Risk in Complex Military Acquisitions in Democracies

Let’s start with two questions:

• Would a general contractor ever give you a believable firm price to build a house to a yet-to-be-developed set of requirements, on an identified mountain hilltop in the Rockies and to be delivered 10 years from now?

• When you buy a new car with a three-year warranty that turns out to be a lemon, which party is most at risk?

Some would say that the first one would never happen, and that the auto manufacturer takes all the risk in the second scenario. When considering government procurement of military equipment instead of houses and cars, they would be wrong. The first exemplifies buying a weapons systems platform and the monumental risk involved as the acquisition launches, and as with the owner of a new car the government literally owns all the risk in such complex military procurements.

Full disclosure, I was listening to a podcast with Tim Cummins, the President of the World Commerce and Contracting Association. His lament of contracting challenges spurred me to draft this piece, and he raised a number of points that I have chosen to highlight in one part of this note. And it strikes me at this time that what follows was never more relevant to complex projects than it is to the execution of the Canadian Patrol Submarine Project (CPSP).

Consider what most of us would accept as facts about the Canadian government as the client for weapons systems platform acquisitions, whether crewed or autonomous armed aircraft, combat vehicles and warships):

• We live in a democracy.
• Those who govern our nation federally have an overriding priority responsibility to protect their nation and its citizens in an ever more complex, volatile and interconnected group of nations that knowingly or otherwise create threats to our nation.
• The government has a responsibility to taxpayers on how revenues are spent, preferring a high degree of certainty to the required outcomes when funds are expended.
• Governments often have no choice but to tackle acquisition projects for goods and/or services that put the public purse in jeopardy due to their complexity and the related uncertainties – projects that the private sector would not normally pursue on their own.
• The Canadian Armed Forces (CAF) is part of the national security community tasked with protecting the nation.
• Given the disruptive character of technologies, weapon systems acquisitions are essential enablers of the CAF’s capabilities required to continue to protect Canada.
• Such acquisitions are shockingly expensive, complex and risky, but unavoidable and time-sensitive.

This witch’s brew encourages democratic governments to be significantly risk adverse by nature, something that most taxpayers applaud. As a result, governments view the acquisition of weapons systems platforms as a threat to the finances of the government, as well as its very credibility and re-election prospects when such projects are routinely very late to need (and thus wildly over the budget announced at project launch) and/or have commissioning challenges to their operational capabilities at delivery.

After reflecting on my lived and learned experience, almost all of the important problematic practices in weapons systems platform acquisitions are rooted in this risk aversion culture:

• Decisions to launch and progress projects are delayed whenever possible, often rendering them late to need, thus requiring expensive maintenance to keep obsolescent weapons systems platforms in service and potentially jeopardizing the operational effectiveness of the CAF that must employ them while on contingency operations.
• Before contract award, every individual in the approval bureaucracy is a gatekeeper and many who rarely remain in their lane – after all, they are taxpaying citizens too. And Service Level Agreements are risky because the potential for failure to meet them generates blame and reputation risk that civil servants feel they are not paid to shoulder amidst constantly changing work priorities. The journey to industry implementation is therefore long and arduous, as all involved contest a broad range of project aspects at every stage of the process.
• Every past issue leads to added processes based on lessons learned, which builds an ever-increasing bureaucracy that compounds complexity.
• Innovation is stifled because of the related risks in adoption and the degree of effort required, which means processes are never simplified, and emerging practices and technologies internationally to speed up acquisitions are rarely pursued to their effective implementation stage.
• Contracts are built to transfer risk to industry at every corner, even when no party can possibly mitigate them – the industry premium to take such responsibilities being a significant ‘sunk cost’, whether such risks emerge or not.
• Relationships across the contract divide that should be built on collaboration and trust are frowned upon, if not prohibited. The risk of perceived impropriety (rooted in a lack of trust and aversion to risk) is simply too worrying. Boundary walls are established as a matter of cultural safety, and a defensive ‘we-them’ posture is the immediate response to arising issues. 
• In spite of it being a founding principle of a healthy democracy, transparency is avoided in risky pursuits because of the fear of admitting to existing challenges to smooth implementation of policy. This further erodes understanding and the trust that builds credibility, and allows the resulting media streaming vacuum to be filled with guesstimates and complaints at its best and venomous attacks and wild assumptions of incompetence at its worst. 

