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June 11, 2018 | Local, Aerospace, Naval, Land, C4ISR
DND unable to spend billions in equipment funds, pushing projects beyond next election
Murray Brewster
National Defence fell $2.3 billion short in its plan to re-equip the military in the past year — a failing that one defence analyst says guarantees many important decisions on warplanes, ships and vehicles will be pushed beyond next year's election.
Defence Minister Harjit Sajjan revealed the figure Wednesday as he launched the department's long-anticipated investment plan at a major defence industry trade show in Ottawa.
The plan is the Liberal government's spending roadmap for its defence policy, released a year ago, which pledged $6.2 billion in new capital spending in the first year.
New figures show $3.9 billion was spent.
Later in the day, the chair of the Liberal government's council of economic advisers underscored the importance of investment in the defence sector and how it will drive innovation in other sectors.
"If we want to grow — and we can in Canada, and we want to grow more significantly — the defence sector is going to play an essential part in doing that," Dominic Barton said.
Leading-edge military technology and the possibilities for its commercialization can transform the broader economy, he added.
However, the investment plan presented by the Liberals on Wednesday leans heavily on refurbishing existing technology and equipment — mostly aircraft — in the coming decade.
The Defence Capabilities Blue Print will see the air force's CF-18 fighter jets, C-140 Aurora surveillance planes, C-144 Challenger executive jets, C-150 Polaris refuellers and transports, CT-114 Tutor trainers and demonstration jets, C-149 search and rescue helicopters and CH-146 Griffons all given life extensions and upgrades.
New aircraft, including drones, won't be introduced until the mid-2020s — or later.
A defence analyst said that's no surprise since many major decisions will be pushed past the 2019 election. That means it will be up to the next government to make the tough decisions on how much to buy and how much to spend.
"Unless we see an extremely busy June with a lot of announcements on milestone projects, a lot of the work is going to be left until later," said Dave Perry, an expert in procurement at the Canadian Global Affairs Institute.
"They're not moving ahead as quickly as they suggested in the defence policy."
The government could leave even more money on the table this year. Figures compiled by Perry, using the federal government's own budget documents and records, suggest as much as $3 billion could go unspent on military equipment in the current fiscal period.
The former Conservative government was repeatedly criticized for promising the military big things in terms of equipment, but rarely delivering and allowing allocated funds to lapse.
That cash was eventually kicked back to the federal treasury and used for deficit reduction.
DND gets to keep money, spend it later
Sajjan said defence spending is now guaranteed in the fiscal framework, the government's long-term financial plan.
That means National Defence gets to keep the money and spend it later.
"We always know we might not need the extra funds, but they have to be there just in case," Sajjan said. "Rest assured, the unspent $2.3 billion dollars is protected. Those funds remain available when we need them."
He defended the spending "delta," saying that 30 per cent of it comes because projects came in under budget. Another 42 per cent was because of delays by defence contractors.
Approximately one-third, though, relates to the department's inability to make a decision — or develop specifications on time.
Sajjan took a shot at the government of former prime minister Stephen Harper, which used to regularly publish its defence spending plans, but never had specific funding attached to individual projects.
Conservative defence critic James Bezan said there is a disconnect between the government's defence policy and its spending plans as outlined in federal budget documents.
"Nothing seems to match," said Bezan, who treats the federal budget as the last word in spending.
There was no mention of National Defence in Finance Minister Bill Morneau's latest fiscal, presented in February. Defence officials insist that is because the department's spending is already accounted for in the fiscal framework.
The federal Treasury Board, however, must approve funding on a project-by-project basis — and Bezan said that hasn't been done.
"There's no money to do the things Sajjan is out there talking about," he said. "We are still dealing with the problems of getting procurement done in a timely manner and getting it done on budget."
The head of a defence industry group — Sajjan's audience as he made the announcement — said the government does deserve credit for consulting more about projects ahead of time, but there are obvious shortcomings.
"Any time funding moves to the right, it is a predictability problem for us. We want as as predictable and as stable funding as we can get," said Christyn Cianfarani, the president and CEO of the Canadian Association of Defence and Security Industries.
"I still think, systemically, there is a problem and if we don't turn it upside down and shake it — the whole procurement system — and do things differently ... many, many things differently, we'll still see sluggishness in the procurement system."
