Canadian Military/Defence procurement process (Mega Thread)

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions of the Copyright Act from 570 News is a Canadian Press report on a recent conference that discussed defence procurement:

https://www.youtube.com/watch?v=55r8ZYPKnuQ

Time for ‘mature’ debate on defence needs and purchases in Canada, experts say

The Canadian Press

Jan 21, 2014

OTTAWA – A panel of defence experts says it’s time for a “mature” public debate about how best Canada’s economy can benefit from the billions of dollars being spent on the country’s military.

Canada 2020, a non-partisan think tank, held a discussion today on defence procurement, a seemingly endless source of political frustration for the Harper government.

Sahir Khan, a former high-ranking staffer in the parliamentary budget office, says the number of failed and delayed procurements, such the recent cancellation of a $2-billion armoured vehicle program, shows the country is stuck in a rut.

A high-profile report on defence spending last year gave suggestions on how to leverage the anticipated $240 billion in planned equipment purchases to the benefit of Canadian defence contractors and companies.

Khan says there is a premium to be paid for building certain military equipment in Canada, such as ships, and there needs to be a public conversation about whether that something the country is prepared to accept.

He says other countries do it, pointing to Japan, a country that was prepared to accept the higher cost of building its F-16 jet fighters at home.

Dave Perry, an associate professor at Carleton University, says the Chretien government slashed National Defence and Public Works procurement offices in the 1990s and the system has never fully recovered.

Ray Castelli, an executive and former official in Brian Mulroney’s government, says defence purchases are always a political football, and in the Canadian system of procurement, they are always controversial.

He says the system needs to improve, but other countries look to Canada for guidance and it’s good thing the government takes its time to carefully consider purchases.

The Harper government has faced political heat for a series of delays, including replacements for the country’s Sea King helicopters and trucks for the army.

The plan to replace the air force’s CF-18s with the F-35 stealth fighter struck a real nerve when the auditor general accused National Defence and Public Works of understating the multi-billion dollar cost and failing to do their homework.

Here is a link to the Canada 2020 site dealing with the topic.

One point which is not being discussed is that this government, a Conservative government which I support, financially, promises too much and then "low balls" the estimates, or, perhaps it's better to say, accepts the CF's "low ball" estimates, and then imposes delay after delay after delay while it tries to cope with a reality in which there is not enough money for much of anything. It's not really bad politics ~ ministers get to announce "new, shiny stuff" over and over again ~ but it is piss poor policy.

 

[Edward Campbell]

In a column in today's Globe and Mail (some of which was lifted, without attribution, from a piece by Michael Byers in yesterday's Globe and Mail) Jeffrey Simpson takes a swipe at procurement.

He gets part of it right: the Conservative over-promise and under-deliver ... but, then, so did the Liberals and the Progressive Conservative before them, and the Liberals way back before them, too. Defence procurement started to go "off the rails" back around 1960s, I think, when the rate of inflation for things like aerospace and electronics soared far, far above the general rate of inflation which guides ministers in most Western countries. In fact, by and large, Canadian defence procurement did not, often, lag far behind the general rate of inflation - the one that tells you and me that new cars and bath towels and tomatoes cost 2% more this year than last, etc. But because we (as a nation) could not, did not even try to keep up with the actual rate of inflation for defence hardware we got less and less and less for our deface dollar ~ even acknowledging that improved capabilities of e.g. each ship or aircraft type meant we could do more with less. We bought "new" and got a 35% increase in capability, but we only bought 50% of the last "fleet" so we actually lost about 15% of overall capability.

He fails to acknowledge, as Prof Byers did, that our capacity to build ships is decidedly limited and we, our government, got ourselves into a scheduling mess.

He also fails to tackle the big issue: using defence procurement as a "jobs! Jobs! JOBS!" measure. Most Canadians do not understand that we could both a) buy what the CF needs for something like 50% of the "buy Canadian" cost and b) create more jobs if we used the other 50% of the "buy Canadian" price to subsidize productive Canadian industries.

 

[The Bread Guy]

1)  The PWGSC and Defence ministers have a tag-team speech scheduled for this morning about "improving Canada’s military procurement at the Economic Club of Canada"
2)  A little something in the Globe & Mail:

The Conservative government is reducing the Department of National Defence’s influence in steering big-ticket military purchases after a string of delays and cost overruns in acquiring hardware for the Canadian Armed Forces.

In a significant overhaul of how Ottawa buys military equipment, National Defence Minister Rob Nicholson and Public Works Minister Diane Finley are announcing Wednesday morning that big military acquisitions will from now on be managed by a Defence Procurement Secretariat that reports to the Department of Public Works and is governed by senior civil servants across a range of departments.

