The Continuing Erosion of Accountability

It’s no secret that I have been a consistent (and persistent) proponent for increased accountability in defence procurement. In my book Reinventing Canadian Procurement: A View from the Inside, published in 2006, I argued against the current overlap and duplication between the roles of the Minister of National Defence and the Minister of Public Works and Government Services Canada. In my view, defence procurement will never be as efficient and as effective as it should be until one minister is clearly in charge. Addressing this governance issue will not solve all the procurement problems, but it is a necessary first step.

In December 2009, the Canadian Association of Defence and Security Industries (CADSI), published a study entitled, “Industry Engagement on the Opportunities and Challenges Facing the Defence Industry and Military Procurement.” In it, the report supported my view and recommended that the government “Create a single point of accountability at the Cabinet level responsible for both defence equipment and the defence industrial base.”

Clearly, the government is comfortable with obfuscating accountability, as it continues to ignore this recommendation. It prefers to be able to blame the complexity of the system for delays, costing fiascos, misguided procurement processes, program cancellations and lapsing funds.

Not surprisingly, this government’s oversight of defence procurement has been disastrous. Not only has it not strengthened accountability, but over the years it has taken steps to weaken it further. The two most recent examples are the Defence Procurement Strategy (DPS) and the National Shipbuilding Procurement Strategy (NSPS).

When companies spend millions of dollars on bids, they expect accountability and objectivity in the evaluation of bids. The DPS undermines both. First of all, it interjects a Defence Analytics Institute (DAI) into the process – which, from what I can tell, is a group of unaccountable people delaying the process. The DPS also introduces Industrial and Technical Benefits (ITBs) and Value Propositions (VPs) into the evaluation process, with potential disastrous consequences. The “case-by-case” assessment concept creates a vague process that will be difficult for industry to prepare for, and it will also be virtually impossible to judge the fairness of such a process.

Under the present evaluation process, bidders are ranked based upon the strength of their technical proposal and their price. However, before the top-ranked bid can be declared the winner, the bidder must achieve a passing grade on its industrial benefit plan, as determined by Industry Canada. In the past, a winning bid was never determined by the strength of the industrial benefits plan associated with it. We should provide the military with the product that best meets its needs, not one that provides the best industrial “value.” Yet, under the new strategy, the opposite may occur. The DPS will use “a weighted and rated Value Proposition to assess bids.” Under DPS we can procure a second rate system simply because it may generate more jobs or better industrial value of another sort. Great for the economy, I suppose, not necessarily for the military.

Those who are aware that building a warship is about as complicated as building a small but technologically advanced city, were surprised to hear that PWGSC has designated Irving Shipbuilding as the prime contractor for the Canadian Surface Combatant project. Two years ago in issue #2 of this magazine, I commented on the dangers of the government’s NSPS in an article entitled, “The Unprecedented Abdication of Decision-making Responsibility.” In it, I noted that “the government has taken the unprecedented step of outsourcing – to Irving Shipyards Inc. and to Seaspan ULC – the multi-billion dollar decisions to select which companies will receive billions of dollars to develop, install and integrate the mission-critical systems into Canada’s fleet of combat and non-combat vessels.” Instead of having two ministers accountable for this procurement, the government has decided to have no minister accountable. It decided to offload all accountability to the private sector. We should not be shocked when Irving does whatever it can to best serve its shareholders – because that is who businesses are accountable to…. not the navy, and not taxpayers.

In many respects, the NSPS is worse than the F-35 debacle. At least with the F-35, Canadians could direct their outrage to the government forcing it (at least for the moment) to pretend to alter its procurement strategy. Not so with respect to the building of ships. In this case, the government has decided to wash its hands of the process and let a third party, which is wholly unaccountable to the Canadian taxpayer, spend our money.

Why does this government continue along this destructive path for defence procurement? There are few political gains. It may have had great intentions to supply the military with the equipment it needs, but these vague, incompetent processes are generating criticism and ridicule because they cannot be clearly explained.

Ministers rigidly sticking to their speaking notes embarrass themselves, their party colleagues, and the employees in the department they oversee. It is not often recognized that departmental officials take pride when their minister is doing well, and are disappointed when their minister bungles. The former case breeds enthusiasm, the latter is hugely demoralizing.

Beyond negative political and bureaucratic consequences are the significant cost implications. Billions of budget dollars are squandered on excessive sole-sourcing. Industry becomes frustrated at wasting ­millions on cancelled or questionably structured competitions, or those where selections are not made on an open, fair and transparent manner.

Most important is the potential life-threatening impact on the men and women in the military. After all, we are not involved in a theoretical, esoteric policy debate. Rather, we are wondering why the military cannot get the equipment it needs to do its job and help keep it safe.

Former Assistant Deputy Minister (Materiel) for DND (1999-2005), Alan Williams is now President of The Williams Group, providing expertise in policy, programs and procurement.
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