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Armed Forces hardware budget punted to the future

Feb. 12, 2014, Ottawa - The Conservative government is making so little headway in six-year-old plans to re-equip the Canadian Armed Forces that it’s again shifting billions of dollars of unspent military-hardware funding to budgets at least half a decade in the future.


February 12, 2014
By The Globe and Mail

The 2014 budget unveiled by Finance Minister Jim Flaherty Tuesday would
transfer more than $3-billion of military-equipment spending to fiscal
years beyond 2018-19.

It’s the second time in three years that Ottawa has had to do this.
In the 2012 budget, the government kicked forward $3.5-billion of unused
capital-equipment cash to future years.

 

These repeated transfers
of Department of National Defence capital funding reflects just how
badly the Canadian government has fumbled the ball on military
purchasing, defence insiders say.

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It also raises doubts about
whether and when the government will actually spend the money. Mr.
Flaherty insisted Ottawa is still committed.

 

“We’re not reducing
spending on the armed forces, but there’s no point in having money
sitting there when they can’t spend it this year,” he said Tuesday.

 

The
list of postponed military acquisitions has been growing steadily –
including search-and-rescue aircraft, next-generation fighter jets,
Arctic patrol ships, a major icebreaker, naval resupply ships and
maritime helicopters.

 

“There’s not much happening,” a senior
Canadian military source said, speaking on condition of anonymity
because the official is not authorized to speak on the matter.
“Everything is delayed.”

 

In 2008, Ottawa unveiled an ambitious
shopping list for the Canadian military called the Canada First Defence
Strategy. It’s proven harder to execute than hoped.

 

David Perry, a
senior defence analyst with the Conference of Defence Associations
Institute, said he was surprised to learn how much earmarked cash is
once again being shifted to future budgets but added that he has tracked
a “persistent underspending” of military procurement money in recent
years.

 

Mr. Perry said one problem is the federal government tried
to buy so much at once after a relatively long pause in purchasing
big-ticket military items that saw Ottawa’s required expertise and
capacity wither away.

 

That’s what happens, he said, “when you take a procurement holiday for almost a decade.”

 

The
Paul Martin Liberal government had already kick-started a resumption in
military procurement before it was defeated in 2006, and the 2008 Tory
acquisition strategy ended up being piled on top of this, he said. The
2012 cuts designed to balance the budget, Mr. Perry said, are also
making things worse – cutting the number of defence purchasing staff by
400 people.

 

“You’ve got a work force that’s actually shrinking and trying to move twice as much money and twice as many projects.”

 

The
dysfunctional record of military procurement – delays and cost overruns
– has hurt the Conservatives’ carefully cultivated reputation as
prudent stewards of the public purse.

 

Last week, Ottawa announced a
new process for making major military purchases that would reduce
National Defence’s influence in steering acquisitions – an effort to
speed up buying and reduce costs.

 

In a significant overhaul of how
Ottawa buys military equipment, National Defence Minister Rob Nicholson
and Public Works Minister Diane Finley said that major military
acquisitions will now be managed by a Defence Procurement Secretariat
that reports to the Department of Public Works and is governed by senior
civil servants across a range of departments.

 

Major military
purchases in Canada have frequently lacked what critics call a single
point of accountability because as many as three or four government
departments play a part in selecting what to buy – decisions that are
sometimes made in isolation from one another.

 

National Defence
currently has particularly strong influence because it first draws up
specifications for what features it needs in equipment – which can
result in the department effectively picking a supplier before a
competition is held.

 

This will change with what is unofficially
called the “super secretariat,” a term the government does not embrace,
but which captures the concentration of decision-making taking place.

 

Defence
officials will still have a central role in deciding what to buy for
the Canadian Armed Forces, but other departments and outside advisers
will now have the ability to properly question what is being requested.

 

For
instance, as one person who was familiar with the announcement said, if
the request is for a “Cadillac and you actually need a Corolla” then
the system needs someone who “has the authority to ask why do you need
this Cadillac?”

 

The secretariat, overseen by deputy ministers from
Public Works, Defence, Industry Canada and Treasury Board, will rely on
independent advisers, “fairness monitors” and arm’s-length audits to
try to keep military purchases from going off the rails.

 

The
government has already placed two troubled procurements under the
management of secretariats at Public Works: fighter jets and fixed-wing
search-and-rescue aircraft.

 

The model was first used to manage the
shipyard selection process for more than $30-billion of public
shipbuilding, a decision that was hailed by many as a success.