Defence and marine procurement: Standing Committee on Government Operations and Estimates—April 24, 2020

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Impact of COVID-19 on defence and marine sectors

In this section

Key messages

Defence sector

Key message

Canada will continue to monitor the situation, analyze potential impacts and explore all possible financial measure available to support the defence industry and protect Canada’s long term national security interests


Defence suppliers contribute to economic development and to strengthening the country’s security. Like many industries facing the pandemic, defence industry activities are impacted, which can affect the delivery of goods and services and the employment status of some workers.

Unlike other industrial sectors in Canada, defence suppliers have a limited number of clients and strongly depend on the Government of Canada. In these conditions, and within a pandemic context, it is highly unlikely that these suppliers will be able to find new clients and develop new markets. As Canada’s operational and industrial capabilities needs to be maintained, it is in the interest of the government to ensure the financial viability of its suppliers.

A number of Canadian defence suppliers have reached out to government officials identifying the need for urgent support, as they are experiencing serious cash flow difficulties resulting from reduced activities in light of the COVID-19 pandemic situation. In collaboration with other government organizations and central agencies, Public Services and Procurement Canada (PSPC) is currently exploring measures to support the defence industry.

Environmental scans show that other jurisdictions are taking the necessary steps to address the financial health of their defence suppliers and the stability of the supply chain. The United Kingdom has developed a policy in which the suppliers will continue to be paid as per the original schedule, even if service delivery is disrupted or temporarily suspended. It will follow through on this plan until at least the end of June to ensure service continuity.

The United States has not yet announced explicit guidance to its agencies to continue to pay suppliers, but has called for consideration of benefits to keep skilled and key personnel in a mobile-ready state. Exact measures are under deliberation in the United States, and the US Department of Defense is in the process of developing direction on the issue.

Australia has announced that it will proceed with advance payments of more than $500 million to its defence industry, citing the important contribution to its economy, security posture and safety.

Marine sector

Key messages


Canada’s National Shipbuilding Strategy (NSS) is a long-term plan to renew the fleets of the Royal Canadian Navy (RCN) and the Canadian Coast Guard (CCG), build a sustainable domestic marine sector, and generate economic benefits for Canada. In response to COVID-19, ISI has suspended all industrial operations, production at VSY remains ongoing and the Province of Quebec has declared Chantier Davie an essential service.

Irving Shipbuilding Inc.

ISI has suspended most industrial operations as of March 20, 2020. The initial 3-week pause has since been extended. The suspension impacts about 1,100 employees, while special measures for working from home or within ISI’s offices have been implemented for the remaining 650 to 700 employees. Design work for the Canadian surface combatant (CSC) continues through the suspension, along with reports, test plans and material ordering for arctic and offshore patrol ship (AOPS).

Canada is working closely with ISI to monitor the financial impact of the suspension and negotiate a plan for COVID-19 related delays. While we do expect the delivery of the first AOPS to be delayed because of the COVID-19 situation, it is too soon to tell exactly when we can expect the first delivery, or how it might impact the overall project timeline.

Vancouver Shipyards

Operations at VSY continue but are being closely monitored. White collar workers not in direct support of production are working from home, while other measures being taken include following self-isolation guidelines, additional social distancing measures, cancelling large gatherings and increased cleaning. VSY has been working closely with WorkSafeBC in implementing these practices, and adjusting and escalating actions in response to new regulations and guidance.

This approach has allowed VSY to continue construction of the joint support ship (JSS), albeit at a reduced rate of production. The terms and conditions of the JSS build contract are being finalized between Canada and VSY with the goal of awarding the contract in the near future.

Canada is working closely with VSY to monitor the impact of COVID-19 and associated measures. Given the uncertainties associated with the duration of COVID and related strategies, it is premature to assess overall schedule implications for the projects at VSY.

Chantier Davie

On March 24, 2020, in response to COVID-19, the Quebec Government published a list of essential industrial sectors, under which Chantier Davie qualified. Chantier Davie has conducted on-site training for dealing with COVID-19, implemented a set of strict directives, and negotiated with their union to maintain intact squads instead of rotating employees through different teams. Nonetheless the workforce numbers and capacity has diminished to accommodate the social distancing measures implemented.

Support for the defence industry

In this section

Key message

Canada will continue to monitor activities taken by our like-minded allies insofar as support for their respective defense industries


In Canada, as with our allies, defence contractors are an essential part of the maintenance of safety and security of our respective nations. As with many industries, the COVID-19 pandemic has meant that these contractors have had to make significant layoffs to respect the operational closures required. Unlike in some other industry sectors, for a number of defence contractors the government is their primary or only client. If current domestic capability is to be maintained, and critical operational needs are to be met, the Government has a vested interest in the financial viability of these companies.

United States of America

Following the declaration of defense contractors as essential (PDF) and to minimize the financial impact on the base itself. A new task force has been put in place to coordinate and maximize acquisitions flexibility, provide guidance, and leverage existing tools (for example, contract flexibility, increasing progress payments) and partnerships (for example,. national defence industrial association) to assess the impact, to protect and incentivize industry, and to promote the base’s capabilities to aid in a government-wide response.

The 2 trillion USD Senate stimulus package includes a 17 billion USD federal loan program for businesses deemed “critical to maintaining national security”. Additional funds are expected in the coming days. In addition, the government passed the Coronavirus Aid, Relief and Economic Security Act, which includes a provision enabling contractors to be paid by the government, and for compensating workers to be kept in a ready state if they are unable to work due to the pandemic.

Five defence industry chief executives are on the White House’s list of business leaders who will be consulted on restarting a coronavirus-hit economy.

United Kingdom

The United Kingdom (UK) has developed a policy to continue to pay their suppliers as expected before the pandemic (even if service delivery is disrupted or temporarily suspended) until at least the end of June to ensure service continuity during and after the current COVID-19 outbreak. This may include a range of approaches such as forward ordering, payment in advance/prepayment, interim payments and payment on order (not receipt). To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period.

To date, the UK has issued £65.5 billion in emergency spending measures to prop up businesses and jobs.

UK’s fourth emergency package of measures announced Thursday, £9 billion (11 billion CAD) of support for the self-employed, brings the total aid announced since March 11, 2020 to £65.5 billion.


Australia has announced they will proceed with advance payments of more than 500 million AUD to its defence industry, stating the important contribution to their economy, security posture and safety. As a whole, the Australian Government has injected a total of 189 billion AUD (128.6 billion CAD) into its economy via 2 stimulus packages. To combat rising unemployment, it also earmarked 130 billion AUD (88.4 billion CAD) towards wage subsidies over the next 6 months.

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