Western Economic Diversification Canada
Symbol of the Government of Canada

Common menu bar links

Major Findings

This chapter summarizes the key findings of the evaluation gathered from all lines of evidence, grouped by evaluation issue and question.

Relevance

This section explores the relevance of the WEPA decision-making process in terms of its consistency with departmental and governmental priorities, and the need for project activities.

1.  The need exists for economic development projects in western Canada, and current departmental program authorities can be used to fund such projects.

When asked to rate how much of a need exists for the type of projects provided through WEPA, on a scale of 1 to 5, where 1 is no need at all and 5 is a major need, the average rating ranged from 3.7 amongst WD representatives to 4.9 amongst provincial representatives, project proponents, and proponents of applications which did not receive funding.

The key informants who provided high ratings noted that projects such as those delivered using the WEPA decision mechanism is needed because it supports critical areas of the economy (e.g. innovation, research and development, and commercialization); funds projects that often could not be funded through other initiatives (i.e. may not be eligible for funding or for which there is a shortage of funding available); levers funding from multiple sources; facilitates wider and more knowledgeable input into the selection of projects; promotes increased understanding between the two orders of government regarding development opportunities, priorities and needs; coordinates development activities; and results in projects that are relevant to the needs of the local economy.

Some key informants noted that, because funding come from existing Western Diversification Program (WDP) authority or provincial government funds, WEPA does not complement other funding as much as it simply duplicates or adds a level of complexity to structures that are already in place. In the opinion of some, WEPA complements the WDP only in that it allows the department to provide funding to provincial agencies without a specific Order in Council.

The departmental mandate allows for the funding of economic development projects using decision making mechanisms developed under the Western Diversification Program authority. Some key informants, mostly WD representatives, who provided a lower rating, believe that the federal and provincial governments would continue to cooperate, communicate and invest in similar projects in the absence of a WEPA decision making agreement. Furthermore, direct funding by the department may be more efficient and effective to the extent that the approval process would be simpler (i.e. only one order of government would be involved), and the department could focus more specifically on its priority areas and perhaps more easily adjust those priorities over time without an intergovernmental decision-making process as WEPA.

2.  A review of the literature confirms a need for projects that can facilitate economic development and diversification of the economy in western Canada.

Despite some improvements in recent years, the economies of the western provinces remain heavily dependent on the resource sectors. Western Canada's economic output from mining, forestry, agriculture and oil and gas activities accounts for about 15% of the region's Gross Domestic Product, compared to only 3% for the rest of Canada2. Over the next several years, further developments in resource sectors are predicted to be the primary source of economic growth in the region. Growth is expected in the forestry, mining and national gas sectors in British Columbia, the oil and gas sector in Alberta, the potash and crude oil sectors in Saskatchewan, and the mining sector in Manitoba3. While growth in these sectors is welcomed, heavy dependence on the resource sectors can create challenges and make the economy more vulnerable to fluctuations in global markets and volatile commodity prices.

The rate of economic diversification in western Canada will be influenced by a variety of economic drivers such as the level of investment in research, development and commercialization, business productivity, access to key markets, and access to investment capital. The available literature indicated that:

  • The level of business investment in innovation in western Canada is low. Compared to other developed nations, industry in Canada and particularly the western provinces lags behind in terms of investment in research and development activities, and the commercialization of research and development products4. Alberta, Manitoba and Saskatchewan have the lowest levels of business expenditures on research and development5. The Coalition for Action on Innovation in its recent Action Plan for Prosperity stresses the need for government action to build a more innovative Canada6.
     
  • From 1981 to 2007, increases in labour productivity contributed to 57% of per capita income growth, meaning it was the largest contributor of the improved standard of living in Canada7. However, compared to other Organization for Economic Cooperation and Development (OECD) countries, Canada and particularly western provinces rank very low in terms of labour productivity and productivity growth. Canada ranks 17th among 20 OECD countries and 6th among the G7 countries in terms of productivity increase over the last 30 years8. In 2007, the level of business sector labour productivity in Canada was only 75% of the level in the United States9. Low levels of business productivity in Canada is associated with weak investment by firms in innovation and building their knowledge capital, a failure to realize the opportunities from increased specialization, and weak business practices and governance mechanisms10. Some of the strategies, which can be implemented by government to boost business productivity, include investments in research and development, innovation, programs to facilitate development of technical, management and entrepreneurship skills, and adoption and diffusion of the latest state-of-the-art technologies11.
     
  • Small and medium-sized enterprises (SMEs) play a significant role in the Canadian economy. SMEs contribute approximately 41 percent of overall Canadian Gross Domestic Product, and employ a majority of the Canadian work force12. The role of SMEs in economies of some western provinces is especially important. For example, 98 per cent of all businesses in British Columbia are SMEs13. SMEs are also the driving force behind Canada's productivity and productivity growth. According to research, over the last 10 years, SMEs have led larger firms in terms of productivity growth14. However, the recent economic downturn, increasing labour costs, and the high Canadian dollar have created many challenges for SMEs and increased the need for programming, particularly programming that enables SMEs to upgrade and modernize facilities, equipment and processes, revise their business process, build new partnerships, connect with suppliers and expand into new markets15.
     
  • The economy in western Canada is heavily dependent on export trade. The continuing growth of Asian economies provides significant trading opportunities for Canadian business, especially for businesses in western Canada. Despite recent declines in international trade due to the recession, Canadian trade, especially trade with Asian countries, is demonstrating a steady increase16. Almost 75% of Canada's exports to Asian countries are shipped through ports in British Columbia17. The value of trade through British Columbia ports is expected to increase from $35 billion in 2005 to $75 billion by the 202018. By strengthening the supporting infrastructure, establishing partnerships, and supporting trade activities (e.g. trade shows, business trips etc.) governments can help business to enter into new markets and expand trade activities.
     
  • Competition for foreign investment is increasing. Although Foreign Direct Investment in Canada overall and particularly in western Canada is on the rise, Canada faces increasing competition from developing countries which are taking advantage of trade liberalisation and infrastructure improvements19. Canada's share of the global stock of inward Foreign Direct Investment fell from 9.8% in 1980 to 6.3% 1990 and to 3.2% in 200620. There is an important role for government in branding and communicating western Canada's advantage as a place to invest and do business21.

