February 16, 2012
The purpose of this document is to set forth the terms and conditions forthe administration of class contributions under the Technology PartnershipsCanada (TPC) program.
2. LEGISLATIVE AUTHORITY
The legislative authority for TPC to make transfer payments is: Paragraph4(1)(a), subsections 5(c), 5(d), 6(c) andparagraph 14(1)(c) of the Department of Industry Act, Statutes ofCanada 1995, Chapter 1.
TPC is a Special Operating Agency (SOA) of Industry Canada and, as such,contributes to achieving the Department's strategic objectives, as statedyearly in Industry Canada's Report on Plans and Priorities (RPP). TPC'soperations directly support key objectives of Industry Canada. Specificobjectives, as well as expected results and outcomes to be achieved by TPCover identified planning periods will be published in successive editions ofthe Agency's business plans and accountability documents (e.g. AnnualReports).
In a context in which innovation is essential in an increasinglyknowledge-based economy, TPC is a technology investment fund established tocontribute to the achievement of Canada's objectives of increasing economicgrowth, creating jobs and wealth, and supporting sustainable development. TPCwill advance and support government initiatives by investing strategically inresearch, development and innovation in order to encourage private sectorinvestment, and so maintain and grow the technology base and technologicalcapabilities of Canadian industry. TPC will also encourage the development ofsmall and medium-sized enterprises (SMEs) in all regions of Canada.
TPC will take an investment approach, targeting an average sharing ratio ofnot more than 33 percent (with typical project sharing ratios ranging between25 percent and 30 percent). TPC will share with its private sector partners inthe risks and the rewards, the rewards to the program consisting of bothfinancial returns and economic benefits. TPC will manage the contributions sothat all repayments are recycled into TPC, allowing potential for futuregrowth.
4. ELIGIBILITY CRITERIA
4.1 Eligible Areas
Eligible areas are Environmental Technologies, Enabling Technologies andAerospace and Defence.
- The Environmental Technologies component encourages and supports the development and application of innovative technologies that contribute to the achievement of sustainable development, or that have significant environmental benefits. It involves projects in priority environmental areas such as the development of sustainable alternatives (better conservation of energy, water and non-renewable resources), pollution prevention through the development of clean process technologies (including clean car technologies), pollution abatement (technologies that reduce waste or harmful emissions) and pollution remediation.
- The Enabling Technologies component encourages and supports the development, application and diffusion of those critical technologies that will have major impact and benefits within and across industry sectors. It involves projects in critical areas such as advanced manufacturing and processing technologies, advanced materials processes and applications, applications of biotechnology, applications of selected information technologies and such other technologies as may be designated from time to time by the Minister.
- The Aerospace and Defence component encourages and supports the development and application of those technologies essential for the development of these sectors. It involves projects that sustain and expand the technological capacity and capability of these sectors. Support is also available for defence conversion projects aimed at reducing the dependency of enterprises on military contracts.
4.2 Eligible Recipients
Eligible recipients are firms, organizations or institutions established inCanada, which are prepared to conduct research, development and innovationactivities in the eligible areas, and which can demonstrate their ability toachieve the stated objectives of the proposed project. Eligible recipients maybe incorporated entities, partnerships, cooperatives, or any trustee or legalrepresentative thereof, or groups or alliances of eligible recipients where alead recipient has been identified. Agencies of the Crown (including Crowncorporations, government institutes, government laboratories, etc.) anduniversities may be allowed as members of alliances, but not as leadrecipients.
The Minister may also provide contributions to associations, consortia orother entities to enable them to provide contributions to eligible recipientsin eligible areas under conditions consistent with these terms andconditions.
4.3 Eligible Activities
Eligible activities for TPC funding are industrial research,pre-competitive development and studies.
