Why does Canada need a Defence Analytics Institute?
May 15, 2014

A week after unveiling the Defence Procurement Strategy (DPS), Public Works Minister Diane Finley announced that the government would also establish a Defence Analytics Institute (DAI). An interim Board of Directors, comprised of industry representatives, academics and public servants, and chaired by OpenText Chairman Tom Jenkins, was put in place to develop a mandate, governance and funding model for the DAI. The government has subsequently positioned the DAI as important to facilitating the objectives of the Defence Procurement Strategy. We look here at what a DAI can usefully do.

The DAI concept actually originated with the Canadian Association of Defence and Security Industries (CADSI). CADSI recognized a few years ago that there was no source – either in government, academia or the private sector – of collective knowledge and data on Canada’s defence industrial base. Industry Canada had long since abandoned any systematic research into and analysis of the domestic defence sector. The academic community, while relatively strong in defence policy, military history and strategic studies, does not have expertise in defence economics or defence industrial issues. And while individual companies have in-depth knowledge about their business and sub sector, no firms can provide sector-wide, objective data or analysis.

This data gap became crystal clear and was the source of some frustration for the Jenkins panel as they gathered information for their report to Minister Ambrose, who was the Minister of Public Works at the time. The resulting document: Canada First: Leveraging Defence Procurement Through Key Industrial Capabilities, subsequently became the foundation document for the DPS. But that gap had also become increasingly evident to the government. In recent years, the public service has been spending considerable amounts of money contracting out research to consultancies to get a handle on elements of the defence industrial base, such as the domestic marine industry, in order to inform managers on major defence projects like the NSPS (National Shipbuilding Procurement Strategy).

This gap in data is not a trivial matter. Because Canada’s defence industry is unique in the world (for a variety of historical, policy and geographic reasons) it is in fact hard to see how a Defence Procurement Strategy, anchored in developing key industrial capabilities or KICs and promoting the export of defence products and services, can be effectively executed without a reasonably sophisticated understanding of Canada’s defence industry.

If bureaucracies were expanding rather than contracting, an in-house capacity to research and analyze the defence sector could be built up within Industry Canada. While some positive steps have been made toward beefing up its internal defence sector capacity, departmental resource constraints and the significant amount of time required to build bureaucracies is an argument for a different approach.

Hence the idea for a DAI – an external source of expertise to government that can be jump-started quickly and relatively cheaply. The need for speed here cannot be over-stated. As Tom Jenkins noted in his report, there is an urgency to get moving on leveraging the recapitalization of the CAF, and data and knowledge on the sector is essential to effective leveraging.

The mandate, governance and funding model for the DAI should be straight forward. What is needed is a relatively small and nimble organization, staffed by probably no more than a dozen economists, statisticians, market researchers, and people with a comprehensive knowledge of the Canadian defence industry.

The organization could be tasked with, among other things, conducting annual studies and reports that produce key economic variables on the state and contours of the Canadian defence industrial base, similar to what the Office of Manufacturing and Industrial Base Policy in Washington does. It could also do more specific studies of KICs and market segments. The objective evidence base obtained by the DAI could then feed into government thinking on where and how to best leverage defence acquisitions through the application of the new value proposition framework and KICs.

Given that roughly 50% of Canadian defence industry revenue comes from exports, the DAI will also need the capacity to research and report on foreign defence markets. In particular, it will need to emphasize non-traditional and growth markets, to reveal real and exploitable business opportunities for Canadian technologies and services. This information can assist the Department of Foreign Affairs Trade and Development Canada (DFATD) as it apportions scarce human resources to the defence exports strategy, which the government committed to in both its Global Markets Action Plan and the Defence Procurement Strategy.

There is no need to re-invent the wheel when it comes to governance and funding of the DAI. There is plenty of relevant precedent from the past 15 years on how to structure such an organization.

The DAI should be created as a not-for-profit organization that exists to provide objective research and analysis to better inform public policy and administration. There are many such organizations in existence already, including the Council of Canadian Academies and the Canada Foundation for Innovation, from which the governance model for the DAI can be largely imported. While the DAI should be permitted to contract services to the private sector for specific studies on a cost recovery basis, the organization should receive its core funding from government (since its primary role is to improve public policy), ideally through a grant to sustain it for at least five years.   

The DAI can be a hybrid of think tank and consultancy. It should be a very practical organization with a neutral and cost effective focus of collective knowledge and data on Canada’s defence industrial base.

Fundamentally, the DAI is required because the government has identified the defence sector as strategically important to both the economy and Canadian sovereign interests. The objectives the government has set for the defence sector through the Defence Procurement Strategy will be hard to meet without the kind of evidence and knowledge a DAI can provide.

Eugene Lang, Special Advisor (Policy) at CADSI, worked in the federal government for 12 years, including DND and Finance.
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