Challenge Stream for government

Challenge Stream - Innovative Solutions Canada

The Challenge Stream leverages the ingenuity of Canadian small and medium sized enterprises to address your operational needs, or to fill a gap in a market. How? By developing new innovative solutions, products, technologies or services.

If your department is facing challenges without commercially available solutions on the market, this stream offers:

Options to develop new solutions, advance the development of existing innovations, or test cutting edge prototypes, aligned to your departmental needs.
Guided assistance through the program, and how it can be best leveraged to address your operational, or mandate needs.
Support in exploring options to procure the innovation once it is market-ready.

What's a challenge?

A challenge, at its core, represents a departmental problem, where solutions aren't commercially available or lack sophistication to address the issue.

The Challenge Stream offers a structured approach for departments to tackle these issues by helping you:

Articulate the problem you aim to solve.
Set essential outcomes for the solution.
Choose the best funding tool:
- Contracts are used when a federal organization seeks a solution to an internal operational problem and would like to purchase the commercial innovation in the future.
- Grants are used when a federal organization seeks to develop a new solution to close a gap in the industry that is linked to its departmental mandate.
Select the right innovation.

Funding options

As the sponsoring department, you will have 2 options to launch a challenge under this stream.

Option 1

Release the challenge allowing applicants (offerors) to submit proposals for either Phase 1 or Phase 2 consideration based on how far along their solution has been developed. This option gives you the maximum flexibility to select proposals at different technology readiness levels (TRL 1-4 for Phase 1 and TRL 5-9 for Phase 2).

Option 2

Release the challenge seeking solely Phase 2 applicants (offerors) to submit proposals. This option may be useful when you need a custom solution to reach a market-ready state faster.

Challenge Stream phases

Overview of Phase 1: Proof of feasibility

Phase 1 is about demonstrating the scientific, technical and commercial merit of a solution by developing a proof of feasibility report.

During this phase, as the challenge sponsoring department, you are looking to understand:

The soundness of the science behind the proposed solution.
If the technical specifications will yield a feasible outcome.

Once the proposals have been evaluated, your department may choose to fund multiple Phase 1 projects and you can select the proposal(s) deemed most promising amongst the pre-qualified applications. Proposals must meet the challenge's essential outcomes, be within technology readiness levels (TRL 1-4) inclusively and meet the following criteria:

for profit
incorporated in Canada (federally or provincially)
499 or fewer full-time equivalent (FTE) employees^{Footnote *}
research and development activities that take place in Canada
50% or more of its annual wages, salaries and fees are currently paid to employees and contractors who spend the majority of their time working in Canada^{Footnote *}
50% or more of its FTE employees have Canada as their ordinary place of work^{Footnote *}
50% or more of its senior executives (Vice President and above) have Canada as their principal residence^{Footnote *}

Businesses successfully completing Phase 1 may be invited to submit a proposal for Phase 2; however, there is no obligation to continue and fund Phase 2 projects. Instances where you may not want to continue to Phase 2 include:

Failure to meet the specified challenge requirements by the company.
Deeming scientific and technical risks as too substantial.

Overview of advancement to Phase 2: Prototype development

Phase 2 continues the R&D initiated in Phase 1 with the objective of developing a functional prototype. During this phase, the innovator will be working to develop the prototype as described in the proposal, aiming to conclude their Phase 2 project with a market-ready solution. As the sponsoring department, you have the option to select multiple proposals for prototype development in Phase 2, contingent on your ability to provide the necessary funding.

Entry at Phase 2

In the past, all of our initial applicants (offerors) had to enter Phase 1, in order to get to Phase 2. Now, you have the option to fund Phase 2 projects if applicants (offerors) demonstrate that they have already proved feasibility and that they are at technology readiness levels (TRL 5-9).

Once a challenge is closed, you will evaluate proposals. If you chose to receive both Phase 1 and Phase 2 applications, you will have options on how to proceed, whether it's funding a combination of Phase 1 and Phase 2 projects or selecting projects that are ready for Phase 2 without having to fund a Phase 1 proof of feasibility.

Buying the market-ready innovation

Under the program's pathway to commercialisation (PTC) feature, departments can explore available procurement options to buy a market ready innovation.

Innovators who have completed contract-based projects may be invited to apply to the PTC. They will need to:

re-certify that they meet challenge stream eligibility;
prove that their innovation is market ready; and,
complete the pathway to commercialization application form.

Innovations that pass the screening will be added to the list of PTC innovations and remain eligible for a 3 year period.

If you see an innovation that you are interested in, and you'd like to explore procurement options, please reach out to us directly.

Before the launch

Before we can launch a challenge on your behalf, we need to work together. Here are steps you can anticipate during the challenge development process:

You will need to demonstrate that you have funding available to issue a challenge.
You will be requested to clearly define the essential outcomes you want the solution to achieve.
Once these are well defined, our program will consult with subject matter experts at the National Research Council of Canada Industrial Research Assistance Program (NRC-IRAP) to assess the commercial landscape, and provide insight on existing commercial solutions that could potentially meet the essential outcomes.
If NRC-IRAP determines there is likely no existing solution in the marketplace, we can proceed with launching the challenge.

Finding inspiration

Coming up with a new challenge opportunity is not always easy, considering the multitude of issues you and your department may want to address. Sometimes, you may come up with an idea, only to find that there is an existing commercial solution out there.

Start by asking yourself these questions:

Could a new solution help you better meet your departmental priorities?
Could a new solution help your operations?
Could a new solution help you solve a concrete problem?

