Defence Procurement Process
Procurement Parameters on Innovation?
Oct 30, 2015

It has been 18 months or so since the announcement of a new Defence Procurement Strategy by Minister of Public Works and Government Services Canada, Diane Finley. Much water has gone under the bridge since then, much of it murky and difficult to see into. But overall, the government has stuck to its guns to implement its multi-point plan to better leverage defence spending to the advantage of Canadian industry. Personnel in PWGSC and Industry Canada have been working to develop the details of how the changes will be implemented, some of it ‘on the fly’ as they apply the new strategy to projects that arrive at the front of the queue. Questions posed by industry stakeholders have been addressed, albeit often in an inconsistent way given the evolving process.

Defence Procurement Strategy Report Card Oct 2015

Value Proposition Evolving. Complex, changing emphasis, at the heart of most concerns and extra effort. The published VP Guide is helpful.
Increased Governance In place. Potential is good, effectiveness to be ­determined.
DND Requirements Challenge Independent Review Panel in place and working. Another milestone to achieve.
Defence Acquisition Guide    Positive initiative. More detail would be welcome.
ITBs: Industrial and Technological Benefits    Much the same as IRBs. The almost-exclusive focus direct work vs other opportunities is tiresome.
Defence Analytics Institute Missing in action.
Increased Contracting Authority for DND    In measured implementation. Challenges exist,
but positive evolution is anticipated.
Streamlining Defence
Introduced changes have done the opposite.
No indication yet that this will change.

The most intense uncertainty centers on the application of the Government’s direction regarding the so-called value proposition, which now accounts for about 10% of the evaluation of bids where they apply. Because this is new, and companies don’t want to be disadvantaged by failing to score what points they can, the value proposition concept is now consuming most of the effort expended to address ITB issues. In some cases, officials have simply asked industry to be innovative in identifying a value proposition; in others, the rules are specific and constraining. Most confusing is the restriction to certain market segments, presuming that the transactions most advantageous to the defence industry can be fenced off to two or three areas of activity for each project. This can be counterintuitive for some proposals – innovation is sought, but the scope is unnecessarily limited.

Similarly, the presumption that the most beneficial ITB transactions are those which relate to direct work on the equipment or system being acquired can be misguided. When an acquisition is made ‘off the shelf’ from an international supplier, the opportunity for direct work in its manufacture will be understandably limited. Even sustainment work may have to account for the fact that a mature supply chain already exists, and it can be difficult and costly to disrupt it to accommodate a Canadian company at potentially low volume. Rather than focus on the scope of work possible for the domestic capability, the government should be encouraging Canadian access to the global market – not imposing the same ITB overall target, but seeking innovation in exploiting new ­markets, access to technology, and international partners.

In addition to meeting the needs of the Canadian Armed Forces and leveraging defence spending to assist Canadian industry, a third objective of the DPS is to streamline defence procurement. This has not yet materialized. Projects have become even more complex, with the need for more extensive industry engagement, ­additional time to prepare solicitation ­documents, extended bid closure dates, and potentially greater use of the complaints process. Internally to DND, the Independent Review Panel on Defence Acquisitions, considered necessary to re-establish credibility in the development of  requirements, is now at work. Despite best intentions to fit as seamlessly as possible into the flow of projects working their way along, this review is yet another sequential step for project teams to meet. Hopefully, this will save time downstream if challenges arise. However, meetings with the independent review panel are new added steps to schedule, prepare for and complete before going further in DND’s internal process.

Overall, the jury is out on the overall improvements that the DPS purports to bring to the defence procurement process. New ministers may review the initiatives in place and direct that additional changes or tweaks be made. Ultimately, success can only really be measured by timely procurements which meet an agreed requirement and are affordable within the budget established. Patience will be needed before this can be determined.

George Macdonald served as Vice Chief of the Defence Staff from 2001-2004, and is a Senior Partner at CFN Consultants.
© FrontLine Defence 2015