New defence procurement agency would be disruptive, costly

It almost seemed like a throwaway line at the end of the Liberal Party’s 2019 election platform, in a section on proposed approaches to security: “To ensure that Canada’s biggest and most complex defence procurement projects are delivered on time and with greater transparency to Parliament, we will move forward with the creation of Defence Procurement Canada.”

Two RCAF CF-188 Hornet fighters from 433 Tactical Fighter Squadron fly over Iceland during an Operation Reassurance surveillance mission in 2017. Cpl Gary Calve Photo
At a time when the departments are moving a record number of equipment projects, including CF-188 Hornet replacement, through the acquisition process under the government’s 2017 defence policy, any restructuring could significantly delay progress. Cpl Gary Calve Photo
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Little was said about the proposal during the election campaign, but in the mandate letters to ministers that followed, National Defence (DND), Public Services and Procurement (PSPC), and Fisheries, Oceans and the Canadian Coast Guard were tasked with bringing forward options to establish Defence Procurement Canada (DPC), a priority, the Prime Minister wrote, “to be developed concurrently with ongoing procurement projects and existing timelines.”

Whether DPC would be a department, standalone agency or new entity within an existing department isn’t clear. Nor is it apparent how the government would consolidate and streamline the myriad procurement functions of multiple departments.

Jody Thomas, deputy minister of National Defence, acknowledged as much during an address to the Canadian Global Affairs Institute (CGAI) Jan. 29 when asked about DPC progress.

“I don’t know what it is going to look like … We’re building a governance to look at what the options could be and we are studying what other countries have done,” she said, noting that a standalone agency outside the department of defence has not necessarily worked particularly well in other countries. “Everything is on the table. We’re looking at it, but we haven’t actually begun the work in earnest.”

The idea of moving defence procurement under a single point of accountability is hardly new. Alan Williams, a former assistant deputy minister of Material (Adm Mat), made the case for a single agency in a 2006 book, Reinventing Canadian Defence Procurement. And the Canadian Association of Defence and Security Industries (CADSI) issued a report in 2009 calling for a “separate defence procurement agency reporting through a single Minister … [to] consolidate procurement, industrial, contracting and trade mandates into one new department, like a Defence Production Department, reporting to a minister.”

More recently, an interim report on defence procurement by the Senate Committee on National Defence in June 2019 argued that “a single agency could simplify the complex procurement governance framework. Serious consideration could also be given to empowering project officials and making the Department of National Defence the lead department.”

Williams remains a strong proponent. In a presentation to a CGAI conference on defence procurement in the new Parliament in late November, he greeted the DPC decision with a “hallelujah,” pointing to the high cost created by overlap and duplication when multiple ministers are involved in a military acquisition decision, and the tendency to play the “blame game” when delays or problems arise and there is no single point of accountability.

But he cautioned that the initiative would falter without better system-wide performance measures on cost, schedules and other metrics. “If you don’t monitor and put public pressure on the system, things will [slide],” he said.

Prime Minister Justin Trudeau’s office tasked National Defence, Public Services and Procurement, and Fisheries, Oceans and the Canadian Coast Guard with bringing forward options to establish Defence Procurement Canada. Prime Minister’s Office Photo

Williams also called for a defence industrial plan, backed by Cabinet approval, to help identify where to invest defence capital, and “a culture that recognizes and demands innovative creativity, taking chances.”

Other former senior civil servants, many with decades of experience in public sector organizational reform, were less optimistic about the prospects of a new agency or departmental corporation.

“There is always a good reason why things are the way they are,” said Jim Mitchell, a research associate with the Graduate School of Public and International Affairs at the University of Ottawa and part of massive reorganization of government departments undertaken by Prime Minister Kim Campbell during her brief tenure in 1993.

“If you want to change things, you first have to understand, why do we have the current situation that we have in defence procurement and who are the people who have a major stake in the status quo and why? If you don’t understand that, you are going to get into big trouble,” he warned the CGAI audience of government and industry leaders.

At a time when the departments are moving a record number of equipment projects, including CF-188 Hornet replacement, through the acquisition process under the government’s 2017 defence policy, any restructuring could significantly delay progress.

“Organizational change is always disruptive, it’s costly, it’s difficult, it’s hard on people, it hurts efficiency and effectiveness of organizations for a couple of years at minimum,” said Mitchell. “It is something you do very, very carefully.”

It’s a point not lost on CADSI. “The sheer scale of the change required to make DPC real should give companies pause. It could involve some 4,000-6,000 government employees from at least three departments and multiple pieces of legislation, all while the government is in the middle of the most aggressive defence spending spree in a generation,” the association wrote in an email to members in December.

A vocal proponent of improving procurement, it called DPC “a leap of faith,” suggesting it might be “a gamble that years of disruption will be worth it and that the outcomes of a new system will produce measurably better results, including for industry.”

Gavin Liddy, a former assistant deputy minister with PSPC, questioned the reasoning for change when measures from earlier procurement reform efforts such as increased DND contracting authority up to $5 million are still taking effect.

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Boeing's F/A-18 Super Hornet, left, and Lockheed Martin's F-35
Boeing’s F/A-18 Super Hornet, left, and Lockheed Martin’s F-35 are vying for the chance to be Canada’s next-generation fighter through the current procurement policy. Mike Luedey Photos

“You really need an extraordinarily compelling reason to make any kind of organizational change. And every time we have attempted it … it takes five to seven years before the organization is up and standing on its feet,” he told CGAI. “If you want to do one single thing to delay the defence procurement agenda…create a defence procurement agency. Nothing would divert attention more than doing that.”

While few questioned the need for enhancements to the defence procurement process, many of the CGAI participants raised doubts about the logic of introducing a new entity less than three years into the government’s 20-year strategy. Thomas described a number of improvements to project management and governance that are already making a difference.

“The budgeting and project management in defence is really extraordinarily well done. If I am told by ADM Mat they are going to spend $5.2 billion, then that is what they spend. And we have the ability to bring more down, or less, depending on how projects are rolling,” she explained. “We are completely transparent about how we are getting money spent, what the milestones are on projects … The program management board is functioning differently and pulling things forward instead of waiting until somebody is ready to push it forward.”

“And we are working with PSPC. I think it is time to look at the government contracting [regulations], how much we compete, what we sole source, the reasons we sole source. I think there is a lot of work there that can be done that will improve the system even more.”

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