3.  The specific objectives, priorities and activities of WEPA are aligned with departmental strategic outcomes and government-wide priorities.

The mandate of the department focuses on the development and diversification of the economy of Western Canada. Towards that end, the department works to promote innovation, business development and community economic development22. The activities of WEPA contribute to each of these priority areas. More specifically, WEPA supports investments:

  • In innovation that promote the growth of a stronger, sustainable knowledge-based economy. As noted in Chapter II, WEPA has supported investments in technology adoption and commercialization, research and development, and building the knowledge infrastructure.
     
  • In business development that helps small and medium-sized enterprises become more innovative, grow faster, create value-added jobs and compete in global markets. WEPA has supported investments in improving business productivity, developing new markets, and attracting foreign direct investment.
     
  • That helps rural and urban communities adjust to changing economic circumstances, invest in public infrastructure and sustain their local economies. More specifically, WEPA has supported a small number of investments that facilitate improvements to community infrastructure. In addition, investments in innovation and business development also contribute to community economic development.

WEPA is consistent with the operational priorities of the department. In 2010-2011, these priorities included supporting technology commercialization (facilitating the translation of knowledge and technology into commercial opportunities); expanding trade and investment (enhancing the participation of SMEs in global markets, creating value-added opportunities connected to western Canada's gateways and corridors; raising western Canada's visibility as a competitive investment location); and facilitating business productivity and competitiveness23. Of the 65 WEPA projects approved as of March 31, 2011, 26 focused specifically on technology adoption and commercialization, 13 focused on market/trade development while 2 focused on foreign direct investment, and 16 focused specifically on improving business productivity.

In addition, the focus of WEPA is consistent with federal government priorities. The Speech from the Throne in 2011 highlighted the federal government's commitment to supporting business development, productivity, innovation, trade, and economic competitiveness. The Speech stated that government will support innovation and new technologies; "continue to make targeted investments to promote and encourage research and development in Canada's private sector", universities, colleges and polytechnics; and will facilitate "opening new markets for Canadian businesses and work towards attracting foreign investment to our economy."24

All WD representatives agreed that WEPA is consistent with the federal government agenda in Western Canada as well as with departmental priorities. These key informants noted that WEPA contributes to government priorities by supporting technology development and commercialization, trade expansion and investment attraction; improvements to business productivity, and strengthening Canada's competitive advantages, all of which contribute to economic development and diversification in Western Canada.

4.  The specific projects supported under WEPA are consistent with the priorities of the federal government.

During the negotiation of WEPA III, each provincial government was invited to define specific provincial priorities. To the extent that the priorities of the two orders of government may conflict, this raised the possibility that projects could be funded under WEPA which were not consistent with federal government priorities. However, this has tended not to occur for two reasons. First, the priorities of the federal government tended to be defined so broadly that they could be seen as encompassing all of the provincial government priorities. Secondly, the project review and approval process provided a mechanism through which the funding partners could discuss current priorities, select appropriate projects and, at times, even shape projects in such a manner that they would better contribute to the priorities of both orders of government.

It should be noted that several WD representatives did perceive that certain negotiated provincial priorities were either not consistent with departmental priorities or at least currently represent a relatively low priority for the department. The provincial priorities mentioned most frequently were promoting Manitoba as a tourism destination across the globe and promoting community and regional development and diversification in Saskatchewan (since the agreements were negotiated, community economic development has become much less of a priority for the department). Very few community economic development or tourism projects were approved.

It was more common for provincial representatives to note examples where they saw possible projects as being consistent with the stated federal government priorities yet not supported by the department because they were considered to be a low priority at the present time.

5.  WEPA is an appropriate role for the federal government given its responsibilities related to economic development. However, WEPA is not a necessary role given the possibility of using other models to promote economic development.

Key informants were asked whether WEPA is an appropriate and necessary role for the federal government. Given the shared responsibilities of the federal and provincial governments with respect to economic development, most key informants saw participation in a joint decision making process such as WEPA to be an appropriate role for the federal government.

Text Version, Figure 3: Is the funding of WEPA an appropiate and necessary role for the federal government?

In this figure, key informants indicated their response to the question of whether the funding of WEPA is an appropriate and necessary role for the federal government.

However, some key informants from the department disagreed that WEPA is a necessary role. It was viewed as not necessary for the department to promote development through a bi-lateral agreement such as WEPA; rather, the department could and does use other strategies such as direct funding to promote development.

6.  WEPA is seen as a decision-making tool that allows the department to deliver on projects linked to objectives under the Western Diversification Program authority. WEPA’s share many of the advantages and disadvantages of intergovernmental agreements.

The WEPA is funded under the program authority of the Western Diversification Program (WDP). Contributions under the WDP support activities that develop and diversify the western Canadian economy and activities where economic and/or employment benefits accrue primarily within western Canada. Funding is focused on activities that: support innovation; promote a competitive and expanded business sector in Western Canada; and, develop sustainable communities that improve the competitiveness and quality of life in western Canadian communities. As a decision making tool, WEPA allows the department to fund projects that support WDP’s broad objectives using a governance model that incorporates provincial and federal management committees.

The comparative analysis undertaken for the evaluation revealed that the decision making processes of WEPA share many of the advantages and disadvantages of intergovernmental agreements. In particular, the agreement facilitated joint planning and coordination, reduced the risk of duplication and overlaps, enhanced intergovernmental partnership and relations, increased the profile of funded projects, helped to create better referrals to other sources of funding, and greater leveraging of financial and in-kind contributions.

The disadvantages included decision-making processes which tended to be long and bureaucratic as federal and provincial government approach to making decisions differed significantly. In addition, less attention was given to areas where government priorities do not align (e.g. community economic development and tourism). Also coordination and administration of the process required significant efforts and resources; and the money spent on the programming activities may not be necessarily new as both governments would have spent similar amounts through other avenues if WEPA did not exist.

Return to the top of this pagetop of page

Achievement of Expected Outcomes

This section describes the effectiveness of projects implemented using the WEPA decision making tool with respect to achieving departmental objectives.

