Strategic Aerospace and Defence Initiative (SADI) - Terms and Conditions

(February 16, 2012 — Abridged)

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Note: This abridged version provides the sections of the Terms and Conditions most relevant to applicants. The table of contents and all links to return to it are included to meet Internet accessibility requirements and are not part of the Terms and Conditions approved by Treasury Board.

Purpose

The purpose of this document is to set forth the terms and conditions for the administration of contributions under the Strategic Aerospace and Defence Initiative (SADI) to be administered by Industry Canada.

Authority

The Minister of Industry (the "Minister") has the authority, under paragraph 4(1) (a), subsections 5(c), 5(d) and 6(c) of the Department of Industry Act, S.C. 1995 c.1., for the promotion of, and increasing the competitiveness of, industry and technology in Canada. The Minister has the authority to make the contributions as provided under these Terms and Conditions pursuant to subsection 14 (1) (c) of the Department of Industry Act, S.C. 1995 c.1.

Program objectives

SADI will foster the growth of a competitive, knowledge-based Canadian economy. SADI supports Industry Canada's strategic outcomes: Advancements in science and technology, knowledge, and innovation strengthen the Canadian economy. Contributions made under these Terms and Conditions will support the Canadian aerospace, defence, space and security (A&D) industries through support to company research and development (R&D).

Specifically, the objectives of SADI are:

  • Encouraging strategic R&D (as defined below) that will result in innovation and excellence in new products, services and processes;
  • Enhancing the competitiveness of Canadian A&D; and
  • Fostering collaboration between research institutes, universities, colleges, and the private sector.

SADI will advance and support government initiatives including the fulfillment of international obligations by contributing strategically to research and development in the A&D industries in order to encourage and further leverage private sector investment, and so maintain and grow the technology base and technological capabilities of Canadian A&D industries. SADI is a contribution program. The Minister may exercise his discretion on whether to fund projects.

Eligibility

For the purposes of these Terms & Conditions, an "Applicant" is defined as a corporation that submits an application for funding under SADI. An "Eligible Recipient" is an Applicant that is eligible to receive funding under SADI and a "Recipient" is an Eligible Recipient that has entered into a contribution agreement ("Contribution Agreement") with the Minister under SADI.

Eligible Recipients

Eligible Recipients for funding under SADI are corporations incorporated under Canadian law and that are prepared to:

  • Conduct strategic R&D activities in A&D industries; and
  • Create opportunities for Canadians to contribute to a highly skilled and knowledge-based workforce.

Eligible Activities

Activities that are eligible for funding under SADI ("Eligible Activities") are industrial research and pre-competitive development in A&D carried out by Eligible Recipients, in Canada. Projects that are eligible for funding under SADI ("Eligible Projects") are those comprising Eligible Activities. The Eligible Projects must be in respect of strategic R&D activities (as defined below).

Industrial research
means planned research or critical investigation aimed at discovery of new knowledge, with the objective that such knowledge may be useful in developing new products, processes or services, or in bringing about a significant improvement to existing products, processes or services.
Pre-competitive development
means the translation of industrial research findings into a plan, blueprint or design for new, modified or improved products, processes or services whether intended for sale or use, including the creation of a first prototype which would not be capable of commercial use. It may further include the conceptual formulation and design of products, processes or services and of initial demonstration or pilot projects.

Pre-competitive development does not include:

  1. initial demonstration or pilot projects if these could be converted or used for industrial application or commercial exploitation; or
  2. routine or periodic alterations to existing products, production lines, manufacturing processes, services, and other on-going operations even though these alterations may represent improvements.

Strategic R&D activities will involve one or more technologies that:

  • Support the development of next generation A&D related products and services;
  • Build on Canadian strengths in A&D technology development;
  • Enable Canadian companies to participate in major platforms and supply chains; or
  • Assist the sector in achieving Canada's international obligations (e.g. development programs supported by Canada such as the Joint Strike Fighter program (JSF).

Eligible Projects must require government funding to meet scope and timing of the proposed Eligible Project. Strategic R&D and the commercialization and/or manufacturing of high-value added technologies, derived from SADI funded projects, must take place in Canada, unless otherwise agreed to by the Minister.

Eligible Costs

Eligible costs for contributions will be those costs that are incurred and paid by a Recipient in respect of an Eligible Activities and which, in the opinion of the Minister, are reasonable and necessary to carry out the Eligible Activities to which they relate. Eligible costs will be limited to a Recipient's non-recurring costs and may include labour, material, overhead, specialized equipment and other costs, which are attributable to the Eligible Activities. The Minister will only reimburse a Recipient for eligible costs that, in the Minister's opinion, are reasonable and relate directly to the Eligible Activities. Costs associated with land and buildings are not eligible costs.

