Defence Procurement – Is it Broken?
BY JON MACK
© 2019 FrontLine Defence (Vol 16, No 2)

Seems like a week doesn’t pass without someone criticizing defence procurement. Not to say some criticism isn’t warranted, but is it broken? No. Could it be improved? Absolutely.

Defence procurement is tough. Not just in Canada, but everywhere. It doesn’t always go right; in fact, sometimes it goes very badly, and sometimes criticism is justified. But the vast majority of defence procurements proceed without issue. Thousands of contracts are awarded each year, with goods and services successfully delivered. Thousands of people in the public service, military and industry work long hours to ensure the Canadian Armed Forces get the equipment they need so they’ll be ready when called upon.

Progress is being made. The DND Materiel Group (the organization within DND responsible for material acquisition and support) is growing, having added almost 400 staff over the past two years with plans to add 50 more in the coming years. In the past year, the training and professionalization of the DND workforce has continued, with more than 20,000 military and civilian students taking e-learning or in-class training from the Materiel Management Training Centre, more than 100 individuals achieving a Project Man­agement qualification, and hundreds of staff participating in periodic project management seminars. Increased contracting authority for procurements up to $5 million continues to be rolled out within the Materiel Group. Changes to the DND Project Approval Directive aimed at streamlining internal approval processes are edging closer and closer – defence spending by the Materiel Group has continued to increase and, more importantly, the past two years have not seen any ‘residual lapses’ (where funding is not available for future use by the department).

Most of the procurements identified in the 2017 defence policy Strong, Secure, Engaged (SSE) are progressing, although some not as quickly as anticipated, with many projects having entered the Options Analysis phase or the Definition phase. It should be noted that the ability to ramp up and achieve progress, to the extent anticipated by SSE, was always expected to be a significant challenge.

Improvements are also being made by the other departments involved in defence procurement, such as Public Services and Procurement Canada’s Phased Bid Com­pliance Process and its pilot program for risk-based contract approvals. But DND, especially in regard to defence procurement, is not good at getting its message out. Apart from infrequent updates by senior officials at conferences or committee meetings, it is rare for DND to provide updates, positive or negative, on major projects and programs.

More often than not, DND communications are responding to negative news rather than getting out in front of the story and better managing the message. Updating the public, be it with the good news, the bad news, or simply the other side of a story would help counter some of the negative news that develops in a vacuum. This is an opportunity that DND has not taken advantage of, to its detriment.

At a conference several years ago, panel members were asked: if they could fix one thing in defence procurement, what would that be? While it was intentionally a softball question, there’s no common or correct answer. There are simply not enough resources, human and financial, in the system, be it in DND or in the other principle departments involved in defence procurement. Some processes are cumbersome and long overdue for streamlining. There is too much paperwork and arguably too many reviews need to be passed. The effort involved in completing cost estimating has grown in response to requirements for more and more “certainty” in costing. An insufficient number of “slots” are available at Treasury Board meetings to consider and approve DND procurement files. Industry is more and more inclined to take disputes to the Canadian International Trade Tribunal (CITT), and the Tribunal has shown it is more willing to challenge the actions of those involved defence procurement files. Risk avoidance, rather than risk management, is too prevalent.

The list of issues goes on and on, and all are worthy of consideration. But if I had to fix one thing, my choice would be to focus on the Options Analysis phase.

Defence projects progress through five phases: Identification, Options Analysis, Definition, Implementation, and finally Close-Out. But what really matters is the time it takes from the start of Options Analysis to award of contract. As per the DND Project Approval Directive, a project doesn’t officially start until it enters Options Analysis. Until then, resources applied to it by the Sponsor (e.g., the Army/RCN/RCAF Commanders) and support from central staff are often minimal.

Prior to 2014, Options Analysis was considered to be less important than Definition. In Options Analysis, relatively little funding and resources were allocated to the project, resulting in relatively little real progress during this phase. It wasn’t until the project entered Definition that capital funding was approved and project management and other resources were applied that significant progress was achieved. However, the release of the Defence Procurement Strategy (DPS) in February 2014 changed things. Instead of having to wait for Definition, projects are now able to fully engage with industry at the start of Options Analysis – with the intent that requirements, procurement strategy and offset strategy would be discussed with industry, and recommendations to decision makers would improve.

The expectation was that upon concluding Options Analysis and entering Definition, in most cases many of the key decisions would have been made and it would be a relatively easier path to complete the Request For Proposal and release it. However, achieving this required a significant shift of effort forward from the Definition phase over to the Options Analysis phase.

Options Analysis has improved since 2014. Government and industry have a better understanding of each other’s requirements and capabilities, costs are better understood, as is the potential benefit to Canadian industry.

Room for Improvement

As noted, there is room for improvement, and the following four areas should be of prime consideration going forward.

1) Resources
More resources, human and financial, need to be applied for progress to be made at the speed expected by senior officials (and by SSE). To enable this, either the project Sponsor needs to do this on his/her own volition, or they need to be told to do so, or such resources and funds need to be placed under the direct control of some other person/organization with the express mandate to progress these projects.

2) Communication
Too often the ability for industry and government to effectively communicate is restricted by “Rules of Engagement” levied by procurement officials. Too often every exchange needs to flow through the contracting authority and be reviewed by a Fairness Monitor in order to mitigate against potential industry claims of unfairness and to be better prepared to defend a challenge at the CITT or Federal Court.

3) Realism
Industry, like the government, wants a successful procurement. Unrealistic expectations benefit no one. Government officials indicating they can release an RFP or award a contract by a certain date, even though the chance of this happening is near zero, isn’t helpful and usually causes industry to overspend their pursuit budgets. Similarly, industry indicating they can meet a requirement or stay within a cost estimate, even though it’s very unlikely, isn’t helpful and sometimes causes schedule slippage and cost escalation as officials have to seek amended approvals.

4) Process
It is important to simplify and streamline the process – but that’s easier said than done. It’s easy to mandate a reduction in the amount of paperwork or the number of steps in a process, but just try to make it happen. Recommendations are being formulated within DND, and some changes are anticipated relatively soon, but material improvements to the approval process for the largest and most complex projects, though challenging, must be found.

From my perspective, Defence procurement is not broken – in fact, it is even less broken now than in years past – but it will never be perfect. Significant improvements have been made in recent years, more changes are in process, and more needs to be done. There will continue to be bumps along the way, and it will take time, but it is progressively better.

– Jon Mack spent 32 years in federal government procurement with DND and PWGSC, and now provides consulting services to industry.

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