Take a look at some of the official plans that your department has published. When working with clients, we often review departmental plans to identify areas that align with key government priorities that could inspire new challenges. Additionally, we can host ideation sessions with your department to generate challenge ideas.

Focus on the outcomes, don't focus on the solution

Direct your focus on the outcomes rather than specific solutions. For example, if you are looking for an innovative solution to get from point A to point B – don't think about 'how'. The goal of the challenge is not for you to dictate a specific solution; instead, concentrate on the end goal. Avoid requesting for something specific like a red car with wings and teleportation abilities.

Think about the end goal: getting from point a to point b. Clearly outline your desired outcomes:

Do you need the solution to be twice as fast?
Do you need the solution to be more cost-effective?
Do you need the solution to be more environmentally friendly?

Let the innovator propose ideas or bring partially developed solutions to the table to meet your outcomes.

Tips

Once you have an idea for a challenge and some essential outcomes outlined, try pitching your challenge idea to someone unfamiliar with it in under 30 seconds. If they understand it, you are likely on the right path.
See what others have launched by looking at some of our closed funding opportunities.

How to define your funding challenge

Get access to the portal

The portal is the ISC web platform designed for departments to work on challenges, receive business proposals, conduct technical evaluations, and more.

Contact your ISC departmental coordinator to receive a link to the Innovative Solutions Canada Portal.
If you don't know who your ISC departmental coordinator is, reach out to us, and we will connect you with them.

Draft your challenge statement

Describe the underlying problem that your challenge aims to address and its magnitude or degree of difficulty.

Identify a clear problem and describe the overall outcome you hope to achieve.
Try to capture or quantify the magnitude of the problem concisely, using plain language, if possible.

Essential outcomes (mandatory)

Define essential requirements that the solution must address.
Identify quantifiable requirements where possible.
Be specific if you know the exact outcome.
Set ambitious targets and avoid prescribing how the solution achieves the goal; focus on what it should do.

Additional outcomes (nice to have)

These are features of a solution that are not essential, but nice to have.

A solution that doesn't address these outcomes could still pass the evaluation process.
Proposals that address additional outcomes could receive extra points during the evaluation process.

Background and context

This is where you can insert any relevant information to be considered by the innovator.

Explain what is currently being done to address the problem and why it's not working (e.g. labour intensive, costly, energy inefficient, time consuming, etc.).
Provide publicly available links to relevant reports published by the department/agency or partners.
Provide information on the level of sophistication of existing technologies related to your problem.
Include information on government commitments to address the problem.
Describe potential leadership opportunities for Canada if other international jurisdictions are facing similar problems.

Departmental requirements for contract-based challenges

Help to develop a Statement of Work (SOW) for Phase 2 projects.
Assign a Technical Authority to the file.
Complete and provide a 9200 Requisition for Goods and Services form to demonstrate that you have funding to cover the value of the contract.
You may need to fill out and provide a Security Requirements Check List.
Once the Statement of Work (SOW) is approved by PSPC, contract negotiations will begin between PSPC and the innovators identified for Phase 1 and/or Phase 2 awards.
Phase 1 and/or Phase 2 work will begin once the contract is awarded.

Departmental requirements for grant-based challenges

You (as the sponsoring department) must perform your due diligence regarding companies short-listed during the selection process. We can support you in the collection of documents to ensure due diligence. This can include but is not limited to requesting articles of incorporation, financial statements and other information, as required.
You must agree on the terms of the project plan to be included in the funding agreement.
Once the grant agreement is signed by the sponsoring department and the funding recipient, the Phase 1 and/or Phase 2 work will commence.
At the end of Phase 1 and/or Phase 2, the awarded companies will submit their final Phase 1 and/or Phase 2 reports.
You will have an opportunity to review those reports and make a decision on whether or not to proceed to the next Phase (if applicable).

Things to consider before launching a challenge

Dedicated time: Departments must allocate time to develop a challenge, answer questions from potential applicants (offerors), evaluate proposals, select winning proposals, and oversee projects in Phase 1 and Phase 2. The time commitment varies depending on the nature of the challenge and whether a grant or contract is being used as the financial instrument. Ensure your management is supportive of a challenge and prepared to give you the time necessary for full engagement in the ISC process.

Technical expertise and knowledge: Developing an ISC challenge, evaluating proposals and following the R&D requires having technical expertise in the subject area of interest. You, or other subject matter experts within your department, must possess this knowledge to:

answer technical questions from applicants (offerors)
evaluate proposals
engage with eligible businesses when discussing their project plans

Funding: Each challenge sponsoring department is responsible for funding its selected projects in Phases 1 and 2 and potentially purchasing the commercial solution. Ensure your department is prepared to deploy funds prior to developing a challenge. Your ISC departmental coordinator will be able to help you determine funding options.

Footnote

Footnote *

Calculations must take into account and include affiliated businesses, such as parent companies and subsidiaries, that are either in or outside of Canada. Under the Innovative Solutions Canada program, an "affiliate" relationship exists in the following situations:

If an affiliate is a corporation that is a subsidiary of another corporation.
If a corporation has two subsidiary corporations, the two subsidiaries are affiliates of each other.
If two corporations are controlled by the same individual or business, the two corporations are also affiliates of each other.

For greater clarity, the business applying in response to a challenge must include the full-time employees of its parent company (if applicable) when calculation the total full-time employees, taking into account affiliates located both within and outside of Canada.

Return to first footnote * referrer

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