Innovative Solutions Canada: Annual Report 2022–23

Executive summary

The Government of Canada is the single largest purchaser of goods and services, with an annual buy of $22 billion. Our program, Innovative Solutions Canada (ISC), leverages that purchasing power to help Canadian innovators start, grow and get to market. ISC was launched in 2017, and in 2018, the Build in Canada Innovation Program was consolidated into ISC. The program's annual budget for innovation spending is approximately $147.6 million.

The program consists of three components, which provide funding opportunities from early research and development (R&D) to commercial procurements. The Challenge Stream focuses on early-stage R&D; the Testing Stream focuses on later-stage R&D prototype testing. We are also piloting and developing a Pathway to commercialization for SME innovators who participate in our program to have an opportunity to sell their market-ready innovation to Government of Canada (GC) organizations after having successfully completed their R&D or testing projects. Government of Canada organizations that have a need for innovations qualified under the Pathway to commercialization will be able to procure these innovations depending on individual departments' budget considerations.

In 2022-2023, 131 grants and contracts, totalling approximately $79.7 million, were awarded to Canadian companies. The first Pathway to Commercialization contract was also awarded. Participation in the program remained constant, with eight departments spending 90% or more of their annual allotment. In addition, 32 federal organizations tested innovative prototypes. Funded projects touched priority areas for government, including environment and a circular economy (25%), digital, artificial intelligence and enabling technologies (17%), health (11%) and military (10%) innovations. 2022-2023 also marks year two of the implementation of the National Quantum Strategy (NQS). The ramp up of ISC's component of the NQS resulted in 13 contracts awarded (up from five in 2021-2022) in the sector of quantum and robotics. Finally, the program continues to engage and attract diverse companies with a vast majority of its applicant companies reporting some form of ownership by one or more underrepresented groups.

This report highlights the activities and accomplishments of ISC between April 1, 2022 and March 31, 2023 (fiscal year 2022-23), and shares some stories from Canadian innovators who have successfully leveraged the program.

Historical statistics

Below you will find data that highlights ISC's historical performance, which includes data since the program's implementation in 2017 as well as historical figures going back to the Testing Stream's origin as the Build in Canada Innovation Program.

Challenge Stream by the numbers (since 2017):

• 368 awards for early-stage innovations
• Over $135M in funded projects

Testing Stream by the numbers (since 2010):

• 716 awards for late-stage innovations
• Over $385M in funded projects

Total number and value of awards by province (cumulative since 2010)

Province	Award value	# of awards
Alberta	$35,976,164	87
British Columbia	$70,049,864	162
Manitoba	$6,071,543	13
New Brunswick	$13,215,530	28
Newfoundland and Labrador	$17,003,046	26
Nova Scotia	$32,836,449	68
Ontario	$224,319,470	457
Prince Edward Island	$3,525,322	7
Québec	$113,048,607	225
Saskatchewan	$4,772,747	10
Yukon	$607,621	1
Grand Total	$521,426,362	1084

2022-23 Performance

• Funded 131 projects (values at approx. $79.7M)
  • 58 early-stage R&D projects funded (valued at approx. $29.9M)
  • 73 late-stage prototype testing projects funded (valued at approx. $49.8M)

Program enhancements in 2022-2023 resulted in a higher match rate between innovations and testing departments and increased program effectiveness for innovators and partners compared to past years. Initial analysis of 2023-2024 data shows that these enhancements continue to have a positive effect on program performance.

We worked with our departmental colleagues to increase participation in both funding streams, we awarded our first contract under our pathway to commercialization program feature, and we supported the National Quantum Strategy by funding projects in quantum and robotics.

Below, you'll find some data specific to fiscal year 2022–2023.

The map below shows the geographic dispersal of ISC supported businesses across the country with awards issued in eight of the ten provinces.

Total value of funding across Canada

The map below shows the geographic dispersal of ISC supported businesses across the country with awards issued in eight of the ten provinces.

Highlights

• Awarded our first contract under our Pathway to Commercialization
• Added 10 Canadian SMEs to our Pathway to Commercialization eligibility list
• Awarded 13 contracts in support of the National Quantum Strategy (5x more than in 2021-2022)
• Consistent participation in our Challenge Stream 21 federal departments launched early-stage R&D challenges
• Increased opportunities and testing partners, giving innovators access to the very best test sites for their innovations:
  • 30 federal departments
  • 2 Crown corporations

Our impacts

Economic

The $79.7 million in funding provided to companies in 2022-2023 is expected to generate an economic impact of approximately $240 million, and result in the following cumulative outcomes related to ISC funding^{Footnote 1} :

• 4 FTE jobs sustained/year per $1 million of ISC funding provided
• $3.1 million impact on GDP per $1 million of ISC funding provided
• $1.40 in tax return per $1 of ISC Testing Stream funding provided

Equity, diversity and inclusion

As a program, we strive to encourage participation from underrepresented groups such as women, Indigenous, youth, disabled individuals, 2SLGBTQI+ persons and others. Through our program design and our outreach to innovators across Canada, we are committed to helping more underrepresented innovators apply to the program, and more specifically receive funding.