There will be a new political oversight as well: a working group of ministers from Public Works, Defence, Industry Canada and Treasury Board will take a more hands-on role ....

I wonder how that politicians taking "a more hands-on role" is going to speed things up and make things more transparent?

Watch and shoot.

 

[Edward Campbell]

I think, fear that this will be the horribly wasteful and ineffective jobs! Jobs!! JOBS!!! agenda ~ much loved by many (most?) politicians and by the business people who will milk the defence budget like a cow.

It is a stupid policy which doesn't work anywhere, not even in the USA. No senior civil servant of my acquaintance, and I do know a handful, thinks the defence budget can or should be used for job creation. But it makes a great political promise, a promise to prop up uncompetitive, unproductive industrial sectors and, especially, to sustain the (often)  low skill, (relatively) high wage jobs that are found there. And, make no mistake: low skill/high wage jobs are the holy grail for politicians all over the world.

:rage:

 

[Edward Campbell]

Don't get me wrong: I'm not unhappy with what I read in the Globe and Mail's report. I favour a civil service secretariat approach. In fact, I would favour a Department of Defence Production which would strip authority and responsibility away from DND and Industry Canada and Public Works and Government Services.

The military has three vital roles in procurement:

    1. Identifying (preferably in performance terms) military (mostly operational) requirements;

    2. Identifying funds within the defence budget to meet those requirements; and

    3. Testing and accepting or rejecting the systems which the defence procurement agency buys.

Now, of course, it's not all that neat. Military operators, engineers and support folks will have to involved during the whole process but the final decisions should be made by senior civil servants who are accountable to a minister other than the MND.

 

[The Bread Guy]

Don't get me wrong: I'm not unhappy with what I read in the Globe and Mail's report. I favour a civil service secretariat approach. In fact, I would favour a Department of Defence Production which would strip authority and responsibility away from DND and Industry Canada and Public Works and Government Services.

I agree with having more arms length, but I also agree with you about the potential for political interference with input into the process.

 

[dapaterson]

And, make no mistake: low skill/high wage jobs are the holy grail for politicians all over the world.

:rage:

Don't forget cozy sinecures for retired senior officers...

 

[The Bread Guy]

Here's the initial Info-machine version of developments - speech text attached ....

The Honourable Diane Finley, Minister of Public Works and Government Services and the Honourable Robert Nicholson, Minister of National Defence, launched Canada’s new Defence Procurement Strategy (DPS).  The three key objectives of the Defence Procurement Strategy (DPS) are to: deliver the right equipment to the Canadian Armed Forces (CAF) and the Canadian Coast Guard in a timely manner; leverage our purchases of defence equipment to create jobs and economic growth in Canada; and streamline defence procurement processes.

The Defence Procurement Strategy (DPS) was unveiled today at the Economic Club of Canada. It is informed by the Government’s extensive engagement with the industry and by the recommendations found in the Jenkins and Emerson reports commissioned by the Government of Canada.

The Defence Procurement Strategy (DPS) represents a fundamental change in the Government of Canada’s approach to defence procurement, and includes the following components:

Delivering the right equipment to the Canadian Armed Forces and the Canadian Coast Guard in a timely manner:

Ensuring early and continuous industry and client engagement in the procurement process;
Starting in June 2014, publishing an annual Defence Acquisition Guide that outlines National Defence (DND) procurement priorities; and
Establishing within DND an independent, third-party challenge for military requirements.
Leveraging our purchases of defence equipment to create jobs and economic growth in Canada:

Using a weighted and rated Value Proposition, to assess bids for defence and major Canadian Coast Guard procurements;
Implementing an Export Strategy to support international sales opportunities and participation in global value chains;
Identifying and applying Key Industrial Capabilities (KICs) to inform potential economic benefits of individual procurements so that they meet the CAF’s needs and increase the competitiveness of Canadian firms in the global marketplace; and
Establishing an independent, third-party Defence Analytics Institute which will provide expert analysis to support the objectives of the Defence Procurement Strategy (DPS) and its evaluation.
Streamlining defence procurement processes:

Adopting a new regime to ensure streamlined and coordinated decision-making for defence and major Canadian Coast Guard procurements;
Establishing a Defence Procurement Secretariat within Public Works and Government Services Canada to ensure close coordination among key departments; and
Reviewing the current National Defence delegated authority to purchase goods with a view to increasing the level from the current $25,000 to achieve more efficient procurement practices.

The implementation of the Defence Procurement Strategy (DPS) will begin immediately with a phased implementation following ongoing industry consultations.

(....)

