This article was originally published on iPolitics on February 15, 2013
There’s been speculation in the media recently about Ottawa starting up a new procurement agency. Coming on the heels of several high-profile military procurements which either have fallen through or been met with controversy — such as the F-35 purchase — it’s clear our military procurement system is dysfunctional and in need of a major overhaul.
With a few rare exceptions, the Department of National Defence is being poorly served by the current procurement system. Goods and services are not being received in a timely or efficient manner, funds are being spent on maintaining old equipment, prices are rising and budgets are constantly being re-programmed at the end of each fiscal year. This inefficiency has consequences both for DND and Canada.
Having spent most of my career working with the federal procurement system, I believe we have three main problems:
1. The public sector doesn’t have the skills to process large, complex procurements.
It takes a lot of specialized skills and experience to effectively procure extremely complex technology systems and platforms for the military — the federal public sector is lacking in this regard. The number of people in the system who have significant project management experience and are able to navigate through the system to deliver a successful outcome are few. Adding to the problem, the current fiscal environment does not lend itself to an easy or quick solution.
This is a long-term structural issue, regardless of how Canada organizes itself to manage major procurements. Canada needs to consider how to best augment its skills base using third parties such as advisory boards or specialist firms that bring technical or management expertise to the table. These third parties must be tasked with delivering specific outcomes and not just providing warm bodies to respond to government direction.
2. The public sector is virtually paralyzed when it comes to managing risk.
‘Risk’ may be a public sector buzzword these days but the cold hard fact remains that risk (technological, design liability, privacy breaches, etc.) is not well managed when it comes to major systems contracts.
The system has two major problems with risk. First, the public sector generally takes the position that it wants no risk, regardless of the situation. Second, procurement budgets often are established well before the federal government and the private sector even have tentative discussions on how risk might be shared on a given project. As a result, when the private sector is asked during the contracting process to assume various risk elements and responds with a price corresponding to the risk profile, the overall project price is immediately pushed off-budget.
To ensure Canada makes maximum use of shrinking defence budgets, more attention must be paid to how the public and private sectors share the risk associated with all major military projects.
3. Organizational and structural issues need to be addressed.
All major military procurements should be conducted by one agency that does procurement and nothing but. Such an agency must report to a minister who is not accountable to the defence minister. There are obviously several variations on this theme which a body, such as an outside panel, might consider. The time has come to seriously examine such options.
While there are some short-term changes Canada might consider to its military procurement system, the most critical task is addressing the skills and resources required to support a stable long-term solution. The Canadian military procurement system can be fixed — and now is the time for an overhaul. It’s time to move forward and tackle this problem head on.