control and communications system for defence applications.
“We expect DND will not be isolated from any potential cuts that the government may bring,” Mr. Spagnalo said, but added, given the project contract Thales has just received, “we still think there will be very interesting programs for Canadian industry to bid on.”
DND’s review was included in the 2011 budget documents, which were presented in Parliament in March but never passed. Its budget was reduced by $525 million annually in 2012-13 and $1 billion yearly by 2013-14, the documents stated.
When contacted by OBJ, DND said it was unable to offer comment.
“As the 2011 budget has yet to be presented in this Parliament, we can’t provide details on the effect of the strategic review,” wrote spokesperson Lauri Sullivan in an e-mail.
“Effects on industry would have to be discussed with industry themselves; we can’t speculate on that.”
Planned spending in 2011-12 will be $20.4 billion, according to DND’s report on plans and priorities for 2010-11.
“The Department of National Defence is making changes to streamline departmental operations, optimize efficiencies, and align programs with core missions and government priorities,” the budget stated in reference to the strategic review.
Across all departments and agencies, total savings of $11 billion are expected to be realized through strategic review by 2014-15, the government stated in the 2011 budget.
Several military firms contacted by OBJ shied away from discussing how much the strategic review would affect their business.
Separately, a representative from BAE Systems said it would be “inappropriate” to comment until the review is complete. The worldwide military products and service firm has 100,000 employees globally and in Ottawa, 25 that focus specifically on the command-and-control sector. BAE would not disclose the share of business it receives from Canada.
“We can say that BAE Systems has a strong record of reducing costs and will continue to look at new ways to deliver value for money for the (Canadian) government,” stated Peter Edwards, BAE’s United Kingdom-based head of communications, in an e-mail to OBJ.
For Thales’s part, the company does see opportunity in Canada’s north, which the federal government has repeatedly named as a priority area for environmental and sovereignty concerns.
The company sells a system that gives “situational awareness” to vessels and helicopters involved in military exercises, allowing them to not only communicate well with one another, but also to get an idea of the environment around them and to pass that information around the “network” by satellite.
“Sovereignty is an issue, and now they’ll want systems in the Arctic that allow for situational awareness,” Thales’s Mr. Spagnalo said.
“You can easily add some more (automated) shore stations up there … and offer similar coverage.”