If we are to help defend Ukraine and shore up our defence of North America, we MUST fix defence procurement
Putin’s brutal invasion of Ukraine launched February 24, 2022 was a wake-up call to the world, including here in Canada. One immediate effect has been the desperate and urgent pleas from Ukraine to friendly countries everywhere for weapons and munitions to defend themselves from that attack. Canada’s response has so far been very limited and insufficient to Ukraine’s needs, including the provision of 4 M777 howitzers out of our army’s inventory of 37. Our Chief of Defence Staff, General Eyre, then seemingly tried to pass the buck, saying “we need the defence industry to go onto a wartime footing and increase their production lines to be able to support the requirements that are out there, whether its ammunition, artillery, rockets, you name it” (Zimonjic, 2022)
More broadly, Canada has been spurred to finally begin a program to shore up our own (Government of Canada, n.d.) defences against the types of long range nuclear and conventionally armed missiles being developed, tested and in some cases fired in anger by Russia, China and North Korea. On June 20, Defence Minister Anand launched a new plan to invest $40 billion on modernizing our NORAD defence system (Anand, 2022). In the meantime, Canada will continue to operate and maintain our existing North Warning System and the limited utility it provides against modern day, but very real threats.
NATO and its member countries including Canada is in a cold war once again. So it’s time to re-arm: Urgently, efficiently and effectively.
What could go wrong? The answer is our defence procurement system, recently described by former Government of Canada Executive responsible or Weapon Systems Acquisition, Ian Mack, as “the worst of the worst” (Mack, 2022). So as not to waste $40 billion, and even much worse, to find ourselves defenseless against a peer nation attack on North America, we MUST fix this procurement system now. This paper offers one fundamental way of doing so.
The basis of that “worst of the worst” procurement system is a Defence Procurement Strategy initiative established in 2014 to improve defence procurement and to develop more efficient, timely and streamlined processes (Government of Canada, n.d.).
Is the policy really a failure? Consider the goals it was intended to achieve:
- Improving defence procurement.
Unfortunately, the overwhelming consensus amongst defence procurement practitioners is that it has gotten worse, not better. The Auditor General of Canada’s audit of the National Shipbuilding Strategy in 2020 (Auditor General of Canada, 2021) backed up that assessment, concluding that the three departments responsible for defence procurement did not manage their procurements in a manner that supported timely renewal of the vessel fleet and that further delays could result in a loss of capability to deliver essential programs. That audit was then immediately followed by the COVID pandemic which caused work disruptions and further delays.
- Delivering the right equipment to the Canadian Armed Forces and the Canadian Coast Guard in a timely matter.
There are many examples to choose from that illustrate how this is NOT happening, but the recent Fixed Wing Search and Rescue example is both illustrative and well described here (Shimooka, 2022).
- Streamlining and modernizing defence procurement processes and ensuring coordinated decision making.
Unlike most countries, Canada does not have one department or agency responsible for defence procurement. We gave three: National Defence, Public Services and Procurement Canada, and Innovation, Science and Economic Development Canada. Therefore ensuring coordinated decision making between the three is vital. The reality is that the needs of the Canadian Armed Forces are usually diametrically opposed to those of the Innovation, Science and Economic Development Canada department as enunciated in their Industrial Technological Benefit / Value Proposition requirements and evaluation criteria, and only rarely the twain shall meet (at the working / project office level at least).
- Leveraging defence equipment purchases to create jobs and economic growth for Canadians.
While it is true that the Government sometimes justifies massive project cost overruns in the name of creating jobs (Middlemiss, 2021), that is hardly “leverage”. Leverage means using Canada’s work force to the maximum advantage to delivering cost-effective capability to our Canadian Armed Forces. Examples would be procuring weapons from Canadian defence companies already achieving export success across NATO, or seeking out and adapting Canadian innovations. It does not mean accepting paying more or accepting less capability in order to make jobs in Canada.
The problem is not with the goals themselves, but rather the execution. So where did we go wrong? For that we need to look at the inspiration of the Defence Procurement Strategy, which included Tom Jenkin’s report on leveraging defence procurement through Key Industrial Capabilities (KICs) (Jenkins, 2013).
KICs represent “areas of emerging technology with the potential for rapid growth and significant opportunities, established capabilities where Canada is globally competitive, and areas where capacity is essential to national security” (Government of Canada, 2018).
Let’s consider the middle point “established capabilities where Canada is globally competitive”. Not want to be, not will be, but IS globally competitive. Meaning the globally competitive capability exists today in a Canadian company. Those KICs don’t exist without one or more Canadian companies continuously investing in maintaining and growing those capabilities. KICs and Canadian industry are inextricably linked.
So how can Canada leverage KICs? It can do so by buying existing capabilities from those Canadian companies when required, and by co-investing with those Canadian companies when an expansion or enhancement of that capability is required or anticipated. Unfortunately, the current policy does not do that. Instead, ISED strives to “motivate investments into KICs through the Industrial Technological Benefit policy Value Proposition requirements”, which perversely rewards other companies, including foreign companies, for promising to redevelop that same key capability themselves, while bypassing the companies who have already made the investment and who are successfully exporting. It encourages new entrants while penalizing the types of companies that Canada depends on and is trying to grow. In doing so it drives up procurement cost and risk, rather than leveraging the proven, leading Canadian capabilities already available.
In conclusion, the goals of the Defence Procurement Strategy are fine, as is the strategy of leveraging KICs. But unfortunately it has failed miserably in execution. Recognizing the role of Canadian industry leaders as the engines that drive those KICs would help get the strategy back on track. Leveraging corporate Canadian KIC capabilities rather than using defence dollars as a slush fund for job creation would be a huge step in the right direction.
Lee offers over 40 years of Canadian space and defence procurement experience as well as insights from an industry perspective, coupled with a thorough understanding and deep passion for Canada’s North and Northern Strategy. Lee is one of Canada’s most accomplished builders of surveillance systems for achieving maritime and northern situational and domain awareness.
Throughout his career in the Canadian aerospace industry, Lee has held a variety of increasingly senior roles in business development, program and general management, while maintaining a strong focus on arctic and maritime domain awareness systems.
Lee spent 25 years with MacDonald Dettwiler (MDA), where he captured over $200 million in government capital projects for the Department of National Defence, Environment Canada and the Canadian Coast Guard, among others, and led the implementation of many of these projects. He enjoyed 10 years as the general manager of MDA Halifax, where he grew the office into a major player in maintaining Canada’s Recognized Maritime Picture.