This risk aversion is short-sighted because contracts outlast the procurement process. The carte blanche transfer of risks to industry during acquisition can create soured relations with the unavoidable supply chain, leading to post-commissioning inflated prices for spares and overhaul maintenance, a lethargic response to arising technical issues and a hawkish protection of dated intellectual property.

As well, such risk aversion during weapons systems platform acquisitions stands in stark contrast to the reality of those in uniform who risk having to pay the ultimate price – their very lives, and the health and future welfare of their families indirectly – to protect this nation and others in multilateral security arrangements like NATO.

Defence industry officials, CAF users of these weapons systems platforms and astute external observers know all this. Everyone is aware that the government’s treatment of the related risks needs to be a focal point in reforming defence procurement.

To be blunt, this is why I am so passionate about dealing with risk aversion and employing advanced risk treatment techniques for complex military platform acquisitions.

Below, I have paraphrased some of the salient points in a much more fulsome paper published on the Policy Insights Forum (Treating Risks in Complex Projects, 12 February 2025):

• There have been many successful programs to incrementally treat the addiction to organizational risk aversion, and such an initiative is essential to the future culture of a yet-to-be-established Defence Procurement Agency in particular and the federal government at large when dealing with weapons systems platform acquisitions.
• Embracing risk, rather than transferring it elsewhere, attempting to hide it or assuming you can eliminate it through mitigation, is fundamental to avoiding the considerable harm being done today to complex weapons systems projects and the capabilities they enable for the CAF to be effective.
• Being fully transparent with all stakeholders (including taxpayers) to develop their understanding of the complexity of such acquisitions, the unavoidable risks involved (including mistakes to escape the tremendous damage of cover-up conspiracies), their impacts as they emerge, and the remedial actions in response. Such an approach can build credibility and demonstrate the accountability needed to strengthen our democracy.
• The governance bodies for such complex acquisitions need to be fully educated and involved in risk treatment, to the point where their meeting agendas are largely set around acquisition project risks.
• Risk treatment using the government’s risk registers and heat maps needs to be restricted to the early stages of planning.
• Every complex procurement project requires a ‘Risk Rapid Response Team’ to deal with the emergence of all unexpected risks, for their risk analysis and the development of an appropriate response strategy and plan for those that are of significant concern to the project’s outcomes.
• Risk treatment must be a collaborative enterprise-wide activity, enabling the weak signals of emerging risks to be sensed by anyone and everyone, and reported expeditiously to the joint Project Control Office.
• Instead of relying on mitigation, the Scouting motto “Be Prepared” (for the worst) should be the strategy employed by developing damage control courses of action to deal with varying degrees of both residual and fully realized risks.

Many who read this note will suggest that I am naïve. They will argue that such transparency will damage credibility, not reinforce it. Many will say that you cannot trust the defence industry. Some observers have suggested that the excessive bureaucratic processes can be addressed without changing the risk aversion reality, along with many other necessary reforms. And they are entitled to their own opinions.

Returning to the CPSP, the Royal Canadian Navy cannot see a timely replacement to their troubled Upholder class without avoiding programmatic risk aversion and employing much more advanced risk treatment then risk registers and heat maps. The outcome must be perfect and on time, for the business of submariners is one of the riskiest disciplines in the defence business. Perhaps CPSP-focused conferences could explore more carefully the most efficient procurement approaches to get to contract, not just at the most effective ‘big tent’ participants and parent designs?

Democracies are typically either exceptionally risk adverse or savvy to smart risk treatment techniques that include transparency with and demonstrated accountability to the public. As we have seen with the Canadian approach, the former behaviour can be extremely harmful to progressing complex projects and to the credibility of the government executing them. Surely, it is time to embrace the related risks by employing a more effective approach to navigating unavoidable risks.