ALBERTA'S DEFENCE INDUSTRY

ALBERTA'S DEFENCE INDUSTRY
GROWTH SECTORS IN THIS REGION INCLUDE ROBOTICS, UNMANNED SYSTEMS, GEOMATICS AND DEFENCE ELECTRONICS

BY PETER DIEKMEYER

A great way to track Alberta’s aerospace and defence trends is to check the speakers list for the ConvergX conference. Headliners for the February conference, which brings together defence sector leaders with oil and gas industry stakeholders, included Charles Bouchard of Lockheed Martin, David Perry of the Canadian Global Affairs Institute and Rear Admiral Craig Bains, who recently assumed command of Maritime Forces Atlantic.

What was particularly interesting about this year’s ConvergX presenters, was that they almost all discussed broad national issues. These ranged from the recent Defence Policy Review, to procurement issues and operations. Few had much to say specifically about Alberta itself. “It’s true,” Kim Van Vliet, president of WaVv, which organizes ConvergX, admitted with a chuckle. “The show has a more of a reputation as a national event that takes place in Alberta rather than just a local gathering.”

That national (and in many cases international) outlook is common to Alberta aerospace and defence providers says Denean Tomlin, president of the Western Canadian Defence Industries Association, which represents more than 250 members and associates. “Canada’s defence industry is small,” notes Tomlin. “But we are pleasantly surprised at the many companies here that are developing highly specialized capabilities. These range from artificial intelligence, to sophisticated materials and geo-spacial technologies. Local players that want to compete in these advanced fields by definition have to think more broadly.”

PIPELINES AND DEFENCE INFRASTRUCTURE
Doug Brown, WCDIA’s chairman, whose day job is at ATCO, agrees. “Because we are so close to the oil and gas sector, we are in many ways a typical Alberta company,” said Brown. “However, much of the infrastructure work we do is defence-related. That includes operational support solutions for military camps, airfield and related logistics services. So we are naturally thinking nationally almost all the time.”

ATCO, which bills itself as a diversified provider of “innovative business solutions in structures and logistics,” enters 2018 with the wind at its back. Late last year the company won a five-year $79 million DND contract to provide facility maintenance and support services at Canadian Armed Forces (CAF) sites across the Canadian North, including Yellowknife, Whitehorse, Inuvik, Rankin Inlet and Iqalut.

A STRONG UAV CLUSTER
Alberta’s unique geography has attracted several key Canadian Armed Forces bases, notably Canadian Force Base (CFB) Edmonton, CFB Cold Lake, CFB Wainwright and CFB Suffield. In addition, the nearby Canadian Center for Unmanned Vehicle Systems, has formed the base of a burgeoning sector cluster, built around a major pool of local university-based research talent, graduates and several civilian and defence players. Experts say that key capabilities of the Alberta UAV cluster center on command & control systems, avionics, navigation systems and manufacturing.

According to John Molberg, a business development manager at Lockheed Martin CDL Systems, the Alberta-based center’s unique ability to allow clients to use local aerospace for testing purposes, such as beyond visual line of sight (BVLOS) operations related to pipeline and powerline inspection processes, provides a key attraction, as it is one of the few such areas of that size available in Canada.

Lockheed Martin CDL Systems (formerly known as CDL Systems) which today specializes in the development and licensing of vehicle control station software for unmanned systems, was a home-grown success story. It has grown to 60 employees (split between locales in Calgary and Huntsville Alabama) since Lockheed Martin acquired it in 2012 and now hires almost four fifths of its staff out of the University of Calgary’s engineering internship program. This, thus makes it a significant booster of the local economy.

In recent years the company, whose software drives more than 40 UVS systems, for customers such as US Department of Defence, the UK Ministry of Defence and the Canadian Armed Forces, has also increasingly branched out into civilian operations. These include a mandate from Transport Canada to demonstrate how it would handle BVLOS operations in civilian aerospace, which are currently forbidden. This growing “dual use” use capability would benefit both defence and non-defence clients, as the company could leverage the technologies between the divisions, Molberg said.

PERATON FLIES HIGH AFTER CF-18 WIN
Another Alberta player tied strongly into major national developments is Peraton Canada Corp. This in-service support provider is expanding its Calgary facilities in the wake of last year’s win (in conjunction with Magellan Aerospace) of a contract to do work on F404 engines which power the country’s CF-18 fighter jets. According to

Marie Darling, Peraton’s Canadian director of business development the company began a $2.5 million expansion of its Calgary facility last November. Construction, which will bring the facility to 76,000 square feet is expected to be completed this Spring.

“We provide all materials and supply chain management of the CF-18’s essential engine systems to military maintainers at main operational bases and globally deployed operations,” said Darling. “We have also seen significant growth in our international business with the F/A-18 community.” Peraton, which used to be known as Harris, changed its name last year after it was sold to a private equity group.

Peraton’s timing in building its local footprint could not have been better. During an industry day held in January regarding the Liberal government’s fighter jet procurement plans government officials said that the Royal Canadian Air Force will keep the existing CF-18s in operation until 2032. This will necessitate a range of upgrade programs and structural improvements, which will keep Peraton staff busy for a long-time.

