Economics, Resources and International Affairs Division
In February 2014, the Government of Canada unveiled its Defence Procurement Strategy (DPS), a multi-point plan to reform the Canadian defence procurement system. The Strategy has three key objectives:
- To deliver the right equipment to the Canadian Armed Forces (CAF) in a timely manner;
- To leverage defence procurement purchases to create employment and economic growth in Canada;
- To streamline defence procurement processes.
Defence procurement in Canada is a complex process. It involves several federal government departments and agencies, notably the Department of National Defence (DND), Public Services and Procurement Canada (PSPC), and Innovation, Science and Economic Development Canada (ISED).
This de-centralized, multi-departmental approach to defence procurement is unique to Canada. Most countries conduct defence procurement differently.
How the Strategy came about
Since 2001, the Canadian government has invested billions of dollars in defence procurement projects. However, delays, cost overruns and other problems encountered with the acquisition of certain defence products prompted the federal government to reform the defence procurement process.
In September 2009, the government of Prime Minister Stephen Harper commissioned the Canadian Association of Defence and Security Industries (CADSI) to conduct consultations with Canada’s defence industry. The intention was to evaluate existing defence procurement processes and determine ways to best align domestic industrial objectives with defence procurement priorities.
CADSI’s report, submitted in December 2009, was made public in March 2010. Among other things, CADSI recommended that the Canadian government establish a defence industrial policy, improve defence procurement processes and practices, and strengthen defence procurement governance.
After further investigation, the government of the day announced in the federal budget of 2011 a commitment to “improving military procurement”. It also made a commitment to develop “a procurement strategy, in consultation with industry, to maximize job creation, support Canadian manufacturing capabilities and innovation and bolster economic growth in Canada.”
The Canadian government then turned to the Independent Panel on Federal Support to Research and Development, which was appointed in October 2010 to conduct a review of federal research and development in Canada. Chaired by Tom Jenkins, the Panel was tasked to provide advice “specifically on better leveraging of the government’s defence procurement spending in order to help achieve [the] objectives” outlined in the 2011 budget.
In its October 2011 report, the Panel recommended that the federal government “make business innovation one of the core objectives of procurement”. It noted that there was “an opportunity to develop a defence industry strategy.”
In September 2012, the government appointed Mr. Jenkins as Special Adviser to the Minister of Public Works and Government Services “to inform the further development of the government’s defence procurement strategy.”
Mr. Jenkins’s report, submitted in February 2013, made a case for “developing a strategy to promote Canadian defence-related industries through better leveraging of procurement.” In his view, Canada should emulate other countries by investing in its defence industrial sector and trying to leverage as much economic benefits as possible from defence procurement contracts.
Taking into consideration the recommendations of CADSI, Mr. Jenkins and others, the Harper government developed its Defence Procurement Strategy, which it launched in February 2014.
The Strategy: An update
A number of initiatives were introduced under the Strategy. Most have been implemented by the three federal government departments responsible for defence procurement in Canada (DND, PSPC and ISED). The key initiatives include:
- Having DND publish an annual Defence Acquisition Guide outlining its defence procurement priorities. The first guide was published in June 2014;
- Establishing within DND an Independent Review Panel for Defence Acquisition (IRPDA) to validate requirements and to provide independent, third-party advice on major defence procurement projects. The IRPDA was appointed in May 2015;
- Progressively increasing DND’s authorities to independently contract from $25,000 to $5 million;
- Replacing the Industrial and Regional Benefits (IRB) policy with an Industrial and Technological Benefits (ITB) policy that uses a “weighted and rated” Value Proposition to assess defence procurement bids. ISED published its ITB policy Value Proposition Guide in December 2014;
- Identifying and using Key Industrial Capabilities (KICs) to increase the competitiveness of Canadian companies on global markets;
- Implementing an export strategy to support defence industry sales to foreign countries and participation in global supply chains; and
- Establishing an independent, third-party Defence Analytics Institute to provide expert analysis and advice on defence procurement. An interim Defence Analytics Institute was established in February 2014.
A new governance and accountability framework was also introduced with the Strategy “to ensure streamlined and coordinated decision-making for defence procurements.” A Defence Procurement Secretariat was created within PSPC to oversee the defence procurement system and to coordinate implementation of the Strategy across the multiple government departments involved in the process.
This Secretariat reports to a Deputy Ministers Governance Committee (DMGC), chaired by PSPC. It consists of deputy ministers from DND, ISED, Global Affairs Canada, and Fisheries and Oceans Canada, acting as the “key decision-making body” for defence procurement.
The DMGC in turn provides guidance on defence procurement matters to a Working Group of Ministers, chaired by the PSPC minister. It includes the ministers of National Defence; Innovation, Science and Economic Development; Foreign Affairs; International Trade; and Fisheries, Oceans and the Canadian Coast Guard.
This Working Group of Ministers was established “to ensure shared accountability in defence procurements” and “act as the forum for discussion, advice and to resolve issues in the implementation of major procurement projects.”
Opportunities and challenges
While many defence experts regard the Strategy as a step in the right direction, some believe there is still room for improvement. A number of commentators maintain that the Strategy does not address the multiplicity of ministerial points of authority and accountability under Canada’s current multi-departmental defence procurement system.
While the DPS created new coordinating entities, the issue of having several government departments and agencies accountable for defence procurement processes remains omnipresent.
These critics, therefore, believe that additional reforms should be implemented. They feel that the defence procurement system as a whole should be centralized under a single federal government department or agency solely dedicated to the acquisition of defence products. Doing so, they argue, would achieve better accountability, governance and efficiency.
Some commentators also maintain that the new coordinating entities created under the Strategy have added bureaucratic layers and new sequential steps to already complex defence procurement processes, thereby further complicating the defence procurement system.
Other experts believe that the Strategy is too industry-oriented and focused on securing employment and economic benefits from defence procurement contracts.
That said, the Strategy is still new. Time will tell whether additional changes or reforms will be needed to improve the way Canada purchases defence equipment.
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