He said the Liberal investment plan is not "aspirational" and states clearly where the cash is coming from.
The Conservative guidebook in the end "did not deliver for the men and women in uniform," Sajjan told the audience of defence contractors.
http://www.cbc.ca/news/politics/sajjan-dnd-equipment-funds-1.4683606
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Annex B: Overview of long-term funding commitment to Canadian Armed Forces capabilities
To ensure that the women and men of the Canadian Armed Forces have the capabilities required for Canada to be Strong at home, Secure in North America and Engaged in the world, this policy commits to significant long-term investment. This includes $33.8 billion for 52 critical new capital projects. In addition, the policy provides $74.2 billion for existing assets and previously planned equipment, infrastructure and information technology projects. As part of Strong, Secure, Engaged, these projects underwent a thorough costing review, which resulted in the provision of an additional $5.9 billion over 20 years on top of what had previously been budgeted for these projects, to better reflect their true costs. In total, this new vision for defence provides $108 billion for the development and acquisition of capital equipment over the next 20 years. All of these projects have been costed and the costing methodologies used were independently verified by five external accounting firms. Throughout the process, Defence also worked with costing experts from Deloitte who brought expertise gained from its involvement in recent defence reviews of close Canadian allies. This rigorous and unprecedented process ensures that the vision laid out in this policy is credible and realistic. Table 1 reflects the planned use of the accrual budget over the 20-year horizon of this policy. It is important to note that this table does not represent the total cost of all planned equipment acquisitions. For example, the first new Canadian Surface Combatant is not scheduled to be delivered until 2026, followed by the remaining 14 ships. As these ships have an expected service life of 30 years, much of the accrual costs will be incurred outside the 20 years reflected in the table. Furthermore, as these are 20-year estimates, there needs to be flexibility to adjust the accrual budget to reflect changes in major capital projects. The process to adjust or re-profile these estimates over time is through the investment planning process. Defence will publish the next Defence Investment Plan in 2018. The Defence Investment Plan will include all approved capital projects under the policy and will be updated every three years. This will help ensure that Parliament and Canadians can clearly understand future changes to the budget, and deliver on the Government's commitment to transparency, results, and accountability. Table 1: 20-year accrual and cash view of planned projects and new investments ($ billions) 20-year - Accrual basis 20-Year - Cash basis Capability Investments to fully fund and complete planned projects table 1 note1 New investment Strong, Secure, Engaged table 1 note2 Total planned projects and new investments Total planned projects and new investments Royal Canadian Navy 14.6 2.9 17.5 53.5 Canadian Army 10.1 8.8 18.9 23.2 Royal Canadian Air Force 26.4 20.1 46.4 64.4 Special Operations Forces 1.2 0.4 1.5 1.2 Joint/Emerging Domains 3.4 1.2 4.6 9.7 Infrastructure 4.5 0.4 4.9 12.0 Total Capabilities 60.1 33.8 93.9 164.0 Accrual Expenditure for Existing Equipment and Infrastructure table 1 note3 14.1 - 14.1 - 20 Year Total table 1 note4 74.2 33.8 108.0 164.0 Table 1 Note 1 Strong, Secure, Engaged commits $74.2 billion over 20 years to fully fund 281 projects that were planned, but for which Defence had insufficient funding to acquire. Adequate funding has now been allocated to deliver these core equipment projects. Return to table 1 note1referrer Table 1 Note 2 Strong, Secure, Engaged commits $33.8 billion over the next 20 years to 52 new equipment, infrastructure, and information technology projects for the Canadian Armed Forces. Return to table 1 note2referrer Table 1 Note 3 This amount ($14.1 billion), on an accrual basis, represents previously acquired equipment and infrastructure. As they are already in service, there is no future cash requirement to purchase these assets. Return to table 1 note3referrer Table 1 Note 4 Totals may not add up due to rounding. Return to table 1 note4referrer Below is an overview of capital funding commitments in Strong, Secure, Engaged, described in terms of investments in the Royal Canadian Navy, Canadian Army, Royal Canadian Air Force, Special Operations Forces, Joint Capabilities and Infrastructure. Investment in the Royal Canadian Navy The Government will provide $17.5 billion to fund equipment projects for the Royal Canadian Navy over the next 20 years. This includes: $2.9 billion over the next 20 years for two new equipment investments in the Royal Canadian Navy to replace obsolete components of current systems and