Indeed, Peraton’s pace of work could pick up even further, if the government follows through on its intention to buy a fleet of Australian F-18s to serve as a stop-gap until Canada’s fifth generation fighter procurement gets off the ground. The Australian fighters, which themselves are on their last leg, would almost certainly require a thorough upgrading before being put into service. As for Darling, she has already got her sights set on other opportunities. Hot on the heels of the win of Peraton’s CF-18 related work, the company is already seeking out opportunities on other platforms. These include MRO work related to the CT-114 Tutor Propulsion Group Sustainment and the Halifax Class Combat System In-service support projects.

However, Darling admits that Peraton simply doesn’t have the manpower – yet – to fill all of the demand for its services. “We expect to increase our Calgary engineering, operations and business staffing by over 20% in 2018.” Darling said,“We are growing significantly. If you are interested in being a part of it, give us a call.”

RAYTHEON CANADA TO UPGRADE PHALANX FOR RCN
One company that reflects the unique challenges and opportunities of an Alberta presence is Raytheon Canada, Services and Support, the Canadian subsidiary of the US-based global powerhouse. Terry Manion is Vice President and GM at Raytheon, the company which does full-service repair and overhaul of a variety of Canadian Army, RCAF and RCN systems. He says, the company’s offerings have also expanded to include the delivery of new C4ISR systems, weapons systems and other capabilities. Raytheon also continues to offer life-cycle support across its various product lines.

While the company has its Canadian headquarters in Ottawa, its operations are spread across the country, with a significant presence in Calgary, Alberta. This broad geographic presence, - typical in Canada’s defence industry, -was a key success driver for Raytheon when the country’s industrial and regional benefits policy (which awarded defence contracts in part based on how well the benefits from those contracts are distributed) was in effect. Regional benefits remain a core element of Canada’s new industrial and technical benefits strategy which replaced IRBs in early 2014.

This could turn out to be good news for Raytheon’s Alberta facilities, which were initially established in 1992. That’s because earlier this year Raytheon’s US parent announced that the Canadian government was buying more than $140 million worth of new missiles for its CF-18 fighter jets. Raytheon Missile Systems of Arizona will produce the weapons. The price tag covers 32 missiles plus training, additional equipment and support. The company provided few details about the program such as when missiles would be delivered. However these kinds of sales generally have offset and regional benefit pressures attached to them. Raytheon’s Alberta locale’s capabilities suggest that it could be a logical beneficiary.

Raytheon’s Alberta operations got further good news in late January when Harjit S. Sajjan, Minister of National Defence, awarded it a $704 million contract to maintain and upgrade the Phalanx Close-In Weapon Systems. According to DND, Raytheon Canada will upgrade and support these 21 rapid-fire, radar-guided gun systems which the government claims provide the most effective naval self-defence system available against close-in threats such as missiles, small ships, and aircraft. These systems, which are already installed on the Navy’s Halifax-class frigates, are also slated to be fitted on the new Protecteur-class Joint Support Ships, when they are built.

CORPORATE RE-STRUCTURING AT C4I TRAINING & TECHNOLOGY
And, this tendency of Alberta defence players to think outside the province isn’t limited to the big OEMs says Clive Morgan, vice president of operations at engineering services provider C4i Training & Technology, developer of the Military Simulation (MILSIM) and Emergency Disaster Management Simulation (EDMSIM) constructive simulation platforms. During the past year this small 15-person firm, which partners with a range of outside contractors, was acquired by a Tampa-based company, while continuing to build its Riyadh office.

C4i bills itself as a provider of scenario based, interactive digital simulation tabletop exercises to train decision makers in disaster preparedness and situational management. Defence mandates account for about 60% of its business, so Morgan spends a lot of time thinking about Ottawa. This appears to be paying off. C4i recently won a contract to provide new capabilities to the Canadian Forces Maritime Warfare Centre (CFMWC) in Halifax and will be adding at least five new staff and possibly more to handle the extra work.

Current Alberta government statistics suggest that the industry’s 170 aerospace and aviation companies contribute $1.3 billion in revenue annually to the provincial economy and employ more than 6,000 highly skilled Albertans. Tomlin, who hopes to help update that and other sector-related data in the near future, echoes a common theme that resonates among sector players. “We are far away from Ottawa,” says the WCDIA president. “That means we need to work together to show how important we are to the local economy and to stay on its radar screen.”

One example: WCDIA recently hosted Ottawa-based representatives from ISED and DND to discuss funding programs available to qualified sector players, at one of the organizations informal monthly meetings. They provided details about Innovative Solutions Canada (ISC), Innovation for Defence Excellence & Security (IDEaS) and other initiatives. Sector players can also cite the province’s growing trade war with British Columbia, over routing rights related to a key pipeline expansion, as an example of the importance of aerospace and defence, which are untouched by the dispute, to the local economy.

Van Vliet for her part remained optimistic in the days prior to ConvergX and totally focused on the show. “The rebounding oil prices are making just about everyone a little bit happier. You can hear signs of relief all around,” said the hard-working organizer. “However life goes on for show participants. If they want to connect with each other, cross-sell products, services and technologies and find funding partners, then ConvergX is the place to do it.”