A Litmus Test for Defence Procurement

Apr 23, 2018

Canada’s military procurement troubles have been well-documented over the last couple of decades, but other Western democracies have similar challenges. Modern procurement is an expensive, complex, and messy business, no matter where it is carried out. In attempting to find alternate solutions to systemic procurement problems, Canada has found itself in the novel position of thinking outside the box. One of the best examples has been the widely publicized saga of the navy’s new supply ships.

With the navy’s two Protecteur-Class replenishment vessels reaching 34 and 35 years, replacing them was identified as a top military priority in 2004, and the project was officially announced in 2006. But it wasn’t long before that first attempt was cancelled due to an unrealistic funding package. 

The need resurfaced in 2010 when the Harper government announced its new National Shipbuilding Procurement Strategy (NSPS) and, in October 2011, had selected Seaspan’s Vancouver shipyard to build two or three Joint Support Ships (as the replacement tanker programme is called) based on the German Berlin-Class design. Since then, a number of issues have resulted in long delays for the Royal Canadian Navy (RCN). 

In 2014, when a fire in the main engineering compartment of HMCS Protecteur forced its early decommissioning, the navy knew it would soon be crippled by a lack of replenishment vessels. It had now been 10 years with no progress on the replacement. 

View from Bridge of MV Asterix during sea trials.

The RCN’s now-urgent need, created by a complete lack of organic capability, forced some otherwise unlikely solutions to emerge. If necessity is the mother of invention, the RCN can at least be thankful that the requirement for a replacement supply ship managed to force two successive governments to push ahead with Project Resolve and select a bid from Federal Fleet and Chantier Davie for a leased solution.

Project Resolve is unusual, not only because it began as an unsolicited proposal, but because it proposed the conversion and eventual leasing of a commercial vessel which would then be managed and partially crewed by a private contractor. 

The resulting programme delivered the support vessel, named MV Asterix, in just two years and saved the RCN from a glaring capability gap that might have otherwise lasted well into the next decade. 

The solution offered by the Chantier Davie consortium, which will operate the vessel on behalf of the navy, is innovative and shows an alternative to traditional procurement models. 

Leasing a major national asset such as a supply vessel is unusual but not unheard of. The UK’s fleet of Airbus A330 Multi Role Tanker Transport (MRTT), for example, is operated under a similar private finance initiative for the Royal Air Force. 

In the MRTT example, the UK government’s review body, the National Audit Office (NAO), concluded that the MRTT programme did not represent value for money, and pointed to a number of issues in leasing such a capability. In Canada’s case, however, the alternative to Project Resolve was to accept a capability gap and a greater dependence on allies for an extended period. The situation was widely seen to be an unacceptable crippling of the navy for several years, and senior leadership saw Project Resolve’s costs as an acceptable alternative.

Such public-private partnerships seem to be trending. The Liberal government recently announced that it is in talks with Chantier Davie to procure up to four new small icebreakers under a deal that could mimic Project Resolve. It appears that the Liberals may see leasing as a way to bypass the woes wrapped up in the Shipbuilding Strategy it inherited? 

In the case of Project Resolve, the lease of MV Asterix is probably going to prove to be the right decision since it delivered a relatively short term solution with little risk to the government. 

Where the UK’s experience in private finance initiatives should be heeded, however, comes over a longer term, multi-vehicle fleet requirement. Criticism of the MRTT programme by the NAO laid the blame on early contract mistakes which led to expensive alterations and additions “Shortcomings in the early stages of the project put the MOD in a position where the operational pressures of an aging fleet and the need to maintain the vital air bridge restricted its ability to deliver a solution which achieved value for money,” wrote Amyas Morse, head of the National Audit Office, in an official review.

Private finance initiatives are undoubtedly an excellent solution to certain problems, but often offer inflexible terms and should therefore be considered very carefully – particularly for critical capabilities. 

The JSS project had been announced, delayed, cancelled, reinitiated and, in January 2018, delayed again. Additional delays in delivering the future Protecteur-Class JSS will almost certainly lead to a rise in the cost of leasing. Based on the NAO assessment, would the option to purchase, rather than lease, prove better for Canada in the long term? 

Clearly, Asterix fills a critical gap while the Navy awaits its two new JSS vessels, however, it would be a mistake for the Liberal government to conclude that Project Resolve represents a catch-all solution for future procurement, but it is a step towards thinking outside the box and finding novel solutions that work.

Ian J. Keddie is a freelance defence writer based in Toronto.