Industrial Capability

Industrial capability is the ability of industry to deliver a required product or service. That ability rests on five things: people, processes, products, access to technology and facilities. NATO material uses the term for the industrial means by which required defence capabilities are actually delivered to armed forces.

The phrase sits alongside related terms such as industrial capacity, industrial responsiveness, industrial resilience and industrial base. In Canada, it appears in defence procurement mainly through the Industrial and Technological Benefits (ITB) Policy and its Key Industrial Capabilities (KICs). Suppliers meet it as a scored or weighted element in solicitations rather than as a stand-alone claim.

The five elements of industrial capability

A NATO technical study describes the industrial perspective through five elements: People, Process, Product, Access to Technology and Facilities (NATO Science and Technology Organization). NATO separates the capability that armed forces require from the industrial means needed to deliver it. A requirement states what the military needs. Industrial capability describes whether industry can supply it.

• People: the workforce and expertise behind the product or service.
• Process: the methods used to design, produce and support it.
• Product: what industry delivers.
• Access to technology: the technical know-how a supplier can draw on.
• Facilities: the plants and infrastructure used to build and sustain it.

Industrial capability in NATO's capacity pledge and production plan

NATO's 2024 Industrial Capacity Expansion Pledge commits Allies to develop national plans that enhance industrial capability, capacity and responsiveness. The pledge also supports an innovative, competitive and sustainable defence industry. It states that defence industrial capacity must support the equipment, readiness and interoperability that Allied forces require. The full text is on the NATO pledge page.

NATO's Updated Defence Production Action Plan links industrial capacity to the ability to meet NATO capability targets in the short, medium and long term. It calls for visibility into industrial production and capacity, including surge options. That information informs defence planning, stockpiling and logistics planning, and it supports supply-chain resilience.

Key Industrial Capabilities in Canadian defence procurement

Innovation, Science and Economic Development Canada (ISED) identifies Key Industrial Capabilities for use in major procurements by the Department of National Defence and the Canadian Coast Guard. Canada has identified 16 KICs. They reflect emerging technologies and established domestic capabilities considered important to national security (ISED, Key Industrial Capabilities).

The stated objectives are innovation, supplier development, exports and economic growth in the defence industry. The framework also gives suppliers greater predictability about the areas where Canada expects industry to invest before upcoming procurements.

Value Proposition weighting and Canadian Supplier Development

A procurement may apply a Value Proposition (VP) when Canada wants to support an existing domestic industrial capability for the equipment being purchased. The government's guidance gives the example of a 10% Value Proposition weighting where a strong industrial capability exists in Canada and the government wishes to support it through the procurement (ISED guidance).

• The VP framework can motivate bidders to propose research and development in Canada, Canadian supplier development and other industrial and technological benefits connected with the procurement.
• For in-service support procurements, Canadian Supplier Development may receive a higher weighting because of the need to support a sovereign industrial capability.
• Operational requirements may call for specified components to be produced in Canada or by Canadians. These are treated separately from scored or weighted VP elements.

What industrial capability means for a bidding supplier

A supplier is not generally asked for a generic statement that it has industrial capability. Where a solicitation invokes the ITB Policy, a KIC, a Value Proposition or Canadian Supplier Development, the bidder must address the specified industrial-benefit criteria and make the required contractual commitments. Bid teams should read the solicitation for these references early, check whether any Canadian-content requirement is mandatory or scored, and map their people, processes, products, technology access and facilities to the stated criteria.