- Industrial research: planned search 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: translation of industrial research findings into a plan, blueprint or design for new, modified or improved products, processes or services; conceptual formulation and design of products, processes or services alternatives; initial demonstration or pilot projects, and prototypes; and other related pre-production activities; and
- Studies: studies pertaining to potential industrial research or pre-competitive development projects and studies for related activities.
4.4 Eligible Costs
Eligible costs are those incurred by the contribution recipient and which,in the opinion of the Minister, are necessary and reasonable to carry out theeligible activities to which they relate, as outlined in the project'sStatement of Work. Eligible costs will be limited to non-recurring costs andwill include labour, material, overhead, specialized equipment and other costswhich are attributable to the project. TPC will not support costs associatedwith land and buildings.
TPC may support retroactive reimbursement of eligible project costsincurred prior to the signing of the contribution agreements with recipients.In such cases, retroactivity will not pre-date receipt of a proposal norexceed a specific percentage of total project costs.
TPC will be under no obligation to reimburse eligible costs incurred by therecipient should the investment proposal be rejected.
5. ASSESSMENT CRITERIA
Applications for contributions under TPC will be assessed in the context oftheir relevance to the objectives of TPC. Specifically, applications will beassessed in terms of the extent to which they demonstrate:
- that the project contributes to the strategic objectives of the government, including technological and net economic benefits to Canada;
- that the project is technologically feasible, and that the applicant possesses, or can reasonably be expected to secure, the requisite technological and managerial capabilities, and financial resources, to achieve the stated objectives of the project;
- that a contribution under TPC is necessary to ensure that the project (either individually or as part of a portfolio of related activities of the applicant) proceeds with the desired scope, timing or location; and
- that the contribution would be repaid.
6. TYPE AND AMOUNT OF ASSISTANCE AND STACKING PROVISIONS
All decisions to provide financial assistance to applicants will reflectthe need for a contribution under TPC, as well as the degree and nature of theuncertainty and risk associated with the proposed project.
Assistance provided will be in the form of repayable contributions at alevel and amount deemed by the Minister to be justified in light of theanticipated benefits to Canada. The average sharing ratio of assistance underTPC on a portfolio basis will not exceed 33 percent of eligible costs. Whiletypical sharing ratios will range between 25 and 30 percent, TPC may offer ona limited basis higher than average sharing ratios to individual recipients ortargeted groups of recipients. In exceptional circumstances, when the Ministerdeems it essential and justified by the potential economic benefits, thesharing ratio may reach, but will not exceed, 50 percent of eligible cost. Theforegoing in no way obviates TPC from respecting the requirement that theentire portfolio have an average sharing ratio that does not exceed 33 percentof eligible costs.
Potential recipients are required to identify other sources of proposedfunding for projects throughout the life of the project, includingcontributions from other programs in Industry Canada, from other departmentsor agencies of the Federal Government or from other levels of government. Forprojects supported by TPC whose contributions are in excess of $100,000, totalgovernment assistance will not exceed 75 percent of total eligible projectcosts.
TPC assistance for projects under the Defence Development Sharing Agreement(DDSA) with the United States will be exempted from the total governmentassistance limit of 75 percent.
TPC's contribution agreements will contain provisions that permitreductions in the Agency's contributions in cases where it is determined thattotal government assistance exceeds the authorized percentages of totaleligible project costs.
TPC will be administered in accordance with Canada's internationalagreements, and in particular, the granting of contributions will not becontingent, either in law or in fact, upon actual or anticipated exportperformance. However, the granting of assistance to enterprises which exportwill not, for that reason alone, be precluded. Further, TPC will beadministered in accordance with all applicable legislation and regulations(including the provisions of the Canadian Environmental AssessmentAct and regulations thereunder) and, unless otherwise specified in theseterms and conditions, all applicable Treasury Board policies anddirectives.
7.2 Contribution Agreement
Contributions will be administered and paid in accordance with contributionagreements which will identify all conditions pertaining to the contributions,all obligations of both parties, and the conditions under which payments andrepayments will be made.
