Lengthy federal election campaign a blow to military procurement

by Marie-Danielle Smith (feat. David Perry)

Embassy
January 5, 2016

A new report on Canadian defence procurement shows more than 60 per cent of major procurement projects are lagging well behind their original deadlines.

Only three per cent are ahead of schedule—in one case, Canada had to align with an “external time pressure” due to international commitments.

Though delays have long plagued Canada’s military procurement machine, 2015 was an especially trying year, suggests author David Perry, a senior analyst at the Canadian Global Affairs Institute. The report, written in December and published Jan. 5, analyzed 59 active projects listed in the government’s Defence Acquisition Guide.

It’s the third in a series of annual reports that evaluate Canadian defence procurement, published by the University of Calgary’s School of Public Policy.

Between the election writ dropping and a new cabinet being named Nov. 4, three months passed during which departments couldn’t secure any approvals for procurement—despite the paradox, as Mr. Perry puts it, of the government announcing progress on several projects immediately before the campaign.

Embassy reached out to DND to confirm details of the report. The department pointed to Privy Council Office guidelines on the conduct of officials during an election, known as the caretaker convention, requiring the government not make any policy that would bind a future government.

In an emailed response to Embassy's questions, Jan. 5, spokesman Daniel Le Bouthillier said the department "works exceptionally hard at making sure procurements at all levels are done responsibly and with the appropriate oversight to ensure value for money to the Canadian taxpayer."

Listing several highlights in the modernization of the military's equipment fleet, Mr. Le Bouthillier added, "while we routinely and successfully acquire the best available equipment for the [Canadian Armed Forces], we would be remiss if we didn’t acknowledge the inherent complexity of major procurements."

Though DND confirms that procurement is "a complicated process which we continually strive to improve and streamline," it maintains that CAF members have "the equipment needed to accomplish their missions proudly, effectively and safely."

Changing of the guard

Mr. Perry contends the replacement of key defence leaders at the beginning of the year delayed progress. This included the deputy minister and assistant deputy minister materiel in January, the minister in February, the chief of force development in June and the chief of defence staff in July. 

And a new review board that began its work in July has left defence officials confused and added another layer of process—with “extensive” terms of reference—that already involves a plethora of bodies, processes and strategies within the government.

“There appears to be some uncertainty amongst procurement officials,” about the panel’s mandate and how it conducts its work, Mr. Perry writes. The process, so far, has added time to early stages of the procurement process. But with no approvals going forward yet, it’s hard to evaluate the impact it’s having.

Procurements seeing the most notable delays, according to Mr. Perry’s report, are the Joint Support Ship Project, Canadian Surface Combatant, Fixed Wing Search and Rescue Aircraft, Force Mobility Enhancements, Lightweight Towed Howitzers, Medium to Heavy Lift Helicopter and Tactical Armoured Patrol Vehicle.

Specific details for these and other procurement projects are offered in the report. Notably, progress can’t be measured for many of them because information just isn’t “publicly available.”

Alan Williams, a former ADM Material, argued in the Ottawa Citizen Jan. 4 that the new Liberal government should fix the $35-billion National Shipbuilding Procurement Strategy.

Getting a contract signed, which should have taken four years, will have taken 11 or 12 in this case, Mr. Williams wrote, calling the procurement process “deeply and fundamentally flawed.”

Ratio of staff to procurement dollars ‘substantially worse’

A long-term slowdown of procurement continued in 2015, Mr. Perry’s report confirms.

In the year 2014-15, the number of approvals allowed to go ahead was half that of 2009-2010. Though more funding has gone towards military procurement since the early 2000s, the number of staff devoted to actually making those procurements happen has been significantly reduced.

What’s more, since 2009 several “major steps” have been added to the procurement process, including whole-of-government investment rules handed down by the Treasury Board. Though there are reasons behind all of the changes, the report notes, they add to procurement’s complexity and any benefits won’t be seen for several years.

In 2003, Mr. Perry writes, the Material Group within the defence department employed 2,600 staff for every $1 billion in procurement funds; but by 2009, that was down to 1,800 and since then “the ratio has only gotten substantially worse.” Another 400 materiel staff were laid off in 2010 as part of the government’s deficit reduction measures.

“Over two decades, DND’s procurement workload, relative to staff, has almost doubled,” writes Mr. Perry.

A “lack of capacity” is often cited as a reason for procurement delays—that, and in some cases a lack of funding or an interdependency with other projects. For example, the stalled fighter jet replacement is causing delays for other Royal Canadian Air Force projects.

Mr. Perry predicted the outcome of the 2015 federal election could improve the situation, at least for materiel staff: the Liberals pledged to “increase the capacity of National Defence’s acquisition branch” during the election campaign.

But some of the problems with Canadian defence procurement are systemic, the report notes: for example, operational requirements are often drafted with particular suppliers in mind; requirements are given unrealistic budgets; the degree to which requirements can be met by “off the shelf” technology is misstated; and project costing can be inaccurate or ignore inflation.

There are reasons to be optimistic. New strategies introduced in 2014 could eventually help to mitigate delays, though it will take a few years before they bear any fruit, Mr. Perry concludes.

The way DND costs its project, and how Treasury Board evaluates these costs, has improved. More attention is being paid to prioritizing some major projects over others, and updates to the project approval project are being put into place so that ministers don’t need to re-approve projects over and over if minor changes are made—something that’s “crucial” going forward, contends Mr. Perry.