Below are some statistics from 2022:

• 85% of applicants self-identified from underrepresented groups.
• 77% of all applicants (that self-identified) identified some form of ownership in the company
• 95% of funding went to companies owned in part by underrepresented groups.

Making it happen with our partners

Innovation, Science and Economic Development Canada (ISED) works with Canadians in all areas of the economy and in all parts of the country to improve conditions for investment, enhance Canada's innovation performance, increase Canada's share of global trade and build a fair, efficient and competitive marketplace.

To deliver the program, ISC works in close collaboration with its service delivery partners at Public Services and Procurement Canada (PSPC) and the National Research Council.

Public Sector organizations provide early stage funding and procurement opportunities, identify needs and market gaps to drive challenges, and test innovations.

• Innovation, Science, and Economic Development Canada leads program delivery by setting the program's policy direction, and is responsible for program operations.
• Public Services and Procurement Canada supports program delivery through dedicated procurement teams, who manage the procurement processes for all ISC contract-based funding opportunities.
• The National Research Council Canada provides expert technical and industrial expertise to support a range of program activities.
• Government of Canada departments and agencies 21 federal government departments must contribute 1% of their 2015-2016 R&D and procurement budgets towards the program. In addition to the 21 core partner departments, there are a number of other public sector organizations that have participated in the program, including:
  • 48 federal organizations
  • 55 provincial/municipal organizations
  • 18 academic organizations

Our funding streams

Our Challenge Stream and Testing Stream help small/medium-sized businesses (SMEs) overcome technology testing and development hurdles so that they can grow, scale, and get to market while also improving government operations.

Below is an overview of our two funding streams and their core components:

Challenge Stream

Uses a competitive process to meet specific government needs

• Early-stage research and development (technology readiness levels 1 to 6)
• Receive up to $2.3M to prove your concept and build your prototype
• Challenge-based competitions

Testing Stream

Uses a competitive process to fund testing of prototypes in real-life settings.

• Late-stage prototype testing (technology readiness levels 7 to 9)
• Up to $1.1M to test non-military innovations, and up to $2.3M to test military innovations.
• Open and theme-based calls for proposals

Success stories

Pathway to Commercialization

ISC has continued to implement the interim approach to the Pathway to Commercialization (PTC), where innovators who are successful in the ISC program may sell their market-ready innovation to federal organizations. We continue to refine the parameters, the process, and the procurement tools that may be leveraged in this phase.

In 2022-2023, the first PTC contract was awarded, and 10 companies qualified under this program feature:

• IMRSV
• Spexi Geospatial
• Kraken Robotics
• Trident Pump Inc.
• Rockport Networks Inc.
• Niricson Software Inc.
• Ova Gestion Conseil
• Zighra Inc.
• Agilicus Incorporated
• NuEnergy.ai

Supporting government priorities

In 2022-2023, we aligned our funding opportunities to the following government priorities:

• Environment and climate change: 25% of projects
• Digital and enabling technologies: 17% of projects
• Health and medical: 11% of projects
• Military: 10% of projects
• Safety and security: 9% of projects
• Quantum: 10% of projects
• Other: 18% of projects (advanced manufacturing, autonomous vehicles and drones, cybersecurity, infrastructure, instrumentation and hardware systems, optics, robotics)

Playing our part to support quantum

Budget 2021 announced an initial $360 million commitment to launch a new National Quantum Strategy (NQS) aimed at building on Canada's significant strength in quantum research; growing Canadian quantum-ready technologies, companies and talent; and solidifying Canada's global leadership in this innovative field.

ISC was identified as part of the NQS under the commercialization pillar to move quantum solutions toward the marketplace by matching Government of Canada clients with Canadian SMEs that are developing early-stage R&D, or testing late-stage R&D.

2022-23 Highlights of quantum funding opportunities supported:

• 5 unique quantum early-stage challenges launched
• 1 call for innovative quantum prototypes was launched
• 15 total awards to Canadian SMEs
• $6M in funding provided to quantum-related projects

Quantum in action: How three innovative companies are paving the way

Since the National Quantum Strategy has been launched, ISC has funded several companies to advance quantum research and facilitate the development of innovative products. From a key management system to a dilution refrigerator and kinetic inductance detectors, the companies behind these inventions are paving the way in quantum research, development and commercialization.

A few notable innovators we helped

Annex A

The following table shows awards issued in 2022-2023. The first nineteen organizations listed were mandated to participate in the ISC program. The last ten organizations are voluntary participants. For the CS, Challenges launched by specific organizations led to a number of awards, with the total value specified in the fourth column. For the TS, ISC coordinates CFPs that lead to awards, by matching companies to interested organizations. The total value per organization for new TS awards is found in the last column. Note that awards can lead to multi-year contacts and grants, so the values listed below may have led to spending in 2022-23 and beyond.

