25 juillet 2018 | Local, Aérospatial
By Brian Mersereau
Defence Watch Guest Writer
During the recent federal election, the issue of considering a new Defence Procurement Agency or DPA surfaced again.
The Liberals made such an organization part of their defence platform this time around as part of their plan to improve military procurement.
While positive outcomes could result from a new organizational structure, simply installing one will not in and of itself create an efficient procurement model. It most certainly will not address in any substantive manner why taxpayers pay far too much to acquire the defence capabilities Canada needs to protect our sovereign interests in a world that has become increasingly unstable in recent years.
It appears that, in many cases, Canada pays more per unit of capability to satisfy its defence needs than most of its allies. Unfortunately, though quite logically, this phenomenon has effectively shrunk the size of our armed forces as the number of platforms we can afford to acquire continues to dwindle due to high costs.
While this approach can create short-term jobs, they are ultimately unsustainable since there is no international market for our higher-priced solutions. This is not the direction in which Canada should be headed.
Before Canada decides to move ahead with a new procurement agency, it should assemble a “smart persons” panel or forum to thoroughly review the existing system and establish the mandate and objectives of whatever type of organization results from said review. Such a review group must be composed of people from the public and private sector with significant experience, not skewed with staff whose procurement experience primarily consists of exposure to the Canadian “way”.
During this review, the panel must examine various issues which are currently perceived to be an impediment to the efficiency of Canada’s procurement system. Based on my own years of experience on both the buy and sell sides of the procurement equation, the following areas merit some serious thought:
The fewer individuals, departments and oversight committees with their fingers in the “procurement pie”, the quicker and more coherently things will get done. Even at today’s interest rates, time really is money for all involved in the process. Adding more time to a schedule for another management review quite often has a negative impact.
While I understand governance and oversight committees have their place, their overinvolvement can produce negative outcomes if mandates are not absolutely clear and if individuals on these committees have limited experience with respect to the issue at hand.
Canada’s ongoing method for defence procurement is that it will not assume any risk on their side of a contract. If Canada insists the private sector must accept all risk, the private sector will so oblige – but at a significant price and to the detriment of schedules and timelines. As contract prices necessarily increase, so do governments costs to manage the contract.
In reality, the most efficient procurement solution for Canada would see some elements of risk managed by the buyer, rather than entirely borne by the seller. More consideration needs to go into balanced risk-sharing formulas.
Canada has an extremely hands-on procurement process for major systems during the competitive phase, as well as during the implementation of the contract. Even in this digital age, Canada hamstrings its own progress with the sheer degree of detail and bureaucracy it requires; unbelievably, freight trucks are still required to deliver proposals.
It seems as though, on occasion, the buyer thinks it knows more about designing and engineering the defence systems Canada needs than the actual designers and engineers for whom it is a primary occupation. Requirements of little or no consequence are painstakingly spelled out in the greatest of detail. Such an approach has a tremendous impact on the amount of time consumed by both the buyer and seller, again driving up costs and extending schedules. Less “hand holding” by the customer must be seriously considered.
In the procurement world, “sole source” is often viewed as a dirty phrase. Frequently, Canada attempts to run competitions in scenarios where the chances of achieving any meaningful savings or benefits related to competition are low at best. This takes years and drives costs higher at no measurable gain for the buyer. The parameters of when and under what circumstances Canada should move directly to a sole source should be thoroughly reviewed. Significant resources are being wasted managing nearly meaningless processes.
Canada’s internal skill set for managing large, complex defence procurements does not appear to be adequate. As a result, it turns more and more often to the expertise of external third parties in order to keep up with large private sector firms at the negotiation table from a knowledge and experience standpoint. While there will always be a need for some third-party expertise, project managing many external suppliers in the negotiation phase – each of whom have their own agendas – only further complicates the already convoluted procurement process. Canada would be much better off with an enhanced internal core staff.
If Canada takes the time to review the appropriateness of some form of DPA model, it must cast the net wider and review other critical aspects of the procurement process – or else any organizational changes will inevitably succumb to the systematic inertia of the overall process. A failure to do so means Canada will continue struggling mightily to stand-up the level of defence and security necessary to secure its citizens in an increasingly turbulent world.
25 juillet 2018 | Local, Aérospatial
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