Defence Procurement: Major Actors and Approaches to Risk
By Richard Shimooka
Over the past decade, major Canadian procurement projects have encountered increasing difficulties, ranging from multi-million dollar cost overruns, decades-long delays, and lackluster capabilities. Military programs, partly due to their large capital outlays, are particularly vulnerable (albeit, by no means unique, as the Phoenix pay system debacle illustrates). Potential causes for these issues include the increasing technical complexity of projects, inconsistent funding and insufficient staffing.
One interesting aspect of military procurement in Canada is the dynamics of interest among the major stakeholders, and how each handles risk. It can provide insight into why policies unfold. In most major procurements today, four major actors can be identified: the government, the civil service, industry and the military. Each group has subtle differences in objectives and tolerances of risk that alter how programs unfold. Examples from major acquisition programs will be used, including the Heavy Lift Helicopter program, the Canadian Surface Combatant and the various iterations of the CF-18 replacement program.
The Political Leadership
The government, or more specifically, the political leadership, obviously plays a disproportionate role in any major procurement: they can shape the program’s features and have ultimate authority on its progress through the system. They can expedite a program, slow it down, or even cancel it if it suits their political need. All of this can change dramatically based on their circumstances.
Rarely do governing parties see a political advantage in defence activities; rather, their primary concern seems to be avoiding controversies on the file. Controversy may be generated by delays, cost overruns, impropriety in the selection process (whether real or imagined), and inadequate equipment for the Canadian Armed Forces (CAF). The relative importance of these concerns is rarely static between successive governments. Even within a single term, a governing party’s priorities and objectives may shift upon circumstances.
For example, upon entering into office, the Conservative Party was concerned about the threat faced by the CAF in Afghanistan and their inadequate equipment. It rushed through a number of major procurements projects, such as the 2007 Tank Replacement program (Leopard 2) and the C-17 Strategic Airlift acquisition program. However, the Conservatives’ policies were short-lived and outside the norm of Canadian politics. Governing parties since the 1960s have tended to see defence as a political liability, rather than an opportunity. Indeed, as its time in office progressed, the Conservative Party adopted a more conventional outlook and, by its final years, it was actively slowing major procurements in order to meet its deficit reduction efforts.
Considering the government’s limited interest in this area, it should not be a surprise that there is little appetite for risk, especially in the areas of cost overruns, delays and process failure. One way this has manifested itself is the wider application of competitions to resolve procurement programs, which are viewed as delivering better outcomes with more integrity than sole-sourced programs. As we will discuss later, this has become an issue for many programs.
Richard Shimooka is a Senior Research Fellow at the Macdonald-Laurier Institute. His research focus is on comparative defence and procurement policymaking.