Fixing the Defence Procurement System
The acquisition of equipment and related services for the Canadian Forces has become the hottest subject in town, for a simple reason: the situation, long deteriorating, has now reached the critical stage. Failure to fix the process soon will likely lead to a breakdown in the military’s field operations, at a time when these are exceptionally demanding and vitally important to national security.
The problem and its symptoms are well-known. Bringing complex new systems into service is taking much longer than it used to, typically fifteen years or more from government go-ahead to operational employment by the military. This is the result, in part, of an increasingly burdensome bureaucratic process, not just within the Department of National Defence, but within the federal government at large. The problem is compounded, however, by other factors. The Canadian defence/ aerospace industry and individual companies fight for what they see as their rightful share of the $2.5 billion allocated yearly to the purchase of new equipment and services, further complicating an already complex process. Moreover, there is the difficult question of political involvement, which is utterly necessary but so often motivated by regional considerations as well as fear of public and media reaction, especially to the big-ticket items like ships and aircraft. And when a federal election is on the horizon, political considerations can often bring the system to a state of near paralysis for many months.
Fortunately, not all new equipment takes 15 years to enter service, and there are examples of quite rapid acquisition. But all too often the Canadian Forces get their new systems much too late, which imposes an extra burden of high cost and physical risk because of the need to keep the old equipment in service long after the “use before” date has expired. Look, for example, at the sad cases of the C-130 Hercules air transport aircraft and the Sea King helicopters, whose replacement will not enter service until some 30 years after the need was established.
Something is seriously wrong. But what can be done about it?
A first step is to identify the root causes. Much research, analysis and speculation has been undertaken recently in this regard, and a clear picture is emerging.
For example, the gradual evolution of a very cumbersome bureaucratic process is commonly seen as a major source of difficulty, if only in its delaying effect. Much of the complexity lies within DND but, to be fair, that department must guide its capital projects through a plethora of interdepartmental hoops involving the Treasury Board Secretariat, Public Works and Government Services, the Department of Industry, the Finance Department, other government departments, regional agencies, and ultimately the Privy Council Office. Just bringing numerous key senior government officials together at one time for an interdepartmental review can be frustratingly slow. Furthermore, each of the outside government departments and agencies has in effect a veto power over a given DND proposal, so they must be treated with considerable deference.
Within DND, where total risk-aversion has become a debilitating force, the business of writing the specifications for a new piece of equipment got out of hand, to the point where multi-thousand page documents have been common. In effect, the department’s technical experts all too often have written detailed design specifications for the system in question, rather than telling industry what the equipment should do in operational terms. Not only is this hugely time-consuming: it also constrains industry’s ability to respond, and it can open the door to accusations that the technical specifications have been manipulated in such a way as to favour one candidate’s system or to edge out another.
In recent years, DND has suffered from a deficit of qualified program management personnel, which adversely affects the department’s ability to move quickly to produce the RFP (Request For Proposal), evaluate industry’s responses, and move the project through the bureaucratic maze to the federal cabinet for decision.
Canadian industry, for its part, is frustrated by what it sees as an insensitivity within Defence about the capacity of Canadian companies to meet the equipment needs of the Canadian Forces, and a general inability to understand the industrial dimension. More and more, companies who believe that they are about to lose a competition will resort to lobbying politicians or to legal challenges, which can lead to delays in decision-making, sometimes very lengthy ones.
DND, with much historical evidence in hand, contends that the obligation, explicit or otherwise, to develop Canadian equipment to meet Canadian needs – as opposed to off-the-shelf acquisition – is often the cause of inordinately long procurement times. Also, a feature of major equipment projects these days is the requirement for competing firms to propose attractive industrial regional benefits packages as part of their formal response, which tends to create nervousness in DND that this factor might trump military requirements, to say nothing about a perceived “delta cost” to the DND budget.
The sometimes divergent objectives of the Canadian Forces and the national aerospace/defence industry have to be reconciled in such a way that the security imperative is not jeopardized.
And then there is the political dimension. To be sure, when hundreds of millions or billions of dollars are involved, the decision must be a political one. Federal politicians in recent decades have been acutely aware that the Canadian public frankly dislikes the expenditure of tax dollars on major military equipment. The media, for their part, never miss an opportunity to play up this angle for a good story, to the extent that the federal cabinet tends to be gun-shy about such purchases and will hedge, sometimes for years, without making a decision. It is no wonder, in this environment, that a 15-year procurement cycle has become common. This situation has become even more problematical recently with the practice of publicizing the life-cycle costs of major crown projects (lumping in lifetime support and operating costs with the purchase cost, for example).Although this is sensible from an accountability perspective, the general public doesn’t understand the distinction, and sees only the huge numbers that result. (If the cost of a typical family car were calculated this way, it would appear to be about $195,000!)
Can the system be fixed?
It has to be. The consequences of continuing down the current path are serious, real and untenable. Successive political delays over the past three decades have led to a bow wave of unfulfilled equipment requirements so large that catch-up is out of the question. Fortunately, the current restructuring of the Canadian Forces presents an opportunity to get things back on track, but only if the systemic problems facing defence procurement can be corrected, and very quickly.
Here are the principal ingredients of our proposed get-well plan:
- DND must issue performance-based requirements to competitors, rather than detailed design specifications.
- DND’s staff of well-trained program managers must be increased.
- The Interdepartmental Review Board process must be streamlined.
- A comprehensive military equipment acquisition strategy must be formulated.
- Regional industrial work must be assigned in fulfillment of this strategy, rather than on the basis of political and industrial lobbying.
- DND must be given the political authority to undertake reasonable risk in its management of major programs.
- The Canadian public needs to be better informed about the need and importance of new equipment for the Canadian Forces, and of its affordability. This is as much a responsibility of the politicians as of the military.
Finally, for all of this to work, the Prime Minister and his cabinet colleagues must lead the corrective process from above, by giving firm direction that all necessary measures be taken to get the defence procurement system working effectively, efficiently and speedily. Otherwise, there is little hope of getting it back on track, nor of giving Canadians the level of national security they need and deserve.
General (ret) Paul Manson is President of the Conference of Defence Associations Institute (CDAI).
Colonel (ret) Howard Marsh is Senior Analyst of the Conference of Defence Associations (CDA).
© FrontLine Defence 2006