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Public Services and Procurement Canada

9.25. Use of the Defence Production Revolving Fund and Loan Account

Under section 16 of the Defence Production Act, in particular, the Minister of Public Works and Government Services Canada (PWGSC) is authorized to acquire, utilize, store, maintain, transport, sell, exchange or otherwise dispose of defence supplies, services, projects, real or personal property. The Minister is also empowered to authorize loans or advances and loan guarantees. Expenditures incurred pursuant to the above authority are to be expended from the Consolidated Revenue Fund.

9.25.1 Program Description

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  1. The Defence Production Loan Account (DPLA) provides PWGSC with an account to make loans or advances to aid in defence procurement such as working capital loans or advance payments on contracts and to make payment for such.
  2. Although the Adjustment of Accounts Act of 1980 eliminated the term Defence Production Revolving Fund (DPRF) from the Defence Production Act, PWGSC was advised by Treasury Board that it will continue to designate and operate the DPRF for other than loan transactions. Thus the DPRF provides PWGSC with a budgetary account to purchase defence supplies, to make payment for such, and to get reimbursed out of an appropriation of a client (for example, Department of National Defence) or by an agent of Canada or by an associated government. The DPRF can be used for the following purposes:
    1. finance the stockpiling of "essential" materiel or defence supplies;
    2. advance production of defence supplies/materiel to permit workload smoothing of defence industrial facilities; and
    3. temporarily fund the acquisition of defence supplies to meet urgent requirements, pending appropriation of funds to finance unplanned requirements.
  3. As stated in the Defence Production Act, associated governments are the governments of the British Commonwealth and of the North Atlantic Treaty Organization, or the government of any other country designated by the Governor in Council, as being a country the defence of which is vital to Canada.
  4. The DPRF was established for interim financing purposes, as it has to be reimbursed by a client or an associated government or whoever receives the finished product. As such, the DPRF can be used to make initial payments and subsequently recover such payments from the client. It is simply a temporary accommodation, and it would be illegal and improper to use it for a permanent commitment of any kind. Although the use of the DPRF requires that money expended will be reimbursed at the time delivery is made to the client, such use does not preclude the making of progress payments to suppliers and the interim recovery of these progress payments from the client.
  5. Expenditures charged to the DPRF may be used for the following purposes:
    1. Stockpiling of materials or substances, such as steel and oil, designated by the Governor in Council, as essential to the needs of the community. In such cases:
      1. an order-in-council is required;
      2. a client appropriation is not immediately required for stockpiling essential materials, but the cost of materials used must be recovered from the appropriation of the client.
    2. Stockpiling of defence supplies, which Canada deems it advisable to maintain (certain defence supplies such as ammunition.) In such cases:
      1. an order-in-council is not required;
      2. although an appropriation is not immediately required for stockpiling defence supplies, Department of National Defence (DND) must reimburse the DPRF from an appropriation when the finished goods are delivered to DND.
      3. acquisition, storage or maintenance of defence supplies. In such cases:
        1. an order-in-council is not normally required;
        2. a client appropriation is required.
  6. Loans or advances charged to the Defence Production Loan Account (DPLA) may be used for any purpose other than for capital assistance. When loans are involved:
    1. an order-in-council is not required;
    2. although an appropriation by the client is not immediately required, the liability for any loss must ultimately be covered from the appropriation of the client.
  7. Losses sustained pursuant to a loan or an advance made against the DPLA can only be credited pursuant to an appropriation by Parliament.