Military defeated in war over procurement reform

The Canadian military was defeated Wednesday in the final battle of itsyears-long war with civilian bureaucrats over how best to reform and control military procurement.

The conflict has beentaking place in the conference rooms and back halls of government offices in Ottawa for more than three years now. It wasfought between generals and officials inside the Department of National Defence and the civilian bureaucrats at Public Works, the government'scontracting ministry, and Industry Canada, the department responsible for economic and industrial development.

The feud concluded, finally, when Public Works Minister Diane Finley took to the small stage at an Ottawa hotel Wednesday and pronounced to the audience of defence industryinsiders that from now on,when it comes to accountability for defence procurement, The buck stops right here."

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Finley laid out a series of small andincremental changes to military procurement in Canada, that, taken together, she said, amountto "a fundamental change in how we do defence and major coast guard procurements."

"In Canada, we have some of the best industrial defence capability in the world, and our companies can compete with the greatest companies in the world," Finley said.

"But we also know there have been issues in the area of defence procurement.We are not going to wish these problems away. Canadians have every reason to expect more from their government."

The new defence procurement strategy attacks the procurement problems on two fronts: policy and process.

The policy effort is aimed at ensuring Canadian industry is engaged earlier in potential defence procurement programs.

"This is not a buy in Canada under all circumstances even if it doesnt make sense strategy," Finley said. Instead, it's an attempt to see more effort placed on engaging Canadian companies in the developing and building of defence gear.

Who's in charge?

The second front involves the way in which defence procurement is managed, and who isin charge.It's here that sources say the military has lost its biggest fight, succumbing to a series ofwounds it inflicted upon itself over the past number of years.

Finley essentially blamed the military for a series of lengthy delays that have resulted in stalled and even failed procurements. She said the military's statement of requirements for the gear it hoped to buy were often overwrought, perhaps on purpose.

"What we found was that the requirements were too complex," Finley said."Too often they appear to be set to achieve predetermined outcomes, and industry has not been engaged early enough. Because of this, the process is costly and complicated and we can take too long to make decisions."

An example of that is the botched process to buy new search planes. That program was funded to the tune of $1.3 billion back in 2004.

The first of about 15 planes was to be delivered by 2006. But almost eightyears later, the government has been unable to even get a bid out to tender.

That delay has been blamed on the military, which was found in an independent review to have written requirements so specific they appeared to preclude more than one plane from winning a competition.

Sources tellCBC News that disagreement was the start of a fight between DND and Public Works that morphed into an all-out war once the difficult details and understated costs of the F-35 program leaked out before the last federal election.

With those two problematic procurements in hand, former Public Works minister Rona Ambroseis said to have started a campaign to reform military procurement. That campaign gained traction with thehelp ofsenior bureaucrats at Public Works, who scored a procurement victory by devising a new system to manage the government's stalled shipbuilding program. The so-called "secretariat model" was used to select winning shipyards to build Canada's new fleet of capital ships for the coast guard and navy.

It's that same model which is now being implemented under the government's new strategy.

Permanent secretariat

It willestablish a permanent version of its previous adhocsecretariats for the F-35, search planes and ships,to oversee the co-ordination of the three departmentsand three central agenciesinvolved in managing defence procurement: Defence, Industry and Public Works, and Treasury Board, Finance and the Privy Council Office.

The secretariat will be resident in Public Works,the department responsible for managing contracts,and will effectively make Finley and herprocurement czar Tom Ringamong the most important managers of defence acquisition in government.

Sourcestell CBC News the fight over control of the procurement system dragged in ministers and deputy ministers at both Public Works and DND.The fight raged for years and it appeared reform would simply not be possible.

But with Ambrose and former defence minister Peter MacKay both now in new jobs, the time seemed right for reform to occur, a source said, describing it as a necessary rebalancing.

For the lion's share of the Afghan war, DND was given great leeway to set requirements for the gear it needed, no matter what. Other procurement departments accepted that as a fact of the times and worked to support the military's acquisition of its needs, even if that meant agreeing to bend or not apply the normal contract rules.

But now with the war over, sources tell CBC News it was time for the pendulum to swing in favour of the process demands of Public Works and the economic demands of Industry Canada.

Liberal defence critic Joyce Murray on Wednesday seemed prepared to hold her most seriouscriticisms to see if the government's proposed changes might have a positive effect.

"Its good that the government has admitted their failure," Murray said.

"I hope, as Ithink most Canadians hope, that they can do a better job ... with this new procurement mechanism. At the same time, you have to wonder whether adding a layer of bureaucracy and continuing to add additional ministers and deputy ministers into the pot, is actually going to be the correction that is needed.

"I dont see clear improvement here," she added."But lets be optimistic. They cant do a lot worse than has been done so far."