Fixing Defence Procurement
Richard B. Fadden and LGen (ret) Guy Thibault recently authored a paper entitled “Three Ways To Improve Defence Procurement in Canada.” I believe that to achieve measurable improvements in defence procurement, this conversation requires more granularity and specificity. In addition, I strongly oppose the proposition that “specific procurement projects be exempt from some or all the rules that govern them”. Fact is, it has been proven that performance can be dramatically improved within the existing regulatory and legislative framework. For example, during the period 1998-2004 the timeframes to undertake defence procurement declined by 40%. (Unfortunately, by 2011 the timeframes had again risen such that they now exceeded those in 1998.) We need not make exceptions.
As such, I would like to offer three alternative recommendations to address what I consider to be the most critical deficiencies in the defence procurement process – the lack of ministerial accountability, the lack of performance measures, and the lack of adequate reporting.
For over a decade, I have been a fervent advocate for the need to establish one point of accountability. Quite simply, there is excessive overlap and duplication between the roles of the Minister of National Defence and the Minister of Public Services and Procurement Canada. Unless and until one minister is placed in charge of defence procurement, it will never be as efficient and effective as it could be.
Amongst our close allies, Canada stands alone with its system of “dispersed accountability.” In the United States, the Secretary of Defense is accountable for military procurement. In the United Kingdom, this responsibility falls to the UK Secretary of State for Defence. In Australia, defence procurement is under the authority of its Defence Materiel Organisation, accountable to the Minister of Defence.
In December 2019, I was encouraged that the government was finally going to act on this recommendation. The mandate letters at that time for the Ministers of National Defence and Public Service and Procurement Canada included a directive to bring forward options for the creation of a new single entity, Defence Procurement Canada. Sadly, my hopes were dashed when the December 2021 mandate letters to these two ministers no longer referenced this matter.
I recognize that addressing this governance issue will not solve all the procurement problems, but it is a necessary first step. The benefits of creating a single procurement organization go beyond strengthening accountability. First, the process would also be streamlined. At the present time, the process only moves as fast as the slower of the two organizations permits. The result is that many months can be lost due to briefings and approvals through multiple organizations.
Second, savings will emerge from the elimination of overhead and duplication of functions through the merging of the resources in Public Service and Procurement Canada and the Department of National Defence. These savings can help mitigate the impact of the significant staff cutbacks over the past two decades.
Third, until one minister is vested with overall accountability for defence procurement, it will be difficult, if not impossible, to introduce system-wide performance measures.
With respect to performance measures, famed management guru Peter Drucker once stated, “Any government, whether that of a company or of a nation, degenerates into mediocrity and malperformance if it is not clearly accountable for results”. Without performance measures open to public scrutiny, performance suffers. We need indicators that, at a minimum, measure cost and timeliness. If costs are rising, why are they rising? Establish delivery time standards. If there are delays, where are the bottlenecks, and why are they occurring? It’s impossible to make improvements if we don’t have a clear understanding of where the problems lie.
Finally, we need a capital plan with the following attributes. First, It must be a fully costed, long-term plan. The Department of National Defence’s Defence Investment Plan (DIP) is a weak and inadequate attempt to meet this need. The costing debacle of the CSC proves this point. Unlike the DIP, the full life-cycle costs for each project should be displayed over a 30-year period and mapped against the projected available funds year by year. These costs include the capital, operations, and support costs for each project. Messrs. Fadden and Thibault were wrong when they stated that resources can be spent in four ways. The fact is, there is a fifth way. The fifth way is what is commonly referred to in the Department of National Defence as “national procurement”. These funds represent the costs to ensure the asset maintains its operational readiness and effectiveness over its life cycle and is what I have referred to as support costs.
Second, it requires Cabinet approval. Cabinet approval makes it far more difficult for governments to change priorities for partisan political purposes.
Third, it needs to be made public. The benefits of such a public plan would be far-reaching. From a public information standpoint, all Canadians would have a better understanding of how and on what their money was being spent. Parliamentary committees could more readily provide rigorous oversight over these billions of dollars of expenditures. Lastly, knowing that this plan is less likely to be modified, potential suppliers will more readily take the necessary steps to position themselves in an optimum position to compete at the appropriate time.