SADI may support retroactive reimbursement of eligible costs incurred prior to the signing of the Contribution Agreement. This is due to the length and complexity of strategic R&D projects in the A&D industries. In such cases, the Minister will not pay for any eligible costs incurred by a Recipient prior to the date on which the Minister acknowledges receipt of that Recipient's complete project application proposal. Costs supported on a retroactive basis will not exceed 20% of the total eligible costs of the project. The Minister shall not reimburse an Applicant for eligible costs incurred should the Applicant's proposal be rejected.

Type and maximum amounts of contributions

Contributions will be in the form of conditionally and/or unconditionally repayable contributions. The contribution amount is the amount of assistance that, in the opinion of the Minister, is required by a Recipient to ensure that the Eligible Project proceeds successfully and is deemed to be justified in light of the anticipated benefits to Canada.

There will be no maximum contribution that can be made under SADI for a particular Eligible Project. The Minister will seek Treasury Board approval prior to authorizing contributions in excess of $10 million. The Minister will seek Treasury Board and Cabinet approvals prior to authorizing contributions in excess of $20 million.

Contributions shall be negotiated to be the minimum amount required, in the opinion of the Minister, to allow a project to proceed. Under SADI, the contribution to any Eligible Project will normally not exceed 40% of eligible costs. Under exceptional circumstances and with the approval of the Minister, the contribution to an Eligible Project may reach, but will not exceed, 50% of eligible cost.

Stacking provisions and other government assistance

An Eligible Recipient will be required to inform the Minister of any other government (federal, provincial, territorial, municipal) financial assistance it has received or requested for the Eligible Project prior to a recommendation being made to the Minister to approve a contribution under SADI. Furthermore, Contribution Agreements will impose upon the Recipient a continuing disclosure obligation to advise the Minister if it receives further government assistance in respect of the eligible costs supported by the contribution.

The level of assistance from all government sources (federal, provincial, territorial, municipal) to an Eligible Recipient shall not normally exceed 75% of eligible costs.

The Minister may approve, on a case-by-case basis, an exemption to the stacking limit. These exemptions will be the subject of an annual memorandum submitted to the Treasury Board Secretariat. The memorandum shall include the following information: client name, project description, expected results, total project costs, total eligible costs, total government assistance (TGA), percentage of TGA (stacking), total federal assistance, SADI assistance, and rationale for providing TGA in excess of 75%. In no instance will government assistance exceed 100% of a project's eligible costs.

Contribution Agreements will provide for the right of the Minister to either reduce the amount of the contribution in an amount equivalent to any amount over the stacking limit, or require the Recipient to repay the excess amount, which amount would constitute a debt due to the Crown and would be recovered as such.

Failure to disclose the information on other government assistance would constitute an event of default, which would permit the Minister to put the Recipient into default and take such action as would apply as set out in the Recovery section of these Terms and Conditions.

Repayments

In accordance with Treasury Board Policy on Transfer Payments, contributions will be conditionally and/or unconditionally repayable.

Repayment schedules will be established with the objectives of initiating repayments as soon as possible, normally one year after the completion of the project, and for achieving repayments normally within 15 years after completion of the project.

For JSF Projects Only: One acceptable deviation from the norm would be for JSF projects where project revenues may occur over a longer period, linked to the forecasted production schedule of the aircraft. In this case, repayment schedules may permit repayment to commence two years after the completion of the program, and may span a period of no more than 20 years.

For JSF Projects Only: In the case of JSF projects, repayment may be based upon actual JSF-related program revenues, and may be limited to the nominal amount.

Industry Canada will monitor all provisions of the Contribution Agreements including those relevant to repayments. All Contributions Agreements will include provisions requiring Recipients to submit annual information updates on projected and actual repayments. All Contribution Agreements will include provisions allowing the Minister to disclose the amount of each repayment made by the Recipient at the time it is due or paid or at any time thereafter. If the Recipient fails or neglects to file the requisite documentation to establish the amount due at the appropriate time, the Minister will have the authority to publicly release the projected repayment amount.

As part of its repayment administration process, Industry Canada will ensure interest is charged on overdue repayments, in accordance with the Interest and Administrative Charges Regulations.