 

[Kirkhill]

Establishing an independent, third-party Defence Analytics Institute which will provide expert analysis to support the objectives of the Defence Procurement Strategy (DPS) and its evaluation.

Well, I found my preferred sinecure.....

 

[McG]

I am troubled by the decision to put more weight on economic benefits when deciding what to buy.  We must balance operational requirements against cost.  Adding Giving greater weight to a third variable in the dynamic will reduce the mileage of our dollars and/or the operational capability of our forces. 

New plan for military procurement dilutes power of defence department
Lee Berthiaume
Ottawa Citizen
05 February 2014

OTTAWA – National Defence appears to have lost a key behind-the-scenes battle as the federal Conservative government Wednesday unveiled a new plan for purchasing military equipment.

Public Works Minister Diane Finley touted the government’s new defence procurement strategy in a speech to the Economic Club of Canada as the solution to years of troubled projects marked by delays, cost overruns and rigged requirements.

In doing so, she highlighted many of the same complaints industry and analysts have had about National Defence’s management of such multi-billion-dollar projects as the F-35 stealth fighter, search-and-rescue aircraft and armoured vehicles.

“What we found was that requirements are too complex,” Finley told an audience of business executives at the Chateau Laurier, in the shadow of Parliament Hill. “Too often they appear to be pre-determined outcomes. And industry is not engaged early enough.”

Among the changes is putting more weight on economic benefits when determining which company should win a bid, and having a permanent group of high-level federal bureaucrats from various departments oversee defence procurement.

The plan will also establish a way National Defence can be challenged when it says it needs something specific.

The Canadian military has ferociously guarded its ability to determine what it needs to do its job, arguing that only it really knows and understands what Canada’s men and women in uniform require to do their jobs.

But its reputation has also taken a hit after it declared in 2005 that an Italian-made search-and-rescue plane was the only aircraft capable of meeting its requirements, and most recently with its handling of the F-35.

While adding a challenge function seeks to strike a compromise, it nonetheless represents a blow to National Defence’s control over procurement.

The same is true for having senior bureaucrats from other departments such as Public Works, Industry Canada and Treasury Board manage the procurement process.

At the same time, the new added focus on economic benefits dilutes military capability as a top consideration when it comes to buying new equipment.

With Defence Minister Rob Nicholson sitting on stage behind her, Finley sought to assure Canadians “that the capability of our men and women in uniform will remain paramount.”

But she also left no doubt that the government is counting on industry turning $240 billion in planned defence spending over the next two decades into high-value, high-skill jobs.

“The defence procurement strategy underlines the goals that our government has had from the start,” she said. “Jobs, growth and economic prosperity. That’s what we pledged to Canadians. And that’s what we’ve been delivering.”

Defence officials had quietly expressed concern about military procurement being shifted too far towards business interests, warning in a secret briefing in November 2012 that National Defence “would, all things being equal, likely obtain less equipment and services.”

The warning is rooted in fears the government will end up paying a premium to buy Canadian or otherwise boost Canadian industry, which is what is already happening with the government’s $38-billion national shipbuilding plan.

Finley said the government is not pushing a “buy in Canada, under all circumstances” approach, but that “common sense” will be required to strike the correct balance.

Tim Page, president of the Canadian Association of Defence and Security Industries, which represents about 1,000 defence and security companies in Canada, was confident a balance could be struck.

Liberal defence critic Joyce Murray said many details remain unclear, but she welcomed the government’s effort to revamp the military procurement strategy.

Murray said while the top priority is ensuring the Canadian Forces have the right equipment, “we have to consider the benefits in Canada and the jobs and companies in Canada.”

David Perry, a defence analyst at the Conference of Defence Associations Institute, said some of the changes included in the defence procurement strategy will help government get a better handle on the costs of buying Canadian.

But he also acknowledged there is a lot of uncertainty given that the government is pinning its hopes on some changes that are still unproven.

http://www.ottawacitizen.com/news/plan+military+procurement+dilutes+power+defence+department/9471616/story.html

 

[Edward Campbell]

I am troubled by the decision to put more weight on economic benefits when deciding what to buy.  We must balance operational requirements against cost.  Adding Giving greater weight to a third variable in the dynamic will reduce the mileage of our dollars and/or the operational capability of our forces.  http://www.ottawacitizen.com/news/plan+military+procurement+dilutes+power+defence+department/9471616/story.html

Yep, I agree. It seems to signal that my fears are well founded ...

I think, fear that this will be the horribly wasteful and ineffective jobs! Jobs!! JOBS!!! agenda ~ much loved by many (most?) politicians and by the business people who will milk the defence budget like a cow.