7.3 Delegation of Authority
The approval or rejection of applications, the execution and administrationof contribution agreements and related administrative matters, and theapproval of claims for payment in conformity with the requirements of theFinancial Administration Act, will be administered by officials ofthe Department in accordance with the delegated authorities approved by theMinister and consistent with TPC's Special Operating Agency (SOA) FrameworkDocument. Members of Parliament have no formal role in the delivery andadministration of the TPC program.
7.4 Information Requirements
The Minister will require from applicants information which the Ministerdeems pertinent to the assessment of the project. Without limiting thegenerality of the foregoing, this will include:
- a detailed description of the applicant (ownership, management, business experience, financial results, etc.);
- a detailed description of the project, and of the technological advances to be achieved;
- the forecast cost of the project, and details on its financing;
- the forecast benefits to result from the project;
- the amount of any federal, provincial or municipal assistance or tax credit, received or likely to be received for the project; and
- the identification of former public servants involved in the project who are under the Conflict of Interest and Post-employment Guidelines.
7.5 Due Diligence Process
Projects considered for approval under the TPC program will be subjected toa comprehensive due diligence process, including the verification ofeligibility. At a minimum, the due diligence conducted by TPC will consist ofclose examination of the proposal by technical and other experts, and forprojects in excess of $500,000, scrutiny by the Interdepartmental AdvisoryCommittee (IAC) and review by Industry Canada's Programs and Services Board(PSB).
All projects are analyzed to determine the relative technological,management and financial risk, as well as the risk of achieving the forecastbenefits.
Departmental systems, procedures and resources are in place for ensuringdue diligence in approving contributions and verifying eligibility and for themanagement and administration of the program.
7.6 MonitoringContribution recipients will be required to submit periodic reports in sufficient detail to enablethe Minister to assess the progress of the project.Further to completion of the project, contribution recipients will be required to submit annualreports on project benefits, and information relevant to the calculation of repayments, to enablethe Minister to:
- carry out the post-disbursement monitoring called for in the contribution agreement;
- administer the repayment of the contribution when conditions for repayment come into effect, including the application of interest charges on overdue repayments; and
- evaluate the effectiveness of the contribution, as stated in Section 10.2.
7.7 Operating Resources
TPC will ensure that sufficient resources are allocated in the Agency'sannual operating budget for the conduct of due diligence as well as themanagement and administration of the program.
TPC will be managed in such a way that program administration will consumeapproximately three percent of total program funding. In addition, subject toTreasury Board approval, TPC will use a portion of the net recycled repaymentsin its operating funds to cover the costs associated with the management andcollection of revenues and to fund program delivery costs associated withincreased investment activity.
8. BASIS AND TIMING OF PAYMENT
Contribution payments will be made on the basis of documented claims forreasonable eligible costs incurred, to be submitted by the contributionrecipient not more frequently than monthly. Each claim is to be accompanied bya brief report of the work completed and details of all costs being claimed,and shall be substantiated by such documents as are satisfactory to theMinister. Claims shall be certified by an officer of the contributionrecipient or by such other person satisfactory to the Minister.
The Minister may request at any time that the contribution recipientprovide satisfactory evidence to demonstrate that eligible costs claimed havebeen paid.
The Minister may withhold up to 10 percent of the contributions prior tocompletion of the projects or of such project audits as may be required.
Payments to TPC recipients will be consistent with the Treasury BoardTransfer Payment Policy including those involving advance payments ofcontributions.
The terms and conditions, program literature and agreements includeprovisions for cancellation or reduction of transfer payments in the eventthat funding levels are changed by Parliament.
Repayments of contributions will be set by the Minister in accordance withthe Treasury Board Policy on Transfer Payments. TPC will manage thecontributions so that all repayments and recoveries are recycled into TPC,allowing potential for future growth.