1.  It is too early to determine the ultimate impact of WEPA III projects given that most projects are still in the implementation phase or have only recently been completed.

Significant time is required for projects such as those funded through WEPA to fully implement their activities and generate expected outcomes. Most WEPA projects, however, were still being implemented at the time of this evaluation. According to project proponents, 60% of projects were still on-going, 38% had only recently been completed and 2% (one project) had not yet started.

Text Version, Figure 4: What is the current status of the projects?

In this figure, 15 Project Proponents indicated the current status of their projects.

2.  WEPA projects were viewed as having made significant progress towards achieving their objectives.

The project proponents most commonly view the objectives of their projects as developing new products, technology, innovation or infrastructure; developing new and expanding existing markets; improving business processes, productivity and competitiveness; engaging in research, development and testing; preparing a workforce and addressing labour issues; and supporting local economies.

The project proponents and other key informants were asked to rate how successful WEPA projects have been to date in achieving their objectives. On a scale of 1 to 5, where 1 is not successful at all and 5 is very successful, project proponents provided an average rating of 4.6. Project proponents noted that their intended project activities were or are being implemented as intended. Projects have produced outputs such as research and technology products, and training that have been utilized or purchased by other organizations, and that projects have met or are on track to meet their performance indicators. Amongst the key informants, the average ratings regarding the success of WEPA projects in achieving their objectives varies from 3.5 amongst stakeholders to 4.1 amongst departmental representatives.

Text Version, Figure 5: On a scale of 1 to 5, where 1 is not at all successful and 5 is very successful, how successful do you think WEPA/the WEPA project is to date in achieving its objectives?

In this figure, key informants provided a rating response to the question of how successful WEPA/WEPA projects have been in achieving its objectives.

While noting that it is premature to determine the eventual impacts as many projects were still ongoing, key informants highlighted the success of various projects, the effectiveness of the projects in leveraging funding from various sources, and the level of coordination and communication between the federal and provincial governments. Those who provided a lower rating noted delays in project approvals which slowed implementation and resulted in some projects not going ahead. In addition, a few projects were not implemented as planned and/or did not generate desired outputs or outcomes due to problems with the WEPA decision making process. A review of 8 case study projects demonstrated that, although most projects experienced at least some delays and one project had not yet made any progress towards meeting performance targets due to delays, all projects still expect that they will achieve their objectives and meet their performance targets.

2.  In most provinces, the WEPA decision-making process was viewed as successful in promoting collaboration and strengthening the partnership between the federal and provincial governments.

Government representatives were asked to rate the extent to which WEPA has been successful in promoting collaboration and partnership between the two orders of government using a scale of 1 to 5, where 1 is no impact at all and 5 is major impact. As demonstrated in the following figure, WD representatives provided an average rating of 4.2 and provincial representatives provided an average rating of 4.4.

Text Version, Figure 6: How much of an impact do you believe that WEPA has had in terms of promoting and strengthening the partnership?

In this figure, key informants provided a rating response to the question of how much of an impact WEPA has had in strengthening relationship on a scale of 1 (no impact at all) to 5 (major impact).

Government representatives noted that partnership is the central premise of WEPA. They highlighted the importance of the joint federal-provincial funding in:

  • Coordinating the activities of the two orders of government by facilitating joint planning and decision-making within an area of joint responsibility. The decision making process under WEPA contributed to greater communication and coordination at both the project officer/program level and across senior management. The agreements resulted in increased understanding between the two orders of government regarding the needs of the respective provinces, key strategic directions and existing initiatives.
     
  • Facilitating a longer-term, more strategic approach to development focused on series of related projects and initiatives. The coordinated, strategic approach extended beyond projects funded under WEPA by facilitating greater coordination in other support provided by the two orders of government.
     
  • Making more informed decisions in the selection of projects. One of the strengths of the existing model was that it facilitated input from a wide variety of federal and provincial representatives who were familiar with the sectors, markets, technologies, and proponents.
     
  • Supporting the development and implementation of incremental, industry-driven projects which meet the development needs of the province. By working in collaboration with industry organizations and provincial governments, WEPA helped to better align the priorities of the proponent, the federal government and the provincial government. In addition, it enabled the department to provide funding to provincial crown agencies without a specific Order in Council.

Some representatives who provided lower ratings noted that the joint decision-making was not necessarily an easy task and, at times, generated strong disagreements regarding the selection of projects.

4.  Reflecting the diverse nature of the project activities supported, WEPA projects generated a wide range of impacts. WEPA projects generated their most significant impacts in terms of strengthening innovation, improving business productivity, and promotin trade and market development.

Government representatives were asked to rate the impacts that WEPA projects have had with respect to each ofo its expected outcomes using a scale of 1 to 5, where 1 is no impact at all and 5 is major impact. The results are summarized below.

Text Version, Figure 7: How much of an impact do you believe WEPA has had in terms of:

In this figure, key informants indicate their perception of the impact of WEPA on expected outcomes.

Return to the top of this pagetop of page

Government representatives provided the following rationale for their ratings and examples to illustrate the nature of the impact.

  • Strengthening innovation (e.g. increasing research and development, strengthening technology linkages, facilitating technology adoption and commercialization, and/or strengthening the knowledge infrastructure). Strengthening innovation was the major area of focus, accounting for 64% of the WEPA funding approved to date.
     
  • Improving business productivity. WEPA projects facilitated business investment in technology to improve productivity, supported general and entrepreneurship training, and improved business operations and processes. Sixteen percent of the funding and 25% of the projects funded to date focused on improving business productivity.
     
  • Promoting trade and market development. Twelve percent of the funding and 25% of the projects funded through WEPA was categorized as market and trade development. Several projects implemented in Manitoba were highlighted as having a significant impact in terms of promoting international trade and market development in the province.
     
  • Addressing the priorities negotiated with the province(s). Each Agreement defines specific provincial priorities. Each province was viewed as having made progress towards achieving provincial priorities as a result of implementing projects, with the rating being highest in Alberta where the focus was on innovation and technology transfer.
     