It is a stupid policy which doesn't work anywhere, not even in the USA. No senior civil servant of my acquaintance, and I do know a handful, thinks the defence budget can or should be used for job creation. But it makes a great political promise, a promise to prop up uncompetitive, unproductive industrial sectors and, especially, to sustain the (often)  low skill, (relatively) high wage jobs that are found there. And, make no mistake: low skill/high wage jobs are the holy grail for politicians all over the world.

:rage:

Soon you will hear the famous "great sucking sound:" the sound of your money being drained out of productive use and poured into projects that promise, but almost* always fail to deliver jobs and downstream economic benefits.

The defence budget should be spent with "bang for the buck" being the one and only priority ~ but I know that is politically impossible for any party, Conservatives, Liberals or Dippers ~ the money that we, Canada, will waste on "economic benefits" should then be spent on subsidies ~ oh, the horror! what with the WTO say?  : ~ that, sometimes, actually do protect jobs in some sectors.


____
* There have been exception, but they are so rare that, essentially, they just prove the rule.

 

[The Bread Guy]

Soon you will hear the famous "great sucking sound:" the sound of your money being drained out of productive use and poured into projects that promise, but almost always fail to deliver jobs and downstream economic benefits.

Funny you should mention that.  Here's another angle from the Minister's speech that other media don't seem to have picked up on - highlights mine:

A federal cabinet minister has called out the defence industry for failing to make more than $5 billion in investments into the Canadian economy that had been promised as a condition for winning military contracts.

Defence companies are required to undertake an equivalent amount of business activity in Canada as the original contracts are worth — meaning they must make up whatever they outsource to foreign firms in work, supplies and services.

This business activity can take a variety of forms, including sharing technological developments with Canadian companies, investing money into academic research, or purchasing parts and services from a Canadian company for another project.

But Public Works Minister Diane Finley revealed Wednesday that one quarter of the $23 billion in commitments made by defence companies by the end of 2011 remained unfulfilled.

And that number is undoubtedly higher when more recent years are taken into account ....

 

[Kirkhill]

“What we found was that requirements are too complex,” Finley told an audience of business executives at the Chateau Laurier, in the shadow of Parliament Hill. “Too often they appear to be pre-determined outcomes. And industry is not engaged early enough.”

By now it is probably known that I have hired or engaged quite a number of contractors on a variety of non-defence contracts.  I can help you build a dairy or a fish processing plant.  I can't help you build a ship or a plane or a tank.  As much as I would like to think I can.

But.

The exercise of finding competent suppliers is common to all projects.  I have many instances of the local electrician, plumber, builder...... showing up on the doorstep wanting to know why we haven't hired locally and have engaged someone from out of town/province/country to build a plant.

On the days I am not being my usual pigheaded self and allow them the courtesy of time I will give them a briefing and a tour.  They then start to ask the questions.....  Why do you do things this way? What's a CFIA kerb? Who are the CFIA? What are GMPs?  Why do you run plastic conduit instead of galvanized? ..... and many more. 

The reason the winning bidders, or even, unapologetically, the sole-source supplier, was selected, was because I and my clients know that they don't have to be trained by us on our nickel.  They don't need a massive detailed spec book/encyclopedia. They don't need 24/7 oversight.  They don't need a massive QA/QC presence to ensure they are doing what they promised. 

An on-site presence, reqular meetings and a concise description of the intent, together with the timely supply of the materials they need, is enough to produce a functioning, profitable facility.

Government contracts, on the other hand, are nightmares to work on.  Starting from the interminable consensus driven decision-making process where the consensus constantly changes as the consensual change over time, through the demand that every aspect of the project be written in such a  manner that even the incompetent can bid and finishing with the NEVER ending stream of questions from said incompetents during the implementation stage.  Not to mention the work that must be undone and redone.

If you don't understand the question, you shouldn't be allowed to bid.

/Rant.

 

[The Bread Guy]

Pot, this is kettle - message, over - from the Liberal party info-machine ....

The Conservatives’ announcement that defence procurement will be “reset” once again, and will largely be removed from the Department of National Defence, is a clear admission that military procurement over the last eight years has been wrought with failure, said Liberal National Defence Critic, Joyce Murray, today.

“This announcement does nothing to erase the Conservative government’s dismal track record on mismanaging procurement projects, which is the worst of any Canadian government since the Second World War,” said Ms. Murray. “On defence procurement, there are two things that the government needs to get right: it needs to provide our Forces with the equipment they need; and it needs to do so at the best possible price for taxpayers. After eight years, the Conservatives’ record has been one of failure.”

