The second part of Canada’s new Defence Procurement Strategy, the Defence Acquisition Guide (DAG), came into effect February 2014. According to the Honorable Jason Kenney, Canadian Minister of National Defence, the DAG “plays a very important role in supporting our effort to deliver the right equipment in a timely manner to the men and women of the Canadian Armed Forces, at the very best value for tax payers”. The DAG outlines the governmental process in which tenders for contracts are made publicly available, and how they are then awarded, overseen and concluded. Alongside the Value Preposition Guide, the DAG’s main goal is to help the defence industry anticipate the future needs of the Canadian Armed Forces (CAF) through the prospective posting of future defence contracts, giving the defence industry ample time for R&D development and proposals. Tenders range in value from $20 million to $1.5 billion, and timeline brackets from 2015 to 2035.
An example is the Meridian Standard tender, a scheduled upgrade to the Department of Defence (DND) and CAF’s ability to conduct intelligence, surveillance and reconnaissance (ISR), as well as technical security and electronic countermeasures in future conflict zones. With a budget of $50 to $99 million, the timeline for the project is as follows. 2016 will see an options analysis by the government, where all proposed options will be accessed on how to best fill the perceived capability gap in the operational capacity of the CAF. By 2019, the DND will then look at implementing the preferred solution, creating a project management team and cost analysis before entering into final consultations with industry and submitting a request for proposal (RFP) in 2020. Acting on the advice prepared by DND, Public Works and Government Services Canada will then award the contract to the most suitable candidate. The Meridian Standard project is expected to be completed in 2024, which will see the DND resume analysis and phasing out operations of the contract.
While the process appears clinical, efficient and regulated, numerous problems have been identified. Several tenders listed under the DAG are inconsistent with cost estimates done by previous government or industry sources. For example, the Arctic Offshore Patrol Ships (AOPS) program is valued at $1.5 billion by the DAG, conflicting with the previous DND estimate in 2012 of $3 billion. Also, before its update in 2015, the DAG had a tender posted for the problem ridden replacement fighter jets program. With an options analysis phase slated for 2017-2019, the message sent to the Canadian defence industry was one of urgency and encouragement in utilizing resources to put forward a contract proposition. The tender, however, has since been quietly removed over continued uncertainty about a replacement contract for the CF-18 Hornet. Another long term problem is the confusing mandates and conflicting authority of the DND and Ministry of Public Works and Government Service.
The DAG comes with the disclaimer that the information included within has received no official approval from relevant government bodies, and thus all tenders may be changed in a moment’s notice. This would prove catastrophic for small or medium enterprises (SME), which make up the majority of Canada’s defence industry, investing a large portion of their available capital into R&D only to have the applicable tender cancelled. According to Alan Williams, procurement chief at DND In 2014, “the industry can’t bank on anything in it (DAG) because there’s no strong foundation to it…it’s built on quicksand.”
There has been some positive reception of the DAG. Christyn Cianfarani, President of the Canadian Association of Defence and Security Industries (CADSI), pointed out that improved lines of communication between government and business may assist the DND in actually spending its per annum budget. In 2014, unspent funds amounted to $2 billion, money which is desperately needed to restore or replace multiple areas of the CAF. “Isolating and resolving capital spending lapses is a task that needs urgent attention if we’re to ensure that projects critical to the operational effectiveness of the CAF start moving,” wrote President Cianfarani in an opinion piece; “If industry can play a role in helping to alleviate blockages in the system, we will.”
By itself, the DAG will not single handidly fix the problems afflicting Canada’s defence procurement. A crucial factor for its long term success is the DAG’s proposed collaboration with the domestic defence industry working as intended. The high risk and costs of R&D for unconfirmed defence tenders would be best tackled by each side managing a proportionate amount of insurance and cost. Finally, primacy and decision making issues within government ministries should be addressed and streamlined. This will better facilitate lines of communication with business, give DND the opportunity to fully utilize it’s per annum budget, and help the DAG ultimately work as intended.
