Editor’s Corner article

Seriously, why can’t DND spend its budgeted funds?
CHRIS MacLEAN  |  Jan 15, 2014

Put it down to poor planning, inexperienced personnel, lack of foresight, bureaucratic inertia, over-reaching ambition, an inadequate financial system, or all of the above. There’s no denying that the Department of National Defence is in financial disarray. The latest manifestation is the government’s interesting decision to “push” $3.142 billion from DND’s budget over the next four years. And who can blame them?

The government says it is not reducing spending on its Armed Forces. “There’s no point in having money sitting there when they can’t spend it this year – which they can’t,” said Finance Minister Jim Flaherty, stating the obvious and bringing this issue to light. “We’re pushing it forward [...] so they can use the money when it’s usable, when the hull of the ship is being built, for example, when they need [it].”

To counteract its inability to approve projects, DND “over-programs” each year’s budget by 30% as it tries to compensate for contract ­slippage and other problems. And yet it still falls short by 50%! Adding to its challenges and track record of under-spending, DND is permitted to carry forward only 1% of its overall budget (compared to 5% for other departments) and, following government accounting rules, is not allowed to reassign funds to other projects (or move ­capital funds to national procurement for ops and maintenance, such as repairing ships that have sustained unexpected damage, requiring more funding approvals).

A gaping hole exists between expectation and reality, as billions in painstakingly approved funds are returned every year. Meanwhile, a litany of unfulfilled defence procurements has built up: various new ships, fighter aircraft, fixed-wing search and rescue platforms, maritime helicopters, and land vehicles – not to ­mention the Canadian Coast Guard’s issues with major platform programs.

Did the government promise too much too soon in their 2008 Canada First Defence Strategy, not realizing the DND system could not close contracts (spend) at such a rate? How much of the blame for DND’s long-term financial instability rests with the department itself, particularly its inadequate financial planning?

The latest Conference of Defence Associations Institute (CDAI) Strategic Outlook, notes the government’s intention to “renew” the CFDS. “While the Canada First Defence Strategy is due for a reset, it cannot be done in a vacuum if government needs are to be met effectively by the three services,” say the authors. “But these needs have to be based on a vision for the country. A simple recalibration of the CFDS is not enough.”

Six years ago, Brian MacDonald, senior defence analyst at the CDAI, noted that “Given that the equipment purchases of today determine the military capabilities of tomorrow, and ultimately in the policy options of tomorrow, the cuts we have seen in the equipment holdings of the alliance are crucial factors in the ability, or inability … to deal with the issues it faces.” Nothing much has changed.

Recently unveiling the government’s new Defence Procurement Strategy, Public Works Minister Diane Finley mentioned the “decade of darkness” of DND budget constraints under the Liberals. After years with an ineffective financial system and incompetence, is DND setting itself up for a self-imposed decade in the dark? The Department needs to learn to manage itself so the government has confidence it is not wasting valuable resources in approving programs that get sidelined.

As Sir Winston Churchill so brilliantly ­paraphrased philosopher George Santayana’s insight into reason, “those who fail to learn from history are doomed to repeat it.” What do you think, will we engage in this same ­discussion again this time next year?

© FrontLine Defence 2014