Since 2006, the Conservatives have built up a long list of failed military acquisitions, characterized by delivery delays and huge cost overruns. From the failure of their flagship F-35 fighter jet program, to the ongoing delays in securing a design for the Arctic Offshore Patrol Ship, to the abrupt cancellation of the Close Combat Vehicle after years of development, this Conservative government has shown a clear and consistent inability to deliver promised equipment to our men and women in uniform ....

Zaaaaat right?  And who was making military purchases, some of which we're still waiting for, run sooooooo smoothly BEFORE 2006?

 

[YZT580]

Pot, this is kettle - message, over - from the Liberal party info-machine ....Zaaaaat right?  And who was making military purchases, some of which we're still waiting for, run sooooooo smoothly BEFORE 2006?

unfortunately, the procurement system as it is now doesn't work (full stop).  It hasn't worked for years and I suspect more dollars have been wasted on trying to set up the purchase in the first place than has ever been spent on establishing a Canadian factory.  There have only been two successful major purchases in the last 10 years that I can recall and both were done outside of the normal process. The C17 and tanks.  I would include the heavy lift helicopters but I am not familiar enough with the process that went on with them.  I do know that they did cut a few corners on that one as well.  So let them try something different. If you end up with fewer because it was made in Canada well, at least you will have ended up with some which is more than we are achieving now.  And yes, you may end up with a rebuilt buffalo for S&R and that is OK too as long as it is pressurized and has a competitive cruise speed.  At least you will end up with something.  The way it is now there is some kind of pissing contest in Ottawa and absolutely nothing that the military brings to the table ever gets accepted.  I mean they weren't even able to complete an order for a new fleet of trucks.  That's bad. 

 

[The Bread Guy]

.... I would include the heavy lift helicopters but I am not familiar enough with the process that went on with them.  I do know that they did cut a few corners on that one as well....

If I were being completely fair, there's some blood on the Tories' hands with that one, too ....

Canada's military is set to buy new Chinook helicopters and Hercules transport aircraft without seeking competitive bids, a move that has opposition MPs crying foul.

Defence Minister Bill Graham has been engaged in high-level lobbying in recent days to win the support of senior decision-makers, including Prime Minister Paul Martin, sources say.

In those discussions, military brass are pitching a plan to issue "sole source" contracts for the new fleets of aircraft — purchases worth hundreds of millions of dollars — to avoid a drawn-out tendering process.

And they're pushing ahead with the plan even though commanders have yet to finish their so-called capabilities paper, a document outlining what equipment the military needs to fulfil missions around the globe.

That research won't be released until sometime around Christmas.

Conservative MP Gordon O'Connor (Carleton-Mississippi Mills) accused Graham of planning big-ticket military purchases "behind closed doors."

"Who will benefit financially as the government skirts the checks and balances of competition?" O'Connor asked in the House of Commons yesterday. Military officials have refused to comment on the proposed purchase ....

Toronto Star, 5 Oct 2005

 

[YZT580]

3 for 3.  The only successful major purchases in 20 years were all accomplished outside of the procurement system. 

 

[Mike_myers]

There have only been two successful major purchases in the last 10 years that I can recall and both were done outside of the normal process. The C17 and tanks.  I would include the heavy lift helicopters but I am not familiar enough with the process that went on with them.

But these two purchase are the exception. It make sense to buy tanks without holding a competition because they already got the Leopard. It was making sense to not hold a competition for the C-17 because it something that's really necessary considering the size of our country and also because there is not much alternatives; thus holding a competition was a waste of time and money. The C-5 galaxy? The americans preferred renting antonov for moving their freight in Afghanistan as it was cheaper than running this aircraft, and anyway it's just too big for our need.

IMHO the problem is multidimensional and there is no such single cause, and I don't think that it's merely a problem of corruption. That occurence where they were trying to get 1st quality handgun (something like SIG or HK ??) and require that the bidder gives away its manufacturing expertise to colt canada is quite explicit. And I am not sure that the defence department is to blame here.

It look more like a mix of lazyness, delusion ... and badluck!
But for the trucks, fighter jet, pistol, slingshot or almost everything else a competition should be made. And no, cancelling competitive process won't make the canadian army to get Abrams, MRAPS, M-4, RQ-170, U2, Patriot, Reaper, F-22, Nuclear submarine, ICBM, etc, etc. There will be never enough money for that and as such I think that they deserve the best *possible* equipment, and sometimes, the best equipment. But that will be the exception.

 

[Colin Parkinson]

Part of the problem is there is no long term planning for replacements and no long term fiscal plan.

 

[sandyson]

Can't have a procurement plan without an underlying plan for national defence.  What Canadian thinks that our territory could be threatened?  We don't need a plan. 'National Defence' is all whimsy.