Defence Production Sharing Agreement

The objectives of the Defense Production Sharing Agreement include:

(a) Achieving greater integration of both Canada’s and the United States’ military development and production capabilities while maintaining greater standardization of military equipment, wider dispersal of production facilities, and establishing a supply of supplemental sources.[3]

(b) Establishing Canada as a trusted acquisition partner, and ensuring that Canadian defense vendors are given equal and immediate consideration for U.S. Department of Defense (U.S. DoD) procurements—similar to American vendors—with certain exceptions.[4]

(c) Setting forth policies and procedures with respect to all contracts for supplies and services placed by the U.S. DoD with the Canadian Commercial Corporation (CCC).[5]

The DPSA applies to all contracts placed, on or after October 1, 1956, by any U.S. military department with the Canadian Commercial Corporation (CCC). It remains in force from year to year until terminated by mutual consent; however, it can be terminated by either party provided that six months' notice of termination has been given in writing.[6]

The DPSA includes provisions that place limits on the amount of profit that suppliers can gain from procurement contracts sourced under the Agreement; it also mandates that the CCC refund profits in excess of these amounts. The CCC is responsible for initiating audits to ensure costs and profits are in accordance with mutually agreed-upon practices, policies and procedures. The Agreement also states that the Canadian Government and its Departments and Agencies cannot profit from any contracts covered by the Agreement. Accordingly, contracts with the United States Department of Defense (U.S. DoD) are not subject to a CCC fee under the DPSA. The Agreement also excludes taxes and customs duties from being added to contracts awarded under the DPSA.[7]

As a part of the 2021 Federal Budget, the Government of Canada has reinstated an annual appropriation to CCC for the administration of the DPSA.[8]

While the DPSA removes barriers for Canadian companies selling to the U.S. DoD, the actual laws and regulations that govern purchases are detailed in the Federal Acquisition Regulations (FAR) and more specifically the Defense Federal Acquisition Regulation Supplement (DFARS):

• DFARS 225.872 waives limitations of the Buy American Act
• DFARS 252.225-7013 allows Canadian goods to be shipped to the U.S. duty-free
• DFARS 225.870-8 recognizes Public Services and Procurement Canada site and employee security clearances
• DFARS 225.801-1 identifies the Canadian Commercial Corporation (CCC) as Prime Contractor for all contracts over US$250,000[9]

In addition, U.S. DoD Instruction 2035.01 recognizes Canadian companies as equal and valuable participants in the North American industrial base.[10]

Signed in 1963, eight years after the DPSA, the Defence Development Sharing Agreement (DDSA) allows Canadian companies to enter into U.S. DoD-led research and development projects, and is designed to provide Canada the same access to future U.S. DoD requirements for Research and Development projects as American companies. Canadian technologies created under the DDSA can be procured by the U.S. DoD under the DPSA.[11]

Following the establishment of the DPSA, in 1960 the U.S. National Aeronautics and Space Administration (NASA) signed a Letter of Agreement (LOA) with the CCC. The LOA institutes a similar level of support to NASA and sets forth policies and procedures with respect to the administration of contracts awarded to Canadian firms through the CCC.[12]