  • Increasing value-added production in traditional industries.Compared to other priority areas, few projects were implemented which focused directly on value-added production in traditional industries. Approximately 7% of funding directly focused on increased value-added production in traditional industries. However, several other projects in the forestry, agriculture and mining industries (e.g., Composites Innovation Centre, Canadian Manufactures and Exporters Manitoba Division Centre of Excellence, and FPInnovations) impact on value-added production. In addition, it is anticipated that some of the technology projects will lead to increased value-added production in traditional industries over the medium to longer-term.
  • Promoting attraction of foreign direct investment.Only two WEPA projects directly focused on promoting foreign direct investment in Western Canada, including a project related to Vancouver Olympics 2010. In addition, several projects such as YES Winnipeg and CentrePort Canada Corporation were not categorized as investment projects but are expected to generate foreign direct investment in the future.
     
  • Facilitating community economic planning, development and adjustment. According to WD representatives and provincial representatives, projects specifically aimed at community development were not a high priority for WEPA. Only two community planning/economic adjustment projects were funded through WEPA. Nevertheless, many projects funded through the department have supported business and job creation and have already or will contribute to community development.

5.  Although many are still on-going, the WEPA projects have already made significant progress towards achieving their performance targets25.

The performance measurement system used by the department requires project proponents to collect and report data on a number of agreed upon standard and unique performance indicators (usually up to a maximum of five indicators per project). When the projects are approved, targets are established for each indicator. Throughout project implementation, the proponents may provide periodic updates to the department on performance indicators and targets. During the interviews conducted as part of this evaluation, project proponents were asked to provide updates on their respective performance indicators.

The following table provides a list of all 22 performance indicators which are associated with two or more of the 65 WEPA projects, the number of projects using each indicator, the number which have reported their performance to date (with the number of those surveyed provided in brackets), the aggregated target numbers, the progress previously reported to the department on each indicator (prior to the survey), and the revised totals after updating the progress based on the results of the survey.

As demonstrated in the table, on an aggregate basis, seven of the targets for the 22 indicators have already been met and three are very close to being met. In particular, the WEPA projects have met or exceeded targets in terms of introducing technologies to market, participating in export and market development initiatives, preparing export ready companies, creating industry association partnerships, training people, facilitating investments, and achieving client satisfaction. The WEPA projects are very close to meeting their targets in terms of identifying products and processes for further research and development, demonstrating viable technologies, and creating and expanding businesses. The indicators requiring much more progress to be reported to achieve the targets include facilitating investment, creating spin-off companies, and executing licenses. Each of these indicators would require considerable time after completion of the project to be realized.

Table 9: WEPA Performance Measures
Common Performance Indicators Projects with Indicator Reporting* Aggregated Target Previously Reported Updated Total
Innovation
Technology demonstrations 15 12(8) 91 19 33
Prototypes developed 11 10(8) 82 33 36
Technologies to market 8 7(5) 203 402 1,018
Technologies adopted 5 4(2) 49 8 14
Patents filed/issued 5 5(4) 29 8 6
Products or processes that are identified for further R&D 3 1(1) 19 4 14
Demonstrations of viable technology 2 1(1) 13 - 8
Licenses executed 2 1(1) 12 - 0
Export and Market Development
Co's participating in export and market development initiatives 8 8(7) 5,105 5,138 5,268
Increase in sales 8 6(4) $ 100,400,000 $ 46,610,000 $ 59,896,000
Export ready companies 4 3(3) 110 97 132
Employment and Staffing
Jobs created or maintained 20 20(12) 7,033 903 2,780
People trained 4 4(3) 593 132 596
Skilled personnel 2 2(0) 52 12 12

Investment

Venture capital invested 2 2(2) $ 16,500,000 $ 1,600,000 $ 6,970,000
Indirect investment facilitated by WD 5 4(0) $ 22,200,000 - $ 29,100,000

Business Creation

Businesses created/maintained/expanded 16 15(8) 1,356 471 1,341
Spin-off companies formed 4 4(2) 19 - 1
Other
Projects promoting participation in major international events 6 5(5) 63 17 26
Industry association partnerships created 4 3(3) 57 42 57
Client satisfaction with business services provided 3 2(1) 3 1 1
Client satisfaction as measured at a minimum of two events 2 2(2) 80% 80% or 92% 89% or 92%

* Provides the number of projects that we were able to obtain performance data either through surveys or by reviewing WEPA performance files. The numbers in brackets indicate the number of projects with whom the evaluation team completed surveys

From the sample of 50 projects which were the focus of proponent interviews, eight projects were selected for further case study. The document and follow-up interviews with various representatives associated with or impacted by these eight projects confirmed the data reported by the proponents. Of the eight projects, one has already fully met their performance targets, six have made significant progress, and one has yet to report any progress due to delays in receiving security certification. All eight projects expect to fully meet their performance targets over time.

Although still early in implementation, the case study projects have already generated significant impacts in terms of facilitating development of technology, innovation and skills, creating jobs, and increasing revenues. The case studies highlight the diverse nature and success of the projects supported under WEPA. These include:

  • Installation of underground mining stimulators and mining training programs developed to better prepare workers for the mining industry; and raising the profile of Manitoba in international markets and increasing tourist volumes and revenues in Manitoba;
     
  • Establishing a new mineral analysis laboratory in Saskatchewan, to conduct mineral analysis for the mining industry and researchers. This also resulted in creating jobs, increasing revenues and contributing to local economic development;
     
  • Availability of a cutting edge neuroscience technology in Alberta for researchers and industries helping to create and commercialize new prototypes, drugs and biological implants.
     
  • The attraction of 49 students from India to attend internship programs at various universities in British Columbia and build their skills. Some of these students have already returned to pursue a graduate degree in various fields. Representatives of various industries expressed interest and support in the program, which may lead to more skilled people working in British Columbia in the future.

6.  The impact of WEPA projects extends beyond the direct impact of the projects to include the impacts of follow-on projects, investments, and developments.

The impacts were not limited to the direct impacts of each project. Projects often lead to follow-on projects or investments by the proponent organization or by other organizations which may utilize the technology, knowledge, products or services created by the project. Even though most WEPA projects are still in the implementation phase, the results of interviews with project proponents as well as others involved in spin-off projects indicated that the projects have already generated significant follow-on projects and investments. Fifty-two percent of project proponents (26 of the 50) reported that their WEPA project have already led to other projects, investments or developments. The proponents estimate that these developments will involve new investments of nearly $84 million. A further 26% of the proponents expected their projects to lead to other projects, investments or developments in the future.