Supporting documentation required from applicants

Applicants will be required to submit sufficient information for the Minister to assess the Applicant and its project proposal against the criteria for Eligible Recipients, eligible activities, eligible costs and assessment criteria. This would include at a minimum:

Organizational Information

  • A detailed description of the Applicant (ownership, management, business experience, past and forecasted financial statements for the years covered by the project, technical team's experience and expertise, etc.);
  • A detailed demonstration of how the Applicant meets eligibility criteria listed in the Eligibility section of these Terms and Conditions;
  • Assurance that the Applicant is in good standing with regard to all federal, provincial, territorial and municipal laws and regulations;
  • Corporate documents as the Minister deems necessary (e.g. articles of incorporation, corporate by-laws and related instruments);
  • Affirmation that any person including any consultant or in-house lobbyist who lobbies on its behalf to obtain funding under SADI and who is required to be registered pursuant to the Lobbying Act is registered pursuant to that Act;
  • Affirmation that the applicant has not nor has any person on its behalf engaged any person (other than an employee) for the purposes of obtaining SADI funding and paid, or agreed to pay, that person a commission, contingency or success fee or any other consideration (whether monetary or otherwise) that is dependant upon the Applicant receiving SADI funding;
  • Assurance that any former public servant, that derives benefit from the Contribution Agreement, will be in compliance with the Values and Ethics Code for the Public Service;
  • Assurance that any former public office holder, that derives a direct benefit from the Contribution Agreement, will be in compliance with the Conflict of Interest Act and Post-Employment Code for Public Office Holders; and,
  • Assurance that no member of the House of Commons or Senate will benefit from the contribution.

Project Information

  • Project proposal, workplan, and budget addressing the overall context/objectives and goals of the project, as well as major activity areas and key project performance milestones as well as the planned schedule of repayments;
  • The forecasted total cost (eligible and ineligible costs) of the project, and details of financing;
  • The forecasted public policy benefits, including the increase in technological capacity, the planned cooperative agreements with post-secondary institutions and any sustainable development plans which result from the project;
  • The amount of any federal, provincial, territorial or municipal assistance or tax credit, received or likely to be received for the project;
  • The names of those officers responsible for the project, with details on the qualifications of the key individuals carrying out the proposed work;
  • Details on how the project and the Applicant will meet the assessment criteria detailed in the Assessment Criteria section of these Terms and Conditions; and
  • Information on all other funding applications made by the Applicant, including the organizations from which assistance was requested and the amount requested, as well as the outcome of the applications.

For JSF Projects Only: Projects seeking funding under JSF terms must demonstrate a direct link to the JSF supply chain. Technical Assistance Agreements (TAA), Non Disclosure Agreements, Letters of Interest (LOI), are examples of the types of documents acceptable to establish this link to the program.

The assessment criteria

Applications for contributions under SADI will be assessed for their suitability for SADI funding in the context of their relevance to the objectives of SADI. SADI will establish reasonable but high standards for assessing Eligible Project proposals. Project proposals will be assessed against the criteria below.

Assessment Criteria

Technology Benefits

  • Degree of strategic technology innovation and/or excellence; and
  • Feasibility of strategic R&D leading to product/service applications.

Social and Economic Benefits

  • Commercialization feasibility and benefits;
  • Technology spill-over and diffusion; and
  • Collaborative partnerships (e.g., with post-secondary institutions or public research institutes).

Company capability to achieve the stated objectives

  • Financial resources;
  • Management expertise;
  • A Business plan to achieve benefits; and
  • Technical team's experience and expertise to conduct the research and development.

Due Diligence

Each Eligible Project considered for funding under the SADI program will be subjected to a comprehensive due diligence process that will examine the feasibility of the proposed Eligible Project and the Eligible Recipient's ability to deliver on the proposed technological and social and economic benefits of the Eligible Project. Due diligence will be conducted by Industry Canada SADI officers, with support from experts within Industry Canada, from other departments/government organizations, and external experts, as needed. Projects in excess of $2,000,000 will be reviewed by Industry Canada's Programs and Services Board (PSB). All Eligible Projects will be analysed to determine the relative technological, management and financial risk, as well as the likelihood of achieving the forecasted benefits. Proposed Eligible Projects successfully completing due diligence will be recommended to the Minister for funding.

Departmental systems, procedures and resources are in place for ensuring due diligence, management and administration of SADI including, for example, review of proposed Eligible Projects by Industry Canada's PSB.

Information on the application process, eligibility and project assessment criteria and approval process will be made public.

