In the Liberal party platform, the Liberal party pledged to create Defense Procurement Canada. Defense Procurement Canada will take the 3 departments who are primarily responsible for defense procurement and merge it into one centralized organization. If the Liberal government decides to proceed with Defense Procurement Canada, they will be joining nations such as the United Kingdom who have a centralized agency called the Defence Equipment and Support (DE&S) Agency who deals exclusively with defense procurement.
DE&S was created in 2007 with a merger of two Ministry of Defense departments. While DE&S has several strengths, the Government of Canada needs to critically examine the challenges this department is facing and ensure that these challenges are not replicated.
Many proponents of a centralized procurement claim that it will save the government money as they don’t have to coordinate between multiple departments. However, the DE&S has a history of overspending and escalating costs. In a 2011 report, the Public Accounts Committee observed the Department “continues to struggle with managing its equipment programme on an affordable basis, resulting in the cancellation or deferral of major projects and a damaging impact on value for money”.
In 2017, the National Audit Office warned that “the risks to the affordability of the Ministry of Defence Equipment Plan are greater than at any point since reporting began in 2012”. Recently, The National Audit Office has assessed the 2017 and 2018 Equipment Plans to be unaffordable with a £7.0 billion difference between expected costs and budget.
One reason why the DE&S struggles with their cost is over sole-source procurement. Due to national security and the type of specialty equipment required, it can be very challenging to have an open competition. Therefore, it can be common to have non-competitive contracts. In 2018-2019, a third (£8.6 billion) of total procurement was on non-competitive contracts. In 2014 new regulations were introduced for single source procurement and a new independent body was established to oversee single source procurement. The government will publish a review this year on the effectiveness on these new regulations.
Defense procurement projects are expensive because a major project can cost governments billions. Also, a few big suppliers dominate the industry with over 42% of total procurement expenditures with 10 suppliers in the United Kingdom. These factors make difficult for any country regardless of procurement system to control costs. Therefore, regardless of what procurement system the Canadian government decides to use, cost will always be challenging.
One way that the United Kingdom saves money in developing new capabilities through multinational collaboration. The Royal Air Fleet’s recent combat aircraft fleet have all been developed with other nations and the government is currently exploring options with potential partners for its next combat air system. This multinational collaboration can be used in Canada as it will give Canada the equipment it requires while saving money. This strategy can be implemented regardless of whether the centralization will occur.
When analyzing all possible ways to improve Canada’s procurement process, it is important to remember that there is no such thing as a perfect procurement system. Developing capabilities for defense and security is an expensive and time-consuming process. It is easy for one thing to completely derail a procurement project. Therefore, it is important to fully analyze what each country is doing in terms of procurement. From this analysis, the government can create a strategy that best meets the equipment needs for the Department of National Defense (DND). Please leave a comment below on the strengths and/or weaknesses of other countries procurement systems.
Marissa Frey is a MA student at the Norman Paterson School of International Affairs.
Featured images courtesy of Wikipedia.
The views expressed in this article are the author’s own and do not necessarily reflect iAffairs’ editorial stance.