improve the Royal Canadian Navy's ability to meet evolving underwater threats. $14.6 billion over the next 20 years to fully fund planned equipment projects. For example, this policy includes sufficient funding to acquire the full complement of 15 Canadian Surface Combatants. It is important to note that Table 1 only captures a 20-year view of the equipment investments committed to in this policy. As the first ship is not scheduled to be delivered until 2026 and the fleet is expected to be in service for 30 years, there will be significant expenditures outside this timeframe. Investment in the Canadian Army The Government will provide $18.9 billion for Canadian Army equipment projects over the next 20 years. This includes: $8.8 billion over the next 20 years for 20 new equipment projects. As examples, this investment will replace existing light and heavy trucks for use in domestic and expeditionary operations. We will also improve the Canadian Army's ability to operate in Canada's North with a new family of Arctic-capable land vehicles, as well as close critical capability gaps such as the Canadian Army's lack of ground-based air defence equipment, which will allow it to defeat threats posed by airborne weapons such as remotely piloted vehicles and aircraft used by potential adversaries. $10.1 billion over the next 20 years to fully fund planned equipment projects. For example, the upgrade of the Light Armoured Vehicle fleet will improve mobility and survivability. Investment in the Royal Canadian Air Force The Government will provide $46.4 billion to fund equipment projects for the Royal Canadian Air Force over the next 20 years. This includes: $20.1 billion over the next 20 years for 17 new equipment projects for the Royal Canadian Air Force. For example, this will deliver a Canadian Multi-Mission Aircraft to replace the CP-140 Aurora Long Range Patrol Aircraft, allowing us to maintain our technological advantage over potential adversaries. Under the Royal Canadian Air Force's responsibility for space capabilities, portions of new investment will expand the Canadian Armed Forces' ability to use space-based assets in support of operations. This includes projects for enhanced communications in the North. $26.4 billion to fully fund planned equipment projects. The new fighter program has been enhanced to ensure the Royal Canadian Air Force can acquire 88 new advanced fighters, which will allow us to deliver on NORAD and NATO commitments without compromise. Investment in Special Operations Forces The Government will provide $1.5 billion to fund equipment projects for Canada's Special Operations Forces over the next 20 years. This includes: $366 million over the next 20 years for four new projects. For example, integrated soldier system equipment will be modernized to enhance interoperability and maintain technological advantage against potential adversaries. $1.2 billion over the next 20 years to fully fund planned equipment projects. As an example, we will acquire an airborne intelligence surveillance and reconnaissance platform that will enhance the ability of our Special Operations Forces to improve their understanding of the operational environment. Investment in joint capabilities The Government will provide $4.6 billion for joint capability projects in domains such as cyber, intelligence as well as joint command and control over the next 20 years. This includes: $1.2 billion over the next 20 years for five new equipment projects and one information technology project. For example, the Combined Joint Intelligence Modernization project will provide a modern deployable intelligence centre for land-based operations, building on the lessons learned in recent operations. Additionally, the Secure Radio Modernization project will upgrade encryption capability of radios to maintain security and interoperability with our Five-Eyes partners. $3.4 billion over the next 20 years to fully fund planned equipment projects. For example, we will improve the capabilities of the Joint Deployable Headquarters and Signals Regiment. This will include the acquisition of portable structures to house the deployed headquarters and the equipment employed by its staff for command, control and communications. Investment in infrastructure The Government will provide $4.9 billion over the next 20 years to infrastructure projects across Canada in order to maintain the necessary portfolio of real property holdings. This includes: $446 million over the next 20 years for three new infrastructure projects. For example, this funding will enable the construction of new buildings to house the expanded and enhanced Canadian Armed Forces Joint Incident Response Unit. This will ensure that the unit is able to provide chemical, biological, radiological, and nuclear defence support to the Canadian Special Operations Forces Command. $4.5 billion to fully fund planned projects over the next 20 years. https://www.canada.ca/en/department-national-defence/corporate/reports-publications/canada-defence-policy/annex-b.html