Another model: Canada integrates defence acquisition and industry funding
Australia should use Canada’s new defence procurement model to test whether its forthcoming Defence Delivery Agency (DDA) will have enough commercial freedom and industrial tools to deliver military capability quickly.
The DDA will have substantial acquisition authority. This will include controlling approved major-acquisition funding, delivering acquisition and sustainment, advising ministers independently and acting as the defence industry steward. The imminent reform of a proposed Canadian defence investment corporation provides a timely opportunity to examine whether Australia’s institutional division of responsibilities is appropriate.
The main message from Canada’s plan is the desirability of integrating acquisition with official financial support. In Australia, that might be done through coordination between the DDA and agencies that provide funding to industry.
A bill introduced in Canada’s House of Commons on 6 October proposes transforming the Defence Investment Agency, established a year ago, into the Canadian Corporation for Defence Investment. As a Crown corporation with the legal powers of a natural person, it could undertake commercial activities beyond those ordinarily available to a government department.
Unlike Australia’s DDA, which will operate as an executive agency within the federal government, Canada’s proposed corporation would be a legally separate, government-owned entity that could enter contracts and exercise its own financial powers, subject to ministerial oversight.
Under the intended scheme, Canada’s military would continue defining its capability requirements, while the corporation would procure the necessary equipment and services and coordinate acquisition with defence production and investment. In doing so, it would aim to reduce bureaucratic steps between identifying and delivering capabilities.
The corporation would have explicit financial authorities such as making loans and advance payments, guaranteeing certain financial obligations and acquiring shares or other financial instruments, with some transactions requiring ministerial approval. The bill would also authorise certain payments to the corporation from Canada’s Consolidated Revenue Fund up to an aggregate limit of C$1 billion (A$1 billion).
These powers would provide additional commercial flexibility, but their effectiveness would depend on how quickly investment decisions could be approved and coordinated with military procurement.
Despite its considerable acquisition authority, Australia’s DDA will remain a non-corporate government entity, with an official, the national armaments director, as its accountable authority. Although the DDA will control approved major-acquisition funding and operate a dedicated special account, its establishing instruments do not expressly provide the lending, guarantee and equity-investment powers proposed for Canada’s corporation.
These financial powers could allow the corporation to provide loans, guarantees or equity investments to manufacturers seeking to lift production capacity in anticipation of defence procurement contracts. Such investments could help suppliers acquire equipment, expand facilities and address production bottlenecks before they delay capability delivery.
Australia has financial and industrial-development tools comparable to those outlined in Canada’s bill. However, they are held by separate institutions, including the Defence Industry Development Grants Program (DIDG Program), the National Reconstruction Fund Corporation (NRFC) and the Advanced Strategic Capabilities Accelerator (ASCA).
Canada’s proposed corporation would also operate alongside existing defence innovation initiatives, including the Bureau of Research, Engineering and Advanced Leadership in Innovation and Science and Innovation for Defence Excellence and Security programs. These initiatives support defence innovation, experimentation and potential pathways to procurement, highlighting the importance of coordination even when procurement and strategic investment are consolidated within one institution.
For example, the NRFC has committed A$150 million in debt financing to Australian defence company Asdam to expand capacity. Meanwhile, the DIDG Program provides grants of up to A$1 million to help small and medium enterprises buy equipment supporting domestic defence-industrial priorities. In contrast to Canada’s proposed corporation, Australia’s industrial-investment mechanisms are outside the DDA.
This division of responsibilities could complicate efforts to align industrial investment with acquisition schedules. Even with a defence contract, manufacturers may need additional upfront financing to expand facilities or acquire equipment. Investment decisions made separately from procurement priorities could therefore leave production capacity lagging behind capability requirements.
While the vice chief of the defence force will oversee strategic capability requirements, the DDA will manage acquisition and sustainment. Before July 2027, Canberra should formalise coordination between the DDA, ASCA, NRFC and the DIDG Program to align procurement priorities, innovation and industrial financing.
Such arrangements should identify who is responsible for transitioning successful prototypes into acquisition programs, financing production expansion and addressing bottlenecks when procurement schedules exceed industrial capacity. Canberra should also assess whether existing financing institutions can meet the DDA’s industrial requirements or whether additional commercial authorities are necessary.
Australia need not replicate Canada’s proposed Crown corporation. But before the DDA begins operations in July 2027, Canberra should ensure that its procurement priorities, industrial-financing mechanisms and production requirements are aligned. Canada’s reforms offer an opportunity to examine whether Australia’s existing institutional arrangements can deliver that coordination.
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