Of the 26 project proponents who indicated that their projects have generated new projects and investments, 14 were able to elaborate on the impact of these projects. Examples of such impacts include the provision of an in-school science program to 9,000 students from grades 7 to 12 in Alberta, and the participation of people in various related employment training programs. Other examples were pilot projects to demonstrate technology developed or staging of events (e.g. a film festival in Manitoba), implementation of new communication and network technologies in several remote communities.

As part of the evaluation, representatives were interviewed from 19 other organizations identified by the project proponents as having undertaken spin-off projects, investments or developments related to the original WEPA project. The objectives of these follow-on activities varied widely, from developing and testing new technology and software to commercializing new products, exploring new markets, raising awareness of the new technology, undertaking business development and expansion, and building partnerships. When asked to rate the success of their follow-on activities on a scale of 1 to 5, where 1 is not successful and 5 is very successful, these representatives provided an average rating of 4.5. The following figure indicates the impacts mentioned by proponents of spin-off projects.

Text Version, Figure 8: Has the project had an impact on your organization in terms of:

In this figure, 19 Proponents of Spin-off Projects indicated the impact WEPA projects have had on their organizations.

Return to the top of this pagetop of page

The proponents of spin-off projects provided the following rationale for their ratings and examples to illustrate the nature of the impact.

  • Facilitating partnerships, strategic alliances, and collaborations. The proponents of spinoff projects entered into a range of partnerships and collaborations. The partnerships included establishing agreements over joint project implementation, publishing research reports and articles, obtaining new investments and product developments, building various facilities and infrastructure projects, and participating in various working groups and advisory committees.
     
  • Skill development. The projects contributed to the development of skills and capacities of the staff members of the spin-off organizations as well as helped other industries, businesses and students learn about and utilize various products and services.
     
  • Developing new markets Four proponents noted that their new markets included various regions in Canada and six proponents were able to expand to international markets such as United States, Poland, Russia, Mexico, Brazil, China, Australia, United Kingdom, Brazil, Spain, and Germany.
     
  • Increasing revenues. Of the ten proponents who noted an impact in increasing revenues, three were able to quantify the revenue increase on a dollar basis and two indicated a percentage increase. According to three proponents, the project helped them to increase revenues by $44 million.
     
  • Creating or maintaining employment. The proponents of 11 spinoff projects, who reported an impact in creating or maintaining employment, noted that the project created or maintained 187 employees. Most of the created/maintained employment was for high-skilled positions in technology, research, Information Technology and marketing sectors.
     
  • Developing, commercializing or adopting new technologies. 10 proponents reported developing or adopting 18 different technologies such as iPad and iphone software and applications, networking device for computers, data downloading smart meters, communications equipment, fibre-optic technology, storage devices, lithium technology, device controllers and switches, and GPS technology. They also reported commercializing five products.
     
  • Encouraging or attracting investments. The proponents of spin-off projects noted that new investments came mostly through connections and partnerships that they built through project implementation. According to the proponents, four projects generated an investment of $10.8 million for their organizations.

The follow-on projects, investments or developments may themselves generate further follow-on activities. Of the 19 proponents of spin-off activities interviewed, 21% (4 proponents) indicated that their projects have already led to other projects, investments or developments and an additional 37% noted that will happen in future. The secondary spin-off projects included a demonstration of products in other regions, and expanding project activities to other regions. The investment generated by new initiatives totalled $5.4 million, with the funding provided by governments, industry groups and private companies.

Of the 8 projects reviewed as case studies, 4 also generated spin-off projects, follow-on investments or developments. For example, after participating in international sales trips organized through a WEPA project, an industry partner was able to build business partnerships with 15 tour operators from five different countries, attract $1.3 million new investments and increase their customer base by additional 400 clients. A nanotechnology research facility specialized on nerve repair engaged in partnership with private sector companies to develop neuron-science drugs and train research fellows. An infrastructure innovation cluster helped partner companies to attract significant new investment for developing and commercializing new technologies. A world class electron microscopes established in Alberta through a WEPA project led to a new project to introduce nanotechnology to students in the province.

7.  The success of WEPA activities in producing expected outcomes is attributed to the collaboration and partnership between governments, the ability to leverage other funds, the flexibility of selecting projects, and the skills of program staff.

This evaluation explored key factors that may have contributed to the success of WEPA programming. Factors identified by key informants include:

  • Collaboration and cooperation between two orders of governments, which helped to set common goals and priorities and identify worthy projects.
     
  • Ability to leverage substantial amounts of funds from other sources, including the federal and provincial governments as well as the private sector.
     
  • Clearly defined and agreed upon activity goals and priorities.
     
  • The flexibility of selecting various projects across different sectors and regions.
     
  • Involvement of skilled staff members and capable project partners. The expertise, skills and commitment of the people involved in WEPA activities, including both federal and provincial government representatives, played a significant role in the success of the projects.

According to the project proponents, the success of projects can be attributed to skilled and committed project staff and the capacity of proponent organizations to deliver quality project activities and develop innovative products and technologies. The ability of the projects to reach out and involve community members, clients and other stakeholders in the project activities and partnerships and support from other stakeholders, and communities also played an important role in success of the WEPA projects.

8.  Several project-specific factors such as delays in project approvals and implementation, lack of stakeholder support and difficulties in accessing additional funds served as obstacles to the success of WEPA.

While projects have generally been successful, they have faced some constraints. Key informants indicated that the following obstacles related to the decision-making process under WEPA served as an impediment to achieve results in projects.

  • Changes in provincial governments can cause a shift in priorities and delay project approvals. There was the concern that the lack of dedicated funding makes provincial funding more vulnerable to government freezes and cutbacks.
     
  • Project development and approval was cited as a complex process, which require significant administrative efforts. Each WEPA project needed to be approved by at least two government bodies (federal and provincial). The application process and project requirements may differ significantly among funders, which created a significant administrative burden on applicants. This burden includes eligible expenditures and funded budget lines which differ among funders.
     
