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Defence Minister Peter MacKay checks out the cockpit of the F-35 Joint Strike Fighter after the Conservative government announced its intention to purchase 65 of the next-generation planes at an Ottawa news conference on July 16, 2010. (Adrian Wyld/The Canadian Press)
Defence Minister Peter MacKay checks out the cockpit of the F-35 Joint Strike Fighter after the Conservative government announced its intention to purchase 65 of the next-generation planes at an Ottawa news conference on July 16, 2010. (Adrian Wyld/The Canadian Press)

Ottawa eyes plan to loosen DND’s grip on military procurement Add to ...

The Harper government, eager to fix Canada’s chronically dysfunctional system for buying military equipment, is considering changes that would strip the Department of National Defence of significant responsibility in steering major purchases.

Stephen Harper and staff in the Prime Minister’s Office are determined to reform the way Canada buys military equipment after a string of troubled purchases, from F-35 fighter jets to supply ships to combat vehicles, have left the impression the Conservatives are failing to effectively manage this spending.

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One option under serious study is the creation of a permanent secretariat, reporting to the Department of Public Works, that would take responsibility for all major military procurements above a certain dollar value, a Department of National Defence source said.

Such a shift would signal the Harper government has lost faith in National Defence’s ability to safeguard the public purse. It would also represent an important reduction in DND’s traditional role in drawing up specifications for big expenditures: in effect, the designing and selecting of the options for purchase.

A big embarrassment for DND last week – when the Harper government shut down a project to buy new army trucks because National Defence was trying to spend as much as 86 per cent more than authorized on the vehicles – is being held up as the last straw by procurement reformers.

“In the end, something has to be done to fix [military purchasing] and the truck is the obvious symptom of that,” one DND official said.

There’s keen interest in replicating Ottawa’s 2011 success in selecting winners to build $33-billion worth of combat and non-combat vessels without sparking a regional political backlash of the kind that plagued the Mulroney government in the late 1980s. The decision to pick shipyards in Halifax and British Columbia was largely managed by Public Works, not Defence.

Canada is hardly alone when it comes to headaches from military procurement gone awry, where costs soar past the amount authorized for spending or industry bitterly complains about an unfair competition.

The Australian government, for instance, created a “Projects of Concern” process in 2008 to rescue failing military procurements by focusing efforts on those purchases that required salvaging. Troubled projects are added to a critical list of procurements until the problems are remedied.

The Canadian government wants to avoid problems before they happen, of course, but the idea of applying special care and handling to major projects has intrigued officials who are studying options for revamping procurement.

Ottawa has considered the notion of a standalone central purchasing agency but judged it too onerous. There’s no support among the Harper cabinet for creating an arm’s-length entity, sources say.

Australia’s experience with an semi-autonomous defence procurement agency has been mixed. The Australian Defence Materiel Organization found itself under attack last year after a series of procurement bungles including delays and cost overruns for artillery and warship acquisitions.

In military procurements, DND is responsible for taking a required purchase and developing the specifications for precisely what features are needed. This can be a lengthy process, partly because regular turnover among project managers at National Defence means the task of drawing up specifications ends up being restarted more than once.

National Defence’s involvement more often than not results in the department picking the supplier before a competition has been held. That’s because it draws up specifications that can be met by only one product – the one it likes best.

That’s the heart of the criticism levelled by Auditor-General Michael Ferguson this spring over National Defence’s handling of the F-35 jet procurement, where the department chose the plane without running a proper competition.

Under the proposed new system for major purchases, the Defence Department would tell the secretariat what its requirements are. But it would hand responsibility for generating the options and specifications to Public Works.

At the end of the process, the new procurement secretariat would return to the Minister of National Defence and unveil the options for purchasing before launching a competition for suppliers. The military would still have the final say on whether the options put forward meet its requirements, but National Defence would no longer be able to tailor the specifications to a particular supplier’s vehicle, equipment, vessel or plane.

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