New strategy for defence procurement
The federal government has rewritten some of the rules for defence procurement. On Wednesday morning in an address to the Economic Club of Canada, Diane Finley, Minister of Public Works and Government Services, and Rob Nicholson, Minister of National Defence, unveiled a new Defence Procurement Strategy (DPS) that draws heavily from the Jenkins and Emerson reports.
Recognizing the challenges of recent major capital procurement projects, the strategy has three key objectives: deliver the right equipment to the Canadian Armed Forces and the Canadian Coast Guard in a timely manner; leverage the purchases of defence equipment to create jobs and economic growth in Canada; and streamline defence procurement processes.
On the latter, the government said it will establish a Defence Procurement Secretariat within Public Works “to ensure close coordination among key departments.” The use of a secretariat was key to the selection of the two shipyards for the National Shipbuilding Procurement Strategy, and commended by the Auditor General, and has also been used for the fighter replacement program and the fixed-wing search and rescue project.
In a release, the government said the “implementation of the DPS will begin immediately with a phased implementation following ongoing industry consultations.”
To ensure early and continuous industry and client engagement, starting this June National Defence will publish an annual Defence Acquisition Guide that outlines procurement priorities. It will also establish an independent, third-party challenge for military requirements.
The government is also introducing steps to get better bang for its procurement buck, such as a weighted and rated value proposition for all bids, improvements to Industrial and Regional Benefits (IRBs), identifying and applying Key Industrial Capabilities to inform potential economic benefits, and establishing an independent, third-party Defence Analytics Institute to provide expert analysis.
“One of the biggest changes is that we will ask bidding companies to present Value Propositions as a fundamental part of their bid,” Finley explained. “Each Value Proposition will demonstrate how a successful bid will benefit Canada. This will now be a key consideration: a weighted and rated element of the defence procurement process, along with the technical and pricing elements that were there before…This is an important shift. Because in the context of government spending millions—sometimes even billions—of taxpayer dollars for defence equipment, Canadians have every right to know that we are getting what our troops need, at the best value, through a process that’s good for Canadian workers, businesses and taxpayers.”
IRBs will now be known as Industrial and Technological Benefits, which Finley said “reflect the real competitive advantages of companies and Canada: creating high-value jobs, investing in innovation, IP transfer, or supporting international business, just as examples.”
The government will also make companies publicly accountable for what they propose; as of 2011, she said Canada had $23 billion in IRB obligations, a quarter of which have yet to be fulfilled.
The new strategy received the endorsement of the Canadian Association of Defence and Security Industries and the Aerospace Industries Association of Canada, both key contributors to the Jenkins and Emerson reports.
“This is a critical and positive milestone, and a transformational approach to how our military and Coast Guard will be equipped and supported,” said CADSI president Tim Page. “Once in operational effect, the policy and implementing measures announced today will strengthen the Canadian Armed Forces and Canadian Coast Guard, and enhance Canada’s economic and national security interests. We look forward to continuing to work closely with the Government to fully realize the clear intent of these policy, process and governance measures.”