  • Involvement of multiple players in the decision making process which can constrain coordination and communication. Coordination of activities with multiple stakeholders required additional time and effort. In particular, when the priorities and funding objectives of the two governments do not exactly align require significant coordination. This slowed down the process and increased bureaucracy in making decisions.

Other constraining factors most commonly identified at the project level included resource constraints related to difficulties in accessing other sources of funding to continue or expand project activities; limited interest from stakeholders and clients in participating in project activities or using outputs; internal issues related to project administration and management; the economic downturn which affected the business environment in the region; and issues with respect to meeting the product or certification standards. Constraining factors identified with respect to the design and implementation of WEPA is discussed in the following section.

Performance: Efficiency and Economy

This section reviews the findings of the evaluation regarding the efficiency and economy of the WEPA decision-making process.

1.  The WEPA decision-making process had both some benefits and challenges.

Government representatives were read a series of statements regarding the design of WEPA and then asked if they strongly disagreed, somewhat disagreed, neither agreed nor disagreed, somewhat agreed or strongly agreed with each. The responses are illustrated below.

Text Version, Figure 9: For each of the following statements would you like to know whether you strongly agree, somewhat agree, neither agree or disagree, somewhat disagree or strongly disagree.

In this figure, key-informants indicated provided their ratings of on a series of statements as to whether they strongly agree (rating of 1) neither (rating of 3), or strongly disagree (rating of 5).

Return to the top of this pagetop of page

The federal and provincial government representatives generally agreed that:

  • WEPA has a clearly defined governance structure. The members of the WEPA Management Committees tend to have been involved in the agreement for a number of years and, in some cases, for multiple generations of agreements. The management committees have developed administrative guidelines for the application, assessment, approval, reporting, implementation and monitoring of projects as well as measurement of results achieved.

    The time required to review and approve applications can be delayed by the need for parallel reviews (i.e. applications are reviewed by both the federal and provincial governments), the time that may be required to get a proposed project on the agenda of a management committee meeting, and the necessity to obtain further approvals once a project is recommended by the management committee.

    WEPA was well-structured given what it has been attempting to accomplish. The WEPA model contributed to effective government support for economic development by increasing understanding between the two orders of government. The WEPA model was viewed to have facilitated joint planning and decision-making within an area of joint responsibility. Most project proponents and a majority of proponents of applications who did not receive funding consider WEPA to be well-structured. The project proponents and other applicants indicated that WEPA decision-making process was supported by qualified project officers who provide useful guidance to proponents and were committed to successful implementation, and have an effective reporting and performance measurement mechanism which ensures accountability of results and achievement of objectives.

    Those who felt that WEPA was not well-structured focused primarily on the application and reporting process, which they felt was cumbersome and bureaucratic. In particular, the proponents and other applicants noted that the requirements often vary between the federal and provincial governments, and the process can take a long time and much effort to complete.
     
  • The intended outcomes and performance measures were clear, quantifiable and consistent with departmental reporting requirements. The performance measurement system had numerous strengths including:
     
    • Performance indicators were clearly defined in each contribution agreement and specific targets were established for each;
    • The inclusion of standard indicators allowed for the aggregation of certain data and the carrying forward of that data into the department’s performance reporting; and
    • Proponents demonstrated a strong commitment to collect and report on the performance indicators.

There were challenges in the WEPA decision making process. WEPA was viewed as flexible by federal government representatives, in large part because the federal priorities were defined quite broadly Provincial government representatives were somewhat less likely to view WEPA as flexible in responding to funding opportunities, citing some disagreements regarding the selection of actual projects within the priorities.

Several project proponents and other representatives who have been involved in previous rounds noted that WEPA III is somewhat less flexible than previous agreements. The proponents noted that restrictions regarding the types of expenditures that each government can fund and the allocation of project funding by line item has tended to become more rigid over time.

Some members of the management committee from the department expressed several challenges in the WEPA decision-making process that related to:

Priorities:

  • Requirement to negotiate defined priorities with the provinces which reduces the department’s ability to pursue evolving federal priorities.
  • The degree of generality that was necessary in the agreement which created a dynamic of broadly defined priorities rather than flexible, targeted approaches.
  • Engagement of industry under WEPA which was a priority for the department but not to the same extent for all provinces.

Administration:

  • The requirement for formal engagement with the provinces on the selection of projects, financial considerations, communications, and approvals which increased the complexity in many cases and, at times, delayed projects.

Communications:

  • The establishment of different communications protocol which often made coordinating announcements a challenge and negatively impacted federal visibility. Establishing equal representation for announcements was challenging in cases where proponents had a reporting relationship with the province.

2.  Departmental funding was necessary to the implementation of the projects. Without funding, most projects would not have gone ahead.

Although the projects received contributions from other sources, funding through the Western Diversification Program authority played a major role in the implementation of most projects. As demonstrated in the following figure, 72% of project proponents indicated their projects would not have gone ahead without the funding and an additional 10% mentioned that the likelihood were low (25% likelihood). These proponents indicated that their projects required significant investments and it would not have been possible for them to obtain the necessary funding from other sources.

Only 14% of the project proponents reported a significant likelihood that their project would still have gone ahead (50% likelihood or higher). On average, there was only 11% likelihood that the projects would have been implemented in the absence of any departmental funding.

Text Version, Figure 10: How likely is it that the project would have gone ahead even without the assistance under WEPA?

In this figure, 50 Project Proponents indicated how likely their projects would have gone ahead without assistance from WEPA.

The projects that reported very little or no likelihood of being implemented in the absence of any funding were proportionally distributed across provinces and industries. The proponents noted that the projects required significant investments and it would not have been possible for them to generate the necessary funding from other sources without the department’s support and endorsement. Those projects which may have still proceeded would have reduced in scope (e.g. certain important project activities would have been eliminated) or delayed.

Of the nine proponents of applications submitted to WEPA which did not receive funding, four (44%) indicated that their project are in the implementation phase, four (44%) reported that their projects were cancelled, and one (11%) is still looking for alternative funding. After applying unsuccessfully through WEPA, three proponents applied to other sources of funding to fill the budget gap. At the time of this evaluation, only one of those proponents was successful in accessing funds from other sources. Of the four projects which are underway without any funding, three reported a reduction in the project budget, a corresponding scale down of project activities, and delays to the project schedule and timing.

