Tighter Timelines and Parliamentary Control
© 2006 FrontLine Defence (Vol 3, No 1)

Over the years, various procedures have been followed when purchasing military ­equipment, from long and costly procedures to replace the Sea King helicopters, to the purchase of 16 tactical aircraft at a cost of close to $5 billion.

Defence Requirements
The budget is not unlimited. This means that choices must be made in terms of both human and material resources.

Usually, military equipment purchases are made within the framework of a defence policy statement, which is contingent on Canada’s foreign policy statement. This statement gives an idea of what the Forces will be like in the future. Nevertheless, the government set broad parameters, both for its objectives and the material resources it needs to meet them.

When the government decides to make a purchase, two options exist: it can purchase material immediately available from a single source’s stock, or issue an invitation to tender to the entire industry.

As Members of Parliament, and therefore defenders of taxpayers’ dollars, we generally prefer invitations to tender. Bidders, knowing they must compete, go to a lot of effort to submit interesting and affordable proposals. This competitiveness influences the entire process, allowing the Department of National Defence (DND) to compare various bids, and make, we hope, the best choice for taxpayers.

The Procurement Process
The process begins when Cabinet gives its agreement in principle to a request.

Armed with this agreement, DND prepares the statement of work, which describes in detail the specifications that manufacturers must meet. These specifications can relate to the equipment itself or to after-sales service or product training. Time frames are also usually specified. It is not uncommon to see statements of work that are several hundred pages long, to the point where some argue that we are telling companies how to build their own product.

The Department of Public Works and Government Services, then administers the entire bidding process. DND remains involved, however, monitoring the process along with industry representatives. 

Treasury Board ensures that funds are allocated and respected throughout the process.

One Extreme to the Other
The Sea King replacement process is a perfect example of what not to do. You will recall that after former Prime Minister Jean Chrétien cancelled the contract to purchase EH-101s, everything was done to avoid selecting this company again. 

Cancelling the contract cost Canadian taxpayers $500 million. Moreover, between the initial decision to proceed with the purchase and the ­winning company delivering the first replacement helicopters, close to 20 years went by. For close to 10 years, the government required bidders to submit one proposal for the platform itself and another for the computer ­system. Many believe that this process was intended to ensure that the EH-101s could not be selected again.

The opposite occurred with the purchase of tactical aircraft to replace the Hercules fleet, which had come to the end of its useful life.
To speed up the procurement process, DND developed such a targeted series of specifications that one could pretty well guess which company would be awarded the $5 billion contract, and this is happening on the eve of an election.

This is a recipe for disaster for Canadian taxpayers, since there is no guarantee that the aircraft will be of any significant economic benefit to Canada. Furthermore, there have been strong ­criticisms of the aircraft’s performance.

The American experience with the C-130J airplanes has proven that there are indeed performance issues. It should be noted that none of the 50 C-130Js ­delivered to the U.S. Air Force between 1999 and 2003 had been declared ready for full service as of the beginning of 2005. Furthermore, the U.S. Defence Department’s Office of the Inspector General (OIG) made many declarations that Canada’s Defence Department should at least consider before buying the aircraft. In its remarks, the OIG declared last year the C-130J should be used only in “permissive” non-hostile environments. 

Later, in its July 23, 2004 audit of the purchase, the OIG found that only two of the delivered planes had been used in Iraq, in limited situations, while the remaining 48 were restricted to training exercises. The new aircraft’s mission-capable rate was found to be lower than that of the old C-130s which were still being used. These facts should encourage the Canadian government to wonder if the aircraft will really meet its military needs. 

The OIG audit also found that the C-130J could not perform basic and ­critical operations, including night vision goggle missions, combat search and rescue, visual formation, global air traffic management, and air-dropping paratroopers and containers, which most probably led the office to state that: “The government fielded C-130J aircraft that cannot perform their intended mission, which forces the users to incur additional operations and maintenance costs to operate and maintain older C-130 mission-capable aircraft because the C-130J aircraft can be used only for training.” 

Furthermore, we should worry about the American OIG dismissal of the idea that the C-130J is simply an improved version of its reliable predecessor – the Hercules, before buying them. We have to be aware of the OIG declarations that 70% of the new plane’s features are unique and that “pilots cannot be certified on both aircraft, which causes additional financial and personnel burden on units that must operate both aircraft.”

There are other observations that we have to consider. The U.S. Defence Depart­ment’s independent weapons tester – the Director of Operation Test and Evaluation (DOT&E) also has a negative opinion of the C-130J. It stated as recently as January 2005 that no C-130J delivered to the Air Force meets program requirements and that the aircraft has still to be fully tested.

The DOT&E specified that major issues confronting the C-130J program include: funding of logistics support and training systems; hardware, software, and technical order deficiencies; manufacturing quality; subsystem reliability; failure to meet required measures of system effectiveness and suitability; and resolution of documented deficiencies.

Those American critical observations, opinions and reports should have been a part of the Canadian Defence department analysis when it came to choose the aircraft. It is like buying a new car, if your neighbour says he regrets buying a certain type of car, chances are, you won’t buy it.

What is required
A transparent and expeditious process of defence procurement is required so that decisions are made in the best interests of taxpayers. The process should not take longer than three to five years, depending on the file’s complexity. With technology evolving so quickly, we can no longer afford 15- or 20-year time frames, which can outdate technology and equipment before it even arrives.

The Bloc Québecois feels that tighter parliamentary control would ensure these objectives are met. We are therefore suggesting that all projects entailing costs of more than $100 million be reviewed by SCONDVA, the Standing Committee on National Defence and Veteran Affairs.

Furthermore, our party introduced a bill to require the government to give ­priority to Canadian suppliers when trade agreements allow it to do so. The bill also requires the government to award ­contracts equally among the provinces to further ensure fairness in the process.

SCONDVA agreed to study the procurement process in the coming months. For too many years the Canadian Forces has been paralyzed by delays resulting from a dysfunctional procurement process; for too many years the Canadian content requirement has been ignored; and for far too many years the taxpayer has been ­relegated to the sidelines, when it is he/she who must pay the bill when all is said and done.

The time has come to set up a fair process that generates healthy competition, addresses the needs of the Canadian Forces, respects the Canadian content requirement, and maximizes positive financial benefits for taxpayers.  

Claude Bachand is the Bloc Québecois critic for National Defence and vice-chair of the Standing Committee on National Defence and Veteran Affairs (SCONDVA).