Administration

General

SADI will be administered in accordance with Canada's international trade agreements. SADI will only support Industrial Research and Pre-competitive Development projects, and the granting of contributions will not be contingent (a), either in law or in fact, upon actual or anticipated export performance or (b) upon the use of domestic over imported goods. However, companies that export will not be precluded from receiving funding for that reason alone.

Monitoring

The Recipients will be required to submit periodic reports to the Minister. This information will enable the Minister to assess the progress of the Recipient's Eligible Project, including but not limited to the following: achievement of project objectives, performance milestones and expenditures; a summary of the nature and extent of the commercialization efforts; etc.

Further to completion of the Eligible Project, Recipients will be required to submit an annual audited financial statement, and/or a statement of disposition of SADI funds, and annual reports on project benefits as well as fulfillment of the specific commitments in regard to Repayments, to enable the Minister to:

  • Carry out the post-disbursement monitoring called for in the Contribution Agreement;
  • Administer the repayment provisions of the Contribution Agreement when conditions for repayment are met, including the application of interest charges on overdue repayments; and
  • Evaluate the effectiveness of the contribution.

Method of payment to the recipient

Payments to a Recipient will be made on the basis of documented claims for actual eligible costs incurred which, in the opinion of the Minister, are reasonable, to be submitted by a Recipient not more frequently than monthly. Each claim is to be accompanied by a brief report of the work completed and details of all costs being claimed, and shall be substantiated by such documents as are satisfactory to the Minister. Claims shall be certified by an officer of the Recipient or by such other person that is satisfactory to the Minister. Claims shall be certified by an officer of the Recipient or by such other person that is satisfactory to the Minister.

The Minister, at his expense, may ask that any claim for payment be certified by the Recipient's external auditors or by auditors of his choice. The Minister may request at any time that Recipients provide satisfactory evidence to demonstrate that all eligible costs claimed have been paid.

Eligible Projects are generally several years in length. Payment of the contribution by the Minister is subject to the appropriation of funds by Parliament, the requirement of the Recipient to provide reports in respect of the Eligible Project and the satisfactory review of those reports by the Minister, all in accordance with the terms and conditions of the Contribution Agreement.

For all contributions, the Minister will have no obligation to pay more than 90 percent of the contribution amount until the Recipient has satisfied the Minister that all obligations of the Recipient under the terms and conditions of the Contribution Agreement have been met.

Official languages

Communications with the public and delivery of services will be in both official languages, in accordance with the Official Languages Act (OLA). All the documents developed by the Program will be published in both official languages. The Program will also contribute to Section 41 of the OLA as it will allow official language minority communities to participate fully to the program when applicable.

Performance measurement strategy

A Performance Measurement Strategy (PMS) has been developed for the SADI program. This document addresses all requirements identified in the Treasury Board guidelines for developing a PMS, specifically the Guideline on Performance Measurement Strategy under the Policy on Transfer Payments and the guide Supporting Effective Evaluations: A Guide to Developing Performance Measurement Strategies. Key performances metrics are directly attributed to the program's three objectives: innovation, competitiveness and collaboration. Key performance indicators include such indicators as dollars of R&D funding approved, percentage of recipients that have developed new or enhanced collaborative relationships and number of projects demonstrating broader benefits to Canada.

Audit provisions

The Minister retains the right to have the necessary audits performed by auditors satisfactory to the Minister, including any of the following:

  • Staff of Industry Canada;
  • An independent audit firm; and/or
  • The Recipient's external auditors.

The program audit plan will include provisions for audits of selected Recipients of contributions in accordance with the Treasury Board Policy on Transfer Payments. Audits of projects will be undertaken consistent with applicable Treasury Board policies.

The Minister will retain the right to have the necessary audits of the Recipient's books, records and financial statements or other areas as required undertaken by auditors satisfactory to the Minister, for the purpose of confirming compliance with all Terms and Conditions of the Contribution Agreement including validating claims for reimbursement of eligible costs, and for the purpose of confirming amounts repayable to the Crown. The Recipient's books, records and financial statements are to be maintained in Canada.

Utilizing a risk based approach, SADI will annually compile a plan for the audit of selected Recipients. Funds to cover costs related to implementation of the annual audit plan will be provided for in SADI's operating budget.

Internal audits will be conducted periodically as determined by the Departmental Internal Audit planning process, which is consistent with the requirements of the Treasury Board Policy on Internal Audit.

Duration and renewal

Intellectual property

The Department does not anticipate acquiring rights to any intellectual property created through projects funded under these Terms and Conditions

Changes in program funding

The program's Contribution Agreements and information literature will provide for cancellation or reduction of payments in the event that funding levels are changed by Parliament.