3.  The funded projects leveraged significant funds from other sources.

The budgeted costs associated with the 65 projects approved as of March 31, 2011 total $374 million, of which the departmental assistance represents 22%.

Table 10: Value of Departmental Assistance Approved as a Percentage of Total Project Costs, March 31, 2011
Province AB BC MB SK Total
Total Project Funding $ 70,196,724 $ 51,650,239 $ 86,733,511 $ 165,097,476 $ 373,677,950
Total WD Assistance $ 26,413,249 $ 12,802,917 $ 24,862,104 $ 19,347,495 $ 83,425,765
WD Funding/Total Funding 37.6% 24.8% 28.7% 11.7% 22.3%
Total Funding Per Dollar of WD Funding Provided $ 1.66 $ 3.03 $ 2.49 $ 7.53 $ 3.48

The budget data indicate that WEPA III projects leveraged $3.48 from other sources for every dollar contributed by the department, which is significantly higher than $2.24 leveraged under the previous WEPA II projects. The degree of leverage varies from $1.66 from other sources for every dollar contributed by the department in Alberta to $7.53 from other sources for every dollar contributed by the department in Saskatchewan. The leverage figures in Saskatchewan benefit from a large contribution from other federal government departments for one large project.

Table 11: Budgeted Sources of Funding for WEPA Projects as of March 31, 2011
Province AB BC MB SK Total
WD $ 26,413,249 $ 12,802,917 $ 24,862,104 $ 19,347,495 $ 83,425,765
Provincial $ 19,675,000 $ 18,994,754 $ 27,011,554 $ 21,104,288 $ 86,785,596
Other Federal $ 705,000 $ 9,334,000 $ 213,000 $ 103,958,000 $ 114,210,000
Other Non Stackable $ 19,337,816 $ 2,420,547 $ 28,786,823 $ 10,924,383 $ 61,469,569
Operating Revenue/ Working Capital $ 2,065,659 $ 10,489,271 $ 2,897,080 $ 8,155,005 $ 23,607,015
Equity $ 2,000,000 --$ $ 2,175,950 --$ $ 4,175,950
Other Stackable --$ --$ $ 250,000 $ 1,508,575 $ 1,758,575
Municipal --$ $ 140,000 $ 45,000 $100,000 $285,000
Total $ 70,196,724 $ 51,650,239 $ 86,733,511 $ 165,097,476 $ 373,677,950

Return to the top of this pagetop of page

Project proponents noted that departmental funding signals government support for particular projects, which helps to provide market credibility as well as attract additional private sector funding and participation.

The leveraging of departmental funding for WEPA projects is further extended if we consider the value of investments associated with follow-on projects and developments. As indicated in the previous section on project outcomes, the projects have generated at least $94.8 million in follow-on investments.

4.  The administration of WEPA was viewed as a cost-effective process.

When asked to rate how cost-effective the WEPA decision making process has been in implementing projects and producing its expected outputs and outcomes on a scale of 1 to 5, where 1 is not at all cost-effective, 3 is somewhat, and 5 is very cost-effective, provincial representatives provided an average rating of 4.6 and departmental representatives provided an average rating of 4.3.

Key factors which contributed to the cost-effectiveness include:

  • Key informants described the administrative and operational costs of the program as reasonable – although the department does not track the total cost of internal resources allocated to WEPA. Both Government representatives agreed with the statement that the administrative and operational costs of WEPA are reasonable. However, data on actual Full Time Equivalents administrative expenditures were not available as there were no dedicated staffs specifically to WEPA. Data is not tracked regarding the actual time that staff members spend on WEPA activities relative to other activities.
     
  • The decision making process was seen as having the resources needed to support effective implementation of approved projects. Government representatives agreed that WEPA process provided adequate resources and capacity to support effective implementation and achieve the intended outcomes of approved projects. According to the representatives, the funding allocated from the department to support implementation of WEPA projects was adequate. The timing of the cash flow was often coordinated between the two orders of government. For example, if one funder has expended their budget for the fiscal year while the other has funding left over, one partner may accelerate payments while the other delays payment on their share until the next fiscal year. On the other hand, the lack of dedicated funding from provincial governments in British Columbia and Alberta negatively affected delivery and created uncertainty.

5.  There are several options to fill the gaps in the absence of WEPA.

The comparative analysis demonstrated that even in the absence of intergovernmental agreements, governments can still work to facilitate communication and coordination by:

  • Engaging in regular communications such as consultations, meetings and information exchange to coordinate program activities with each other and avoid overlap in programming and duplication of efforts. The focus of this coordination can be on specific projects or be more general in nature;
     
  • Organizing advisory committees, where representatives of various stakeholder organizations and groups come together and review, discuss and advise on programming activities; and
  • Developing a strategic plan for the region or specific sectors. Such strategic plans could outline the development priorities for the region/sector and roles and responsibilities for each government involved in it.

6.  The major issues identified as affecting or potentially constraining the effectiveness of efficiency of WEPA as a decision making process include the time required for project approvals, the complexity of the project approval process, a lack of coordination in performance reporting requirements between the federal and provincial governments, and a lack of dedicated provincial funding in some provinces.

Based on results of key informant and project proponent interviews, case studies, focus groups and document and file reviews, a number of constraining factors have been identified which are discussed below:

  • The time required for project approvals can be long and unpredictable. The existing system was criticized both in terms of the length of time that can be required to obtain approval as well as the unpredictability of the time required, which can affect the credibility of project officers amongst applicants. There are a variety of application, project and proponent factors that can slow approval. It is very difficult for proponents to plan activities when timing is very uncertain.

    A review of project approval times indicates that the average length of time required for approval increased from 189 calendar days under WEPA II to 245 days under WEPA III. The following figure shows the distribution of the time required under WEPA II and WEPA III. As demonstrated in the table, about 50% of projects were approved in 160 days or less under WEPA II as compared to over 200 days under WEPA III.

Text Version, Figure 11: Time required for the project approvals.

