Jenkins Report: Key Industrial Capabilities
Mar 15, 2013

The presentation of a report from a panel of $1-a-year experts, headed by respected entrepreneur Tom Jenkins, has given the federal government an opportunity to “KIC-start” a long-overdue overhaul of its problem-plagued defence procurement machinery.

After receiving the “Canada First: Leveraging Defence Procurement Through Key Industrial Capabilities” report, Public Works & Government Services Minister Rona Ambrose said that she and other key ministers would “carefully review and consider” its recommendations so as to maximize the economic benefits of the defence sector.

A core recommendation by the Jenkins panel is to foster Key Industrial Capabilities (KIC) in sectors of proven excellence. The report notes that while these account for a small proportion of overall defence procurement, focusing on them would mitigate short-term costs and risks while offering “the prospect of significant gains in innovation and competitiveness over the long term.”

Jenkins, who has previously advised Ambrose on issues related to innovation, is Executive Chairman and Chief Strategy Officer of Open Text Corp, the Waterloo-based, largest independent software company in Canada. The other panel members included Ray Castelli, Chief Executive Officer of B.C.-based Weatherhaven, a leading global supplier of redeployable camps and shelter systems; Christyn Cianfarani, Director of Government Programs, Research and Development, and Intellectual Property at Monreal-based CAE Inc.; Major-General (retired) David Fraser, a former multinational brigade commander in Afghanistan; and Dr. Peter Nicholson, former President and CEO of the Council of Canadian Academies.

PWGSC recognized that the report lays the groundwork for the government to ­further leverage defence procurement, an industry which is estimated by CADSI (the Canadian Association of Defence and Security Industries) to sustain 18,000 jobs in Canada, as well as creating $710 million in gross domestic product.

“Canada has an opportunity to leverage the exceptional circumstances that are being created by the sustained increase in defence procurement to promote a long-term growth trajectory for our defence-related industries,” the report states. “This will not happen with a status quo set of procurement policies and related programs, particularly in light of anticipated increased competitive pressure from foreign suppliers that are facing declining markets elsewhere.”

The panel noted that in setting out the Canada First Defence Strategy (CFDS) in 2008, the government had promised stable long-term funding which, absent further spending cutbacks at the Department of National Defence, would amount to $490 B over 20 years for personnel, equipment, readiness and infrastructure. Nearly half, some $240 billion, is targeted at the latter three, and the government has said it would leverage the opportunity to support the Canadian supply chain’s competitiveness.

“While a significant number of CFDS procurements have occurred or are currently in progress, many others are forthcoming and represent the potential for very substantial long-term economic benefit for Canada,” the panel said, adding that a KIC approach would help defence industries to not only better meet Canadian Forces operational needs but also generate sustainable economic growth.

“Defence-related industries are unique in that governments are essentially the only customers, and have flexibility under international trade agreements to favour domestic suppliers,” they point out. “Production and trade of military goods and services is therefore powerfully influenced by governments, usually in ways that strongly encourage the development of the home country’s defence industry.”

In promoting the KIC concept, the panel says it must be based on “high-level, but pragmatic, criteria emanating from the country’s defence and security needs and the prospects for long-term growth in jobs and income.”

Noting the lineup of major procurements currently in queue across the broad spectrum of the Canadian Forces – several of which have had to be “rebooted” due to continuing problems – the panel proposes an interim set of KICs: Arctic and Maritime Security, Protecting the Soldier, Command and Support, Cyber-Security, Training ­Systems, and In-Service Support.

“These should be used to inform impending decisions, with the understanding that a reassessment will occur approximately every four years, taking into account experience and more precise data and analysis.” The panel suggests that a third-party defence analysis institute or network be set up to help provide oversight.

“If KICs are to play an effective role in enhancing defence industrial performance, the government will need to consider substantive changes in both demand-side and supply-side policies and programs,” notes the report. Jenkins also stresses the importance of common nomenclature and data if the ­various participants are to understand each other clearly.

Having been told recently by a former senior Canadian Forces officer who is now an executive in the private sector that many of the public servants making key procurement decisions lack the appropriate business acumen, FrontLine put that comment to Jenkins and Ambrose. Both agreed that having public and private sector employees work in each others’ cultures – a common practice in many other countries such as Australia, Sweden and even the U.S. – could be worthwhile.

“That’s a fair observation,” Jenkins replied. “I think that we would do well to have more cross-pollination between the three pillars of our society, really: academia, industry and government. I think that applies not only to procurement in defence but, writ large, I think we would do well to encourage more [cross-pollination]. We used to do that in this country, but we’ve gone away from it.” He added that a simple KIC approach, as the panel had recommended, would help the different cultures to bridge any gaps.

“More of that can only be beneficial,” Ambrose agreed, noting that some of the larger defence procurements her ministry has handled required it to “beef up our capacity” by bringing in experts from the private sector. “We have excellent public servants working on the files (but) outside advice […] is healthy.”

Ken Pole is a contributing editor at FrontLine.
© FrontLine Defence 2013