Successes should not be overlooked but defence procurement does often go haywire, for basic reasons.
On November 17, 2014, Postmedia columnist Andrew Coyne published “Canada’s Glorious Bipartisan Tradition of Messing Up Military Procurement,” in which he observed that all Canadian governments have equally mismanaged defence procurement. This is somewhat unfair, because there have been some quite successful large, complex procurements over the years. The current upgrade of the Halifax-class frigate fleet is but one example of a well-run major program that has been ignored by critics. That said, given the number that don’t go well, the overall track record of successive Canadian governments can at best be described as mixed.
There are a number of reasons for this history. First, major defence acquisitions can involve a lot of risk, especially for systems still in development or requiring substantial modification. The technologies may still be evolving, systems integration can be challenging, cost containment is always a struggle, schedule slippage is endemic to complex programs of all kinds, and maintaining workforce continuity in long programs is a problem. In these circumstances, managing the risks can be difficult and not only in defence — witness Bombardier’s difficulties with its C-Series program. Consequently, program delays and cost overruns are not uncommon and public criticism (some of it reasonably informed, some of it less so) is a fact of life.
The only way to avoid these traps is to buy mature, in-production equipment, but doing so can incur its own costs and risks. These systems can be expected to become obsolete and require replacement earlier, they may have lesser capabilities that impair the operational effectiveness of the Canadian Armed Forces in certain circumstances, and in some cases they may actually have higher lifetime costs of ownership if more advanced systems are more energy efficient or better designed for support and maintenance. Mature systems thus may or may not offer the best overall bang for the buck.
The inherent complexity of many defence procurements, with their associated public controversy, often leads in Canada (more so than in many other nations) to significant politicization of the process. Political opportunism thrives on the inevitable confusion and disarray around all badly functioning government programs, and the single greatest factor causing delays, poor decision-making, confused communications and bad outcomes in defence procurement is the poor design of the government of Canada machinery built to manage it.
Both good and bad decisions can come out of either good or bad machinery, but bad machinery will more frequently lead an organization to bad decisions than to good ones, and can significantly delay all decisions. The direct consequence of delayed, bad or muddled decisions in defence procurement is higher costs for programs, meaning measurably less capability acquired for the money spent.
The structural problems in Canada’s defence procurement machinery begin with its legal foundations, which are complex and require unanimity among four or more ministers and their departments before an acquisition can proceed. The mandatory players include, at a minimum:
- The minister of public services and procurement (formerly the minister of public works and government services). The Defence Production Act gives this minister exclusive authority to “buy or otherwise acquire defence supplies” required by the Department of National Defence and also assigns him or her responsibility for defence industrial policies, programs and plans.
- The minister of national defence. The National Defence Act makes this minister responsible for defining defence equipment requirements and managing defence programs.
- The minister of innovation, science and economic development (formerly the minister of industry). The Department of Industry Act gives this minister responsibility for a number of policy areas, such as industry, technology, science, intellectual property and small business, all of which have direct and indirect connections to defence procurement. In practice, also, this minister often crosses over into the defence industrial responsibilities of the minister of public services and procurement.
- The president of the Treasury Board, in collaboration with Treasury Board ministers. The Financial Administration Act gives Treasury Board wide powers to set limits on the authority of all ministers to make decisions concerning the operations of their departments, and to manage the conduct of the government’s business. In this latter role, the Treasury Board and its supporting secretariat tend to operate in a gatekeeper mode rather than as enablers or orchestrators of government business. Prodigious effort is required by all departments to get the Treasury Board approvals required to implement their programs.
In addition to these ministers, others may have some level of interest and engagement when a particular procurement touches their mandates. This legal construct creates a business model in which accountability is obscured and where many ministers have authority to stop or delay a program, but no one below the prime minister has the authority to keep it moving ahead. Consequently, no one can be held responsible when things get bogged down.
This legal complexity at the top carries forward to the government’s business framework for executing defence procurements. Each department has its own processes, and they operate largely in isolation from one another. There is no horizontal integrated management of activities, like procurement, that cross departmental boundaries. There are general policy directives and a series of individually negotiated hand-off points, but no system-level framework for performance management, business intelligence or anything else a typical private sector organization would consider essential for managing its operations. The Conservative government’s 2014 Defence Procurement Strategy did put in place some mechanisms aimed at improving coordination, but these are project-focused rather than system-focused, represent only minor adjustments to the status quo, have yet to deliver any observable results and may not survive the change in government.
All decisions should be taken within a full life-cycle perspective of the total cost of ownership, as well as the operational and support environments.
The management of defence procurement is further weakened by the fact that the associated structures are designed around an invalid premise that procurement is a stand-alone function. Especially for complex systems, procurement needs to be managed within an integrated end-to-end construct encompassing pre-acquisition, acquisition, in-service operation and support, and disposal. All decisions should be taken within a full life-cycle perspective of the total cost of ownership, as well as the operational and support environments within which the system will be used.
There are well established international best practices and standards defining these principles (for example, ISO Standard 15288 and the NATO Policy for Systems Life Cycle Management), and National Defence understands and applies them as far as it can internally, but at the level of the government of Canada, the principles are not widely embraced. They are largely accorded lip service in Treasury Board policies and clearly not taken seriously, as all Canadian governments over the past four decades have continued to manage procurement as a distinct, stand-alone activity that is largely disconnected from the custody and management of the acquired assets by operational departments. This business model is designed for mass purchasing of commonly available, disposable commodities, and it can work fairly well in that instance. However, it is demonstrably failing too often when it comes to the acquisition and support of complex defence or other systems.
Given all the flaws in the government of Canada’s machinery, it is remarkable how often it has been possible to successfully deliver some defence acquisition projects on time and on budget. Defenders of the status quo see this as evidence that the system works, but in fact it is more a testament to the willingness of those involved to exert the “heroic effort” required to move the processes along despite their inherent inefficiencies. “Heroic effort” is not a viable or sustainable business approach, and the new Liberal government will need to make meaningful machinery changes if it is going to deliver on its commitment to be a more effective manager of defence procurement.
This article is part of the Equipping the Military special feature.
Photo credit: Canadian Forces Combat Camera, DND / Crown Copyright