This figure shows a line chart of the distribution of time required for WEPA II and WEPA III project approvals.

Return to the top of this pagetop of page

However, further analysis indicates that the difference in project approval times is largely attributable to an increase in the average size of projects. Larger projects tend to require longer time periods for approval. 29 of the 65 projects funded under WEPA III have involved departmental contributions of $1 million or more as compared to 30 of the 145 projects funded under WEPA II. The average time required to approve large projects has not changed (259 days under WEPA III as compared to 255 days under WEPA II).

  • Project development and approval is a complex process for applicants, which often require significant administrative efforts. The process is inherently complex in that WEPA projects need to be approved by at least two funding bodies (federal and provincial) and the application process and criteria may differ significantly between those bodies (requiring separate applications and processes). Sometimes applications receive approval from one order of government must wait several months or more to be approved by the other, which delays project implementation. Furthermore, the types of expenditures (e.g. certain missions or infrastructure) that the federal government and provincial government can and cannot fund vary between the two orders of government.
  • Performance indicators and reporting requirements may vary significantly between funders, adding to the administrative burden on applicants. The major weakness of the existing performance tracking system is that, in most provinces, performance indicators and reporting schedules are not coordinated between the federal and provincial government. This raises the possibility that proponents will need to track different indicators and produce separate reports for each order of government. Another weakness is that the performance indicators vary significantly from project to project which makes it difficult to meaningfully aggregate data on the performance of the agreement overall.
     
  • The lack of dedicated provincial government funding set aside for WEPA. The federal government had a dedicated budget through the Western Diversification Program authority. In Manitoba and Saskatchewan, the provincial contribution was formally approved by Treasury Board and established as a specific line item in the provincial budget. However, in Alberta and British Columbia, there is no dedicated funding but rather funding is secured on a project-by-project basis from a variety of ministries and programs. The lack of designated provincial funds added complexity to the project approval process and creates extra challenges for implementation. As evidenced in British Columbia, the absence of dedicated funding can make the agreement more vulnerable to shifting priorities, provincial cutbacks or budget freezes.

7.  There were a number of suggestions for improvement.

Key informants and project proponents provided suggestions and recommendations with respect to how a future departmental decision making process could be improved (also applicable to other departmental decision making process), which are summarized below.

  • Improve the application and review process by developing a more standardized structure for proposal documents; increase transparency by providing clearer guidelines on what information is needed and what criteria are used in reviewing applications as well as by providing clear feedback on the rationale for the decisions made; and providing for a more seamless review of applications between the two orders of government (e.g. have one department responsible for shepherding the proposals through the system). Consideration could also be given to issuing a formal call for proposals to complement the current system.
     
  • Reduce the time required for approval of applications (e.g. by devolving more of the funding decisions to the regional level) or at least provide a better indication of how long a decision may take. It was noted that the existing system is not very predictable.
     
  • Streamline the reporting requirements by developing a common group of performance indicators for each project, agreed to by the two orders of government and the proponent. Under such a system, proponents would not be required to report separately to the two sources of funding.
     
  • More narrowly define the priorities to better target the program funding and to ensure that projects are consistent with federal government priorities.
     
  • Ensure that the provincial governments establish a dedicated source of funding for any future agreements.
     
  • Consider varying the level of funding by province based on demographic and economic characteristics as well as geographic size. Larger provinces should be allocated more funding.
     
  • Establish a program advisory group. The planning process could be broadened to include input from industry as well from the federal and provincial government.
     
  • Develop mechanisms (e.g. meetings, events, and documentation) to better share lessons learned and best practices across projects, proponents, and government.
     
  • Communicate the success stories to raise awareness of WEPA. Both government and proponents should place a higher priority on finding opportunities (e.g. the results of research or specific activities) to get the word out about the successes of particular projects and the important role played by government in facilitating the development and implementation of those projects.

Representatives of other programs in western Canada noted that the key to successfully delivering this type of agreement is on-going and open communication with all program partners and stakeholders as well as having a flexible design and delivery mechanisms that allow changes to accommodate the needs of various organizations and projects.

 


[2] WD Value Capture Strategies in Key Sectors and Potential for Foreign Direct Investment in Western Canada.

[3] Canada West Foundation. An Extraordinary Future: A Strategic Vision for Western Canada.

[4] Conference Board Canada. 2009. How Canada Performs: A Report Card on Canada.

[5] The Conference Board of Canada. 2009. Western Canada Productivity, Competitiveness, and Potential

[6] Coalition for Action on Innovation. Action Plan for Prosperity, October 2010

[7] Boothe P. & Roy R. Business Sector Productivity in Canada: What do we know. International Productivity

[8] OECD Productivity Database

[9] Boothe P. & Roy R. Business Sector Productivity in Canada: What do we know. International Productivity Monitor

[10] Boothe P. & Roy R. Business Sector Productivity in Canada: What do we know. International Productivity Monitor

[11] Conference Board of Canada. 2011. Labour Productivity Growth
http://www.conferenceboard.ca/hcp/Details/Economy/measuring-productivity-canada.aspx

[12] Industry Canada. 2011. Key Small Business Statistics

[13] WD. 2011. Small Business Profile

[14] RBC, "Small and Medium-Sized Businesses are Driving Productivity Gains," October 2006

[15] BDC’s Entrepreneurial Insight, February 2008

[16] Canada Pacific Gateway. 2010. Asia-Pacific Gateway and Corridor Initiative Reaches A Milestone.

[17] Roslyn Kunin and Associates Inc. 2007. Final Report: Situation Analysis of Projected Asia-Pacific Gateway Investment in the Western Provinces with a Focus on Human Resources.

[18] British Columbia Ports Strategy.

[19] Conference Board 2004. Open for Business? Canada’s Foreign Direct Investment Challenge.

[20] United Nations Conference on Trade and Development. World Investment Report 2007.

[21] Conference Board 2004. Open for Business? Canada’s Foreign Direct Investment Challenge.

[22] WD Report on Plans and Priorities, 2011-2012.

[23] WD Report on Plans and Priorities, 2010-2011.

[24] Speech from the Throne. 3 June 2011, Ottawa, Ontario

[25] The funded projects are expected to be completed by September 30, 2013