TPC contributions are generally conditionally repayable, includingpotential for sharing in upside returns. Repayment is not limited to the faceamount of the contribution. In view of the risks inherent in projects of ahigh-technology nature, it is recognized that not all projects will succeed,and consequently, that not all contributions will be fully repaid.
A variety of repayment instruments will be considered, including:royalties, fixed repayments, warrants on the recipient's equity, and/or acombination of the different instruments. Hence, repayment terms arenegotiated on a case-by-case basis, and are based on an assessment of thenature and risk of the project, need of the applicant and benefits toCanada.
Repayments will generally be triggered by a fixed date. Due to the varietyof the repayment instruments, this date is also established on a case-by-casebasis. Examples include: a fixed date following the completion of thestatement of work or a predetermined date when the technology is expected tobe inserted into the company's operations.
TPC will monitor all provisions of the contribution agreements includingthose relevant to repayments. All contribution agreements will includeprovisions requiring recipients to submit annual information updates onprojected and actual repayments to the Minister together with explanations ofsignificant changes, if any.
As part of its repayment administration process, TPC will ensure interestis charged on overdue repayments, in accordance with the Interest andAdministrative Charges Regulations.
10. RESULT-BASED MANAGEMENT AND ACCOUNTABILITY FRAMEWORK
TPC's accountability framework is defined in its Special Operating Agency(SOA) Framework Document under the section entitled Accountability andReporting Relationships. The Framework also outlines the terms of reference ofthe TPC Advisory Board, the organizational structure and partneringrelationships within Industry Canada and other government entities.
The Annual Report is the primary reporting framework to the Minister andwill be tabled in Parliament by the Minister. The Annual Report completes theaccountability cycle by reflecting financial and operating results for theprevious fiscal year. It will also report on the state of the overall TPCportfolio.
Annual plans and specialized reports (e.g. business plans and performancereports) are the principal and formal means by which TPC is held toaccount.
10.2 Performance Measurement
In order to measure and report on the results of the TechnologyPartnerships Program, Industry Canada will ensure that appropriate performancemeasurement systems are integrated into the operational cycle of itsactivities. The department's requirements for a Results-based Management andAccountability Framework, that will provide for appropriate measuring andreporting of results, are included in TPC's Special Operating Agency FrameworkDocument and its Evaluation Framework. These frameworks include: key resultsto be achieved; the performance measurement strategy; the expected schedulefor major evaluation work; and reporting provisions for both fundingrecipients and the department, including parliamentary reporting.
The Minister will retain the right to have the necessary audits of thecontribution recipient's books, records and financial statements or otherareas as required undertaken by auditors satisfactory to the Minister, for thepurpose of validating claims for reimbursement of eligible costs, and for thepurpose of confirming amounts repayable to the Crown on the basis of thecontribution agreement.
Utilizing a risk-based framework, TPC will annually compile a plan for theaudit of selected recipients of contributions. Funds to cover costs related toimplementation of the Agency's annual audit plan will be provided for in TPC'soperating budget.
11.2 Contribution Audit Framework
TPC will adopt a risk-based approach to the selection of contributions foraudit. The audit risk of each contribution agreement will be assessedannually. The intent is to audit contributions where TPC has identified someparticular concerns. In addition, audit selection criteria will be used tohelp determine the purpose, scope and timing of contribution audits. TPC willundertake to coordinate its audit plans with other government organizations atthe federal and/or provincial level, where these are involved in funding thesame projects, and will give due consideration to audits of recipientsperformed by other government organizations. TPC will require auditors toagree that contribution audits will be conducted according to generallyaccepted auditing standards.
TPC will be evaluated in accordance with Treasury Board's policy on programevaluation. The responsibility for scheduling and arranging for the conduct offormal evaluations of TPC's operations will rest with the Audit and EvaluationBranch of Industry Canada. Funds to cover costs related to formal evaluationsof TPC's operations will be provided for in the Agency's operating budget.