PROCUREMENT: Remember “Your rifle was made by the lowest bidder”
Nov 15, 2006

Does the 13th Rule of Combat Need to Apply to Defence Procurement?

There has been considerable public and political debate in recent months, helpful and otherwise, concerning defence procure­ment. The process is heavily rules-based for a number of important reasons; most significantly, to protect the rights of Canadians to have access to fair and open competition for government contracts and to respect our obligations under international trade agreements, which are vital to the competitiveness of Canadian industry abroad.

In general, these rules do not drive excessive delays. Other factors have been more problematic, including: International Trade in Arms Regulations (ITARs); uncertainty about long-term government funding and affordability; regional interests and pressure exerted through elected ­officials; and pressure from industry and lobbyists to change military requirements to favour their product or just delay any decision.

The lack of both consistent long-term defence policy (accompanied by the necessary funding) and the willingness to make timely acquisition policy decisions have had an effect on defence procurement, to varying degrees, in this country for decades. The political dimension of the issue, however fascinating, is not within the scope of this article.

Defence procurement can be a slow, overly complex process that engages many stakeholders, internal and external to the federal government. However, to a significant degree, the slow internal processes and the complexity of specifications have been wounds inflicted by the Department on itself. We have not constrained statements of requirements to concise, high-level performance terms; we have taken years to produce lengthy, complex technical specifications – often with hundreds of mandatory requirements; and we have refused the 90% proven “off-the-shelf” solutions and embarked instead on expensive and time consuming customization/Canadianization.

The outcome has been clear. It has taken years to develop technical requirements, and the bidding processes have been long and costly to both government and industry. Furthermore, on occasion, the result has often been that all bidders were non-compliant, and the entire process unsuccessful.

To some extent, we were more focussed on the process itself than on the results needed – safe and operationally effective equipment in the hands of our troops as quickly as possible. To deliver urgently needed capabilities in a useful timeframe – and 15 years is not a useful timeframe – the 90% solution from proven, modern off-the-shelf solutions needs to be the norm.

The process-driven culture is changing within National Defence and the fundamental approach to procurement and in-service support of new fleets is undergoing a revolution. The keywords are now: results, operational performance, and best value to the Crown.

Performance-based, best value competitions come in two varieties, off-the-shelf and design-build. Projects that seek proven off-the-shelf solutions state mandatory high-level requirements in terms of operational performance (such as protection, mobility, range, etc.), as well as key safety, certification and delivery time parameters. Mandatory requirements are normally limited to 15 or less high-level performance statements with all other requirements rated competitively. Evaluations are intended to confirm the proposed equipment meets at least the minimum mandatory performance.

Evaluations also include actual testing, to the maximum degree practical – including live firing, flight, mobility and destructive/survivability tests.

Price is evaluated for both the acquisition phase and in-service support phase and is based on the total cost of ownership, where possible. Operational performance is weighted higher than other ­factors. Initial acquisition costs may be higher, but the total cost of ownership will be lower, with higher operational availability, providing best value to the Crown.

WWI display at the Canadian War Museum (Canadian War Museum, Ottawa)

Design-build projects, such as ships and certain combat vehicles, follow a ­similar process to military/commercial off-the-shelf (MOTS/COTS) solutions in terms of performance specifications, but price is weighted lower in the acquisition phase to encourage the highest possible design and build quality and the lowest possible cost of in-service maintenance and repair.

The message is simple: build in quality, performance and reliability and there is no disadvantage to the bidder.

Build Quality delivers lower maintenance and through-life costs. The higher weighting of the in-service support price rewards the bidder who has invested in quality and knows that their equipment will be cheaper to maintain.

National Defence has conducted ­performance-based procurements in the past. In 1986, the Low Level Air Defence project stated performance requirements in terms of the ability of an air defence system to defend an airfield and an army brigade in several air threat scenarios. Proposals were evaluated against operational performance, maintenance and ­reliability, industrial benefits, and price. Operational performance was rated higher than any other factor and short-listed bidders demonstrated actual system performance to the project team before the final selection was made. History has shown that Canada acquired one of the most capable Low Level Air Defence ­systems ever built.

Performance-based processes also entail major changes to the way the Department drafts procurement documentation. In most instances, particularly for MOTS/COTS solutions, there will be no lengthy, complex, time consuming technical specification produced by the project staff. The vendor with the ­successful proposal will provide their specification to the appropriate level of detail necessary to support contractual deliverables. Intellectual property and technical data will normally be acquired to fully support defence purposes of maintaining operationally effective equipment throughout its service life.

In October 2005, the Materiel Group in National Defence stood up a new division to become a special centre of expertise devoted to the rapid delivery of large, complex major crown projects. In an effort to depart from the tradition of large “potted-plant” project management offices, a centralized project support ­directorate was created to provide just-in-time support when and as it is needed for scheduling, financial management, risk analysis, and so on. Under the leadership of Mr. Paul Labrosse, the division is managing the strategic airlift, tactical airlift, fixed wing search and rescue, utility ­airlift, joint support ships, medium ­helicopter, maritime helicopter and medium trucks projects, and others could be added in the near term.

There are organizational changes under way as well. The demise of the supply branch of Materiel Group during Program Review in the mid 1990s led to a gradual erosion of the procurement and contracting capacity in the Group. Procurement and contracting expertise has been regrouped this year under new procurement directors in each of the Equipment Program Management divisions, and a significant effort is being devoted to recruiting and professional development to rebuild this capacity.

Some procurement will continue based upon technical specifications and the lowest price, and that is absolutely fine when we are buying office furniture, but not when we are putting young Canadians in harm’s way. Should the lowest bidder make our soldiers’ rifles? Possibly, but the best and most reliable rifle is seldom the cheapest and the Canadian Forces deserves the best we can provide.

Dan Ross is the Assistant Deputy Minister Materiel – ADM(Mat) – at the Department of National Defence in Ottawa.
© FrontLine Defene 2006