Fact, Fantasy or... Trap?

For this year’s Great Debate, the editor of FrontLine Defence magazine posed the question above. The answer, I believe, is yes, yes and yes.

• Fact
Much has been done, and continues to be done, to reform the defence procurement process. Early in my tenure as ADM (MAT) I undertook a review of over 200 files, active as of August 1998, in order to obtain hard, objective data on the procurement cycle times. This study determined that it took 15.8 years from the time a deficiency was identified until a project was closed out.

However, since then, much has been done to reduce cycle times. For example:

  • Increased emphasis was placed on professional development and sharing lessons learned and introducing improved project management controls such as “earned value.”
  • New acquisition reforms have been introduced. These include:
      – Total package procurement, whereby one contractor is held accountable for both the acquisition as well as the total life cycle of the good;

            – An emphasis on articulating requirements based upon performance standards rather than detailed specifications;

            – Acquiring products that are, to the extent possible, commercially or ­militarily available off the shelf (COTS/MOTS) thereby limiting expensive development activity, reducing time and lowering risks and costs;

            – Introducing the “compliant, lowest price” evaluation methodology to ­provide better value to the military and the Canadian taxpayers;

  • Issuing a directive establishing a new cycle performance standard. Hence­forth, projects are to take no longer than three years from the time a decision is reached to pursue a resolution of an identified problem until approval-in-principle is given for the preferred option and two additional years to sign a contract. This directive was amended to reduce the allowable time to approval-in-principle from three years to two years. Accordingly, the total allowable time from initiation to contract award is now four years.

As a consequence of these actions, a new target acquisition cycle time of 9.25 years was established.

• Fantasy
A number of myths continue to pervade defence procurement today. Some of the more common ones include:

Myth: The bureaucratic defence ­procurement process is unresponsive.
TRUTH: The bureaucratic procurement process can actually work rather quickly. While some areas need to be streamlined (such as preparation of the statement of requirements), the more frustrating challenge is often in dealing with the lengthy delays in obtaining government approvals.

Myth: Sole-sourcing saves time.
TRUTH: Not only does sole-sourcing rarely save time but it comes with other significant drawbacks. Those who advocate sole-sourcing as a means to expedite the process are misinformed. Any timesavings that could theoretically be achieved are often wiped out, or even exceeded, by the internal debates and the prolonged contractual deliberations surrounding the program (witness the current Hercules and Chinook files).

The fact is, sole-sourcing usually results in a lose-lose-lose proposition. The taxpayer loses because sole-sourcing can result in incremental costs up to 20%. It’s like going into a car dealership and saying you want to buy a specific car and then trying to negotiate. You have instantly lost your leverage. Industry loses, as there is no longer an imperative to provide quality jobs to Canadian industry.

The military loses from two perspectives. First, any excess costs come from within its budget – funds that would have been allocated to other capital requirements. Second, and perhaps most importantly, sole-sourcing can undermine the primary purpose of defence procurement, namely to acquire (within budgetary constraints) the best product to meet the military’s needs. If you predetermine the outcome without undertaking a rigorous examination of the possible options how can you be certain you have chosen wisely? The fact is, you can’t!

Myth: The major funding pressures are to pay the salaries and benefits for military personnel and to acquire capital.
TRUTH: The funding pressures to sustain existing equipment are at least as great as the pressure to pay salaries and buy new equipment. It is noteworthy that this is now recognized by our politicians and in obtaining incremental funds to maintain its existing equipment.

Myth: It costs less to maintain new equipment than it does to maintain the equipment being replaced.
TRUTH: The costs to maintain new ­platforms can be higher than the costs to maintain existing equipment. For ­example, the support costs for the new maritime helicopters will significantly exceed the costs of maintaining the Sea King helicopters.

To ensure that our defence procurement  process is the best it can be, Canada’s decision makers must address the realities of the system rather than the myths or fantasies. Sadly however, this brings us to the next topic — the trap.

• Trap
I was wrong. I fell into the trap of believing that there was truly a desire to change the system. The evidence seemed overwhelming and widespread. First, mandate letters from the prime minister to ministers of National Defence and PWGSC seemingly always included a charge to reform the defence procurement process. Second, studies and reports to government have repeatedly tackled this topic. A 2000 report by the Standing Committee on National Defence included 38 recommendations for reform. The current Committee has also studied the process at length and is about to issue its report. In its 2003 report to the minister of National Defence, the Advisory Committee on Administrative Efficiency made 49 recommendations, and 55 more were made in the January 2005 Government-wide Review of Procurement report by Walt Lastewka, parliamentary secretary for PWGSC.

Third, the media has been repeatedly critical of many aspects of defence procurement. A recent example is an Ottawa Citizen article in which David Pugliese brought to light the lack of adequate oversight in defence contracts. Since January 2006, FrontLine Defence magazine has ­featured no less than three Great Debates on various defence procurement topics, and published numerous followup articles – all highlighting deficiencies and offering solutions from informed analysts.

Nevertheless, in spite of all this ­posturing, little substantive change has been demanded. Platitudes and banal ­generalities are the order of the day. Recommendations are made to study issues. Frankly, there has been enough study. It is time for action. To optimize the process, its performance must be monitored. The surest way to monitor improvement is to publicly display performance measures, and the surest way to produce performance measures is to hold one minister accountable. Unless and until this is done, defence procurement and the credibility of the government will suffer.

• Conclusion
Can further reforms be undertaken? Absolutely. The actions taken to date were necessary but insufficient to reduce cycle times to the shortest extent possible – this is due to the lack of clear accountability throughout the process. For example, today no one minister is accountable for the billions of dollars in defence expenditures. This void in accountability was clearly evident at the recent hearings held by the Standing Committee on National Defence on defence procurement. Appearing before the committee, both the ministers of National Defence and Public Works and Government Services Canada (PWGSC) didn’t hesitate to point the finger at each other.

To address this critical shortcoming, I believe a new defence procurement organization, called Defence Procurement Canada, should be created – combining the acquisition resources from DND with the contracting expertise from PWGSC to address the very specific needs of Canada’s military forces. For accountability purposes, it would report to one minister, the minister of national defence. Once established, rigorous performance measures can be demanded from this minister dealing with cycle times, budget expenditures and overall performance.

Reforming the defence procurement process is critical for the safety and security of our men and women in the military. It is time we put partisan politics aside and do what is in their best interest.
During his 33-year career in the federal public service, Alan Williams served as assistant deputy minister (ADM), supply operations service, at Public Works and Government Services Canada, and as ADM(Materiel) in the Department of National Defence. He is now a consultant, a writer and a lecturer at Queen’s University. In 2006 he published a book called Reinventing Canadian Defence Procurement: A View from the Inside. He can be reached at williamsgroup@rogers.com.
© Frontline Defence 2008