ISC awards and value of awards by government organization^{Footnote 2}

Department	Challenge Stream			Testing Stream
	Number of challenges launched	Number of awards	Award value	Number of awards	Award value
Federal departments mandated to participate in ISC
Department of National Defence	2	8	$5,865,142	16	$14,495,417
Public Services and Procurement Canada	1	-	-	3	$1,453,113
Shared Services Canada	-	3	$3,357,156	4	$1,902,297
National Research Council of Canada	3	9	$4,718,692	11	$8,079,445
Agriculture and Agri-Food Canada	-	10	$1,500,000	3	$1,620,987
Natural Resources Canada	-	4	$523,036	4	$2,459,057
Employment and Social Development	-	1	$1,116,819	-	-
Royal Canadian Mounted Police	-	1	$149,255	3	$1,368,914
Environment and Climate Change Canada	1	4	$1,448,412	2	$540,221
Fisheries and Oceans Canada	-	-	-	4	$1,747,978
Health Canada	-	-	-	1	$147,062
Canada Border Services Agency	-	-	-	1	$382,450
Canadian Space Agency	3	2	$2,224,796	1	$541,882
Public Health Agency of Canada	1	3	$450,000	-	-
Global Affairs Canada	-	4	$1,499,288	1	$86,360
Transport Canada	-	3	$2,966,046	6	$5,716,314
Innovation, Science and Economic Development Canada	2	3	$1,292,000	-	-
Canadian Food Inspection Agency	1	1	$500,000	1	$215,494
Indigenous Services Canada	-	-	-	1	$1,375,704
Other participating departments
Communication Security Establishment	-	2	$2,250,662	-	-
Parks Canada	-	-	-	2	$919,006
Canadian Coast Guard	-	-	-	2	$2,512,434
Infrastructure Canada	-	-	-	1	$409,032
Atlantic Canada Opportunities Agency	-	-	-	1	$438,182
Canada Revenue Agency	-	-	-	1	$172,500
Royal Canadian Navy	-	-	-	1	$1,374,804
Immigration, Refugees and Citizenship Canada	-	-	-	1	$348,450
Prairies Economic Development Canada	-	-	-	1	$919,743
Veterans Affairs Canada	-	-	-	1	$578,597

The following table shows actual spending per mandated organization against their set-aside 1% of 2015-16 procurement and intramural R&D. This spending may relate to new awards, shown in the previous table, as well as multi-year awards from previous FYs. Out of 21 GC organizations with a mandated goal for spending with the ISC programs, eight reached 90% or higher of their set-aside amount. However, the total is only 34.8% of the overall set-aside amount of the 21 organizations.

Federal departments mandated and actual spending, 2022-23

Department	Departmental Challenge Stream set aside 1 % of 2015-16 procurement + intramural R&D	Departmental spending 2022-23
		Challenge Stream	Transfer to Testing Stream (up to 30%)	2022-23 Total
Department of National Defence (DND)	$65,000,000	$4,708,372	$6,231,570	$10,939,942
Public Services and Procurement Canada (PSPC)	$8,800,000	$496,607	$212,137	$708,745
Shared Services Canada (SSC)	$7,600,000	$5,415,405	$1,296,307	$6,711,712
National Research Council Canada (NRC)	$5,500,000	$3,473,785	$1,469,660	$4,943,446
Agriculture and Agri-Food Canada (AAFC)	$3,900,000	$904,981	$170,000	$1,074,981
Natural Resources Canada (NRCan)	$2,600,000	$523,036	$780,000	$1,303,036
Employment and Social Development Canada (ESDC)	$2,200,000	$207,660	$0	$207,660
Royal Canadian Mounted Police (RCMP)	$1,800,000	$1,386,167	$518,636	$1,904,804
Environment and Climate Change Canada (ECCC)	$1,600,000	$1,024,148	$0	$1,024,148
Department of Fisheries and Oceans – Canadian Coast Guard (DFO-CCG)	$1,500,000	$977,203	$399,532	$1,376,736
Health Canada (HC)	$1,400,000	$2,160,428	$0	$2,160,428
Correctional Services Canada (CSC)	$1,400,000	$1,441,627	$5,750	$1,447,377
Canada Border Services Agency (CBSA)	$1,400,000	$642,150	$1,069	$643,219
Canadian Space Agency (CSA)	$1,300,000	$358,297	$0	$358,297
Public Health Agency of Canada (PHAC)	$1,300,000	$997,080	$0	$997,080
Global Affairs Canada (GAC)	$1,300,000	$503,399	$0	$503,399
Transport Canada (TC)	$1,300,000	$0	$0	$0
Innovation, Science, & Economic Development (ISED)	$1,300,000	$1,200,000	$0	$1,200,000
Canadian Food Inspection Agency (CFIA)	$1,300,000	$1,310,494.00	$0	$1,310,494.00
Crown Indigenous Relations and Northern Affairs (CIRNA)	$800,000	$0	$0	$0
Indigenous Services Canada	$500,000	$663,046	$149,808	$812,854
Total	$113,800,000	$28,393,886	$11,234,471	$39,628,356