The many pieces of the defence procurement puzzle

by Marie-Danielle Smith (feat. David Perry)

Embassy
June 3, 2015

These days, you could be mistaken for thinking the entire federal government has a hand in defence procurement. 

Public Works and Government Services Canada, the Department of National Defence, the Canadian Armed Forces, Industry Canada, Foreign Affairs, Trade and Development Canada, Fisheries and Oceans Canada, the Privy Council Office and the Treasury Board now all play a big role.

In years past, operational and technical requirements for military equipment could have been viewed by the public through, for example, what was known as a Statement of Operational Requirements, a detailed technical document that would show what the military wanted. But in 2013, Embassy reported that these documents were no longer being released until the tendering process was completed.

What the public does get is a complex series of strategies, institutes, secretariats, committees, groups, policies and guides.

Take the government's new Defence Acquisition Guide, to which Defence Minister Jason Kenney announced an update at a lunchtime address to CANSEC on May 27. The update to the year-old guide “refreshed” 60 per cent of existing projects and added several new ones.

Over the last year, the government has also moved to replace its 1980s-era Industrial and Regional Benefits policy with an Industrial and Technological Benefits program, which was announced at the same time as its new Defence Procurement Strategy in February 2014.

The ITB policy is supposed to make sure that defence contracts are awarded to companies that can guarantee business investments that add substantial "value" to the economy. A Value Proposition Guide to this effect was therefore released last December.

The buck doesn’t stop there. Foreign Affairs implements an export strategy for defence procurement. The Privy Council Office and Finance Canada are involved on the financial side.

Then there’s the Defence Procurement Strategy Secretariat, which operates within PWGSC. It oversees the implementation of the procurement strategy and reports to a Deputy Ministers Governance Committee.

That committee, in turn, reports to a Working Group of Ministers.

Both ministerial groups are chaired by PWGSC but also include DND, Industry Canada, DFATD and Fisheries and Oceans Canada, the latter because it oversees the Canadian Coast Guard.

There’s also the Defence Analytics Institute, which would supposedly inform Canadian defence procurement with still further analysis.

An interim board of directors brought together in February 2014 was supposed to establish a permanent institute by a year later, but no announcement has been made.

At CANSEC, Mr. Kenney did announce an Independent Review Panel for Defence Acquisition would be established within DND.

“The panel will draw on existing departmental and CAF as well as other expertise to ensure it has a full grasp of the right issues at the right level of the table,” he said.

Speed-up delayed

Though the value proposition system is full steam ahead, David Perry, a senior analyst with the Canadian Defence and Foreign Affairs Institute, said the part of the procurement strategy that is designed to speed up procurement is delayed.

“The parts looking at actually delivering stuff quickly are the least well-advanced and seem to be taking a lot longer,” Mr. Perry said, including giving more contracting powers to DND and establishing the review panel.

The panel is made up of five experts, according to a DND press release June 1. Former Chief of Defence Staff Larry Murray will take over chairmanship in July.

David Hargreaves, a vice president at MDA Corporation, said the board could allow procurements to move faster, because mandatory requirements would appear more credible to industry after being independently reviewed.

“The danger is that they become a bottleneck in the process themselves, so what’s going to be really critical is that they stay at the macro level,” said Mr. Hargreaves.

He said overall, a culture change must take place within the government when it comes to implementing the procurement strategy.

Dynamics between government departments are changing, especially with more emphasis being placed on Industry Canada, he said. Those changes mean it could take a while for lower-level bureaucrats to catch up.

Capital spending

At the end of the day, procurement can’t go through unless real dollars are spent. Mr. Perry argues about $10 billion in budgeted capital spending has lapsed since 2006-07.

“There’s people that think that’s been a conscious effort on the part of the government to do that and get that fiscal benefit, but you can’t really find any actual firm evidence that that’s been the case,” Mr. Perry said.

Still, it’s something that industry keeps an eye on. Speaking to Embassy at CANSEC, an arms trade show in Ottawa organized by the Canadian Association of Defence and Security Industries, Mike Greenley, a vice president of CAE Canada, said “when the full budget is not being spent, funds are being returned, and therefore capital expenditures are being deferred and projects are being deferred. Then our market opportunity obviously slows down, and we don’t have as many opportunities out there for business.”

He said industry needs “the actual monies to actually be spent.”

Jerry McLean, a vice president and managing director at Thales Canada, said defence procurement slowdowns have had “a very severe impact” on his company.

“We had to restructure last year to compensate for a slowdown of the funding,” he said.

“[Government needs] to make sure they get their value for money, get the best possible kit that they can for the service, based upon the money that they have. So those processes take time. It’s difficult, often, for industry, but we definitely understand why it’s necessary.”

Stuff happens

Mr. Hargreaves summed it up: “Procurements are hard, right? Stuff happens.”

Indeed, that seemed to be the theme at this year’s CANSEC, and perhaps every year. Mr. Greenley told Embassy in 2010—when he was a vice president at General Dynamics—that the slow pace of procurement made him nervous. “As a leader, I would say I’m still nervous about it, yeah. I still maintain my nervousness that I would’ve had in [2010],” Mr. Greenley told Embassy at this year’s show.

Projects such as surface combatants and fixed-wing search and rescue aircraft are much farther along than they were in 2010, he said. “But they’re not signed yet, and they’re not out there in the marketplace. So I’ll call myself still nervous.”

Some industry members even admit that slow procurement is a part of how businesses operate.

“Industry generally appreciates how slow the government process and these programs come up,” said Randy Meiklejohn, manager of advanced systems at Esterline CMC. And industry is more engaged with government than ever, he said.

By comparison

The slowness also isn’t necessarily a special case on the global scene.

Governments often make their largest discretionary purchases on military equipment. “So it gets the most political influence and attention,” Mr. Greenley said. “Canada is a challenging defence procurement environment, but I can’t honestly say that it’s horribly better or horribly worse than any other nation.”

Mr. Hargreaves agreed. “I would characterize [delays] as part of the way defence procurement works worldwide. These procurements just take long times,” he said. “If you’re not set up and realize that, you’re going to be shocked and disappointed.”

However, countries in conflict situations can be more fast-paced, according to Philip Daskal, vice president of sales at Toronto-based Inkas Armored Vehicle Manufacturing. Most of their business is international.

“With where we send our vehicles overseas, they’re troubled areas. High security. A lot of criminalization going on. In saying that, the demand and the need is urgent,” he said. “Working with the Canadian government, it is a bit of a slower pace. There’s a lot more paperwork required, a lot more certification.”

Slow it further

Meanwhile, some actually like the slow pace—and would like it to go slower, or in fact, stop entirely.

“Canada can’t be a country that is opposed to terrorism when it’s hosting a show that actually celebrates the tools of terrorism,” said Homes Not Bombs organizer Matthew Behrens, part of about 100 activists camped outside the EY Centre on May 27.

Canadian defence companies were marketing weapons to foreign countries with less-than-stellar human rights records, he noted.