Forget more defence dollars - Canada needs to fix its procurement process



by Steve Saideman

February 23, 2018

On February 27, the Liberals table their next budget. Whatever it says about defence spending, it is probably best to be skeptical. 

When Stephen Harper was prime minister, there seemed to be annual announcements that the budget of the Department of National Defence was going to be under-spent by billions of dollars. While there was much suspicion that this was part of an effort to reach a balanced budget, the fact that the Trudeau government may be forced to make similar announcements — which may very well happen when this year’s budget is released — suggests something is broken besides campaign promises. 

Indeed, when the Defence Policy Review, Strong, Secure, Engaged, was released in 2017 with promises of much greater defence spending, there was much criticism, as people anticipated that the Liberals had no intention of actually fulfilling those promises. 

It turns out that there is a feature in Canadian defence that is enduring, regardless of the party in power: it is hard to spend large amounts of defence dollars.

This seems counter-intuitive, since most defence projects are expensive, and increasingly so, as defence costs inflate faster than most of the economy. Yet it is precisely that the big projects require complex processes to make the decisions, issue the contracts and then build the weapons systems that make it so easy for spending to slip from one year to the next.

Simply put, Canada does not have enough procurement specialists to do all of the work, as prior defence cuts have meant expertise is lagging when it comes to how to estimate costs quickly, how to develop clear requirements for contracts, and how to write contracts. On top of that, there is a cumbersome bureaucracy involving multiple ministers which means diffuse accountability — no single minister is accountable because several partially are. This means that decisions get delayed, which in turn means that money goes unspent.

The National Shipbuilding Strategy illustrates these problems quite well. It seemed simple. The shipyards were chosen years ago (in 2011) — Irving in Halifax for the frigates and the arctic offshore patrol vessels and Seaspan in Vancouver for the support ships. While that was the big political decision, it did not mean that designs of ships were chosen or subcontractors determined for various parts of the project. Picking ship designs is a complicated process, since the design that wins may influence which subcontractors get more or less of the work, and also because the Navy values flexibility, which means that tradeoffs may be deferred. Moreover, delays increase the costs in a variety of ways, so as governments change and tweak the requirements, deferring decisions causes the budgets to grow. 

To be clear, while it often seems like the defence contractors are at the mercy of capricious politicians and delayed by the understaffing of procurement officials, they also can make everything more complicated. Currently, the highest-ranking officer in the Royal Canadian Navy, Vice Admiral Mark Norman, is suspended due to unproven claims he was embroiled in the rivalry the Irving shipbuilding company has with the Davie shipyards. The story is complex, but the ruthless desire by Irving to get every potential project made it more difficult to produce interim ships to supply the Navy at sea. In short, everyone involved is mismanaging defence procurement.

The F-35 story is very similar but “benefits” from more politicization. No major party can oppose the shipbuilding effort, nor can they be too critical, since it involves thousands of clearly identified jobs — and voters. The effort to replace the current fighter planes has been fraught from the outset, as politicians have attacked competing parties over decisions and non-decisions alike. Whatever “offsets” there might be that lead to high tech jobs in Canada, they are not so clearly tied to particularly communities, like ships in Halifax and Vancouver. This means that the various parties can politicize and threaten to cancel all they want.

To what effect? The Royal Canadian Navy simply cannot do as much as it once could. It cannot send as many ships to sea since the RCN has fewer ships. Because Canada is not at war, this does not endanger Canadian security — the absence of a few ships will not lead to our invasion.  But it may mean that Canada cannot keep all of its commitments to its allies, that it cannot always show up when it is expected to do so. Politically, it is problematic; Canada was able to assure US President Donald Trump last year that while we may not spend two percent of GDP on defence anytime in the near future, Canada was going to be increasing its defence spending. But stories of deferring spending may cause Trump to overreact, as he will not read beyond the headline to realize that news is the result of procurement problems.  

Politically, of all the promises Justin Trudeau made, the broken commitments on the defence file will probably cost him the least. Unless one works for a defence contractor, most people do not vote based on defence spending. The Conservatives can try to argue that they are more serious about national defence, but their lousy record of procurement is recent enough that they probably do not want to focus on it. The New Democratic Party will never try to outflank the Liberal Party to its right. So, the political consequences are probably minimal. 

The most serious cost involved is that older equipment might endanger Canadian soldiers, sailors and aviators. They may not be able to perform their assigned missions to the best of their ability because their equipment may not function as well as it should, or as well as the equipment of their adversaries. So, while a navy reliant on leased supply ships or on an interim vessel might seem like a joke, this is not really a laughing matter.

When it comes to the realities of the modern military, the risks are significant and the consequences can be fatal. Getting better at procurement, something that Strong, Secure, and Engaged promised to do, is not just about saving money and preventing the government from being embarrassed. It is what we owe the people who risk their lives for Canada at home and abroad. 

So, whatever promises are made in this budget, the focus should be on whether it includes significant improvements, including increased staffing, of Canada’s defence procurement specialists. Alas, these people don't just appear from thin air — they require training and experience. The question remains whether the new budget will create incentives and processes that begin to reverse the shortfalls. All we can be certain of is that if the procurement process is not fixed, more dollars will be pushed further into the future, and so will the ships, planes and other kit that the Canadian Armed Forces need.

Image credit: REUTERS/Murad Sezer

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  • Michael Shannon
    commented 2018-02-25 09:55:36 -0500
    Procurement certainly must be sorted out but we shouldn’t overlook HR which accounts for about 1/2 DND’s budget. There are too many executives (and their staff), too many CWOs “advising”, too many musicians (about 1,000) and too many people being warehoused on SLT or university studies. The regular army has extra units which exist solely to create command slots. which reduces cohesion, increases expense and reduces readiness. All of these extra people cost far more than their base salary not including the significant costs of physical postings for many. And we shouldn’t forget the costs of non-operational activities like display teams and the mil cols. Cutting HR costs by 20% is an attainable goal and should be the starting point for defence reform.

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