NDDN Committee Report

There is likely no more noble an act than putting your life at risk for your country. This is what our men and women in the military do. In theatre operations, whether they succeed or fail, whether they live or die, may depend on whether they have obtained the right equipment at the right time. Our report can have a dramatic impact on the answers to these questions. We must therefore spare no effort to make the Canadian defence procurement process the best it can be. We must not settle or compromise in our recommendations.

As we have heard the Canadian defence procurement process is complex, involving many organizations. If we are to optimize the process we must look at it comprehensively. In particular we must address not only the procurement process but as well the associated industrial and legal frameworks.

We do not think that the recommendations in this report go far enough in addressing the procurement process for military equipment. While we believe that our soldiers deserve the best, we nevertheless need to make sure that the quality-price ratio is above reproach. We are particularly concerned about the trend towards procurement without a tender process, because of purported urgent requirements. We cannot constantly use national security or mission imperatives as an excuse for bypassing for the tendering process, particularly when we know that the equipment will only be ready after the missions are over.

It is also essential for Canadian taxpayers to receive value for money, and for the spending to genuinely lead to reinvestment in our own industry and in our regions. We are particularly concerned about the extent to which the current government is abdicating our country’s sovereignty by literally delegating its contacting authority to foreign companies in awarding maintenance contracts. Our aerospace industry, which depends on such contracts, is completely at the mercy of these companies. We have also noticed that there is a trend towards turnkey solutions that give the manufacturer control over maintaining the equipment being sold to our Armed Forces.

Lastly, we believe that it is important to introduce more satisfactory check and balance measures that would enable us to better evaluate the sustainability of our procurement evaluation policy. In order to do so, we recommend:

1. introducing a new structure (military procurement agency)
2. making the Minister of National Defence more accountable
3. establishing a better balance between civilians and military personnel at the Department of National Defence, specifically with respect to the procurement decision-making process, and
4. establishing the capacity to provide more than internal checks by creating a body that has full judicial authority to reopen contracts that have already been awarded and to be able to take civil and criminal action where appropriate (Inspector General).

Based on the evidence we have heard, the Liberal Party of Canada would recommend the following 6 recommendations be adopted. The first three deal with the defence procurement process, the fourth deals with the industrial dimension, the fifth deals with the legal framework and the last one deal with the creation of an Inspecteur General with full auditing and judicial powers with the capacity to lay charges and reopen contracts.

1. DEFENCE PROCUREMENT PROCESS

As we have heard, today no one minister is accountable for defence procurement. This is totally unacceptable. Accordingly,

RECOMMENDATION 1
The contracting resources from Public Works and Government Services Canada (PWGSC) and the procurement resources from National Defence (DND) should be combined into one agency called Defence Procurement Canada (DPC) reporting to the minister of National Defence.

This will finally establish one focal point of accountability for defence procurement. It will also, reduce the costs and shorten the cycle times for defence procurement. This recommendation is fundamental to reforming the defence procurement process.

Now that one minister would be accountable for defence procurement we can demand an accounting of performance. Accordingly,

RECOMMENDATION 2
The minister of National Defence should report annually:
A) On the full life cycle costs of its major capital programs, comparing actual vs. planned costs.
B) On actual vs. planned progress on its major capital programs.  
Variances from plan should be identified under the headings:
   a) Waiting for government approvals;
   b) Internal delays;
   c) Contractor delays; and
   d) Change in scope.
C) On the planned vs. actual support (national procurement) costs.

It is essential for any decision-making process to be able to pass the smell test. Canadians must know that the whole process is transparent and that there is no appearance of conflict of interest at any step in the procurement process. Rightly or not, the procurement of equipment for the military by the military too often leaves people doubtful or even cynical about the validity of the process. Therefore:

RECOMMENDATION 3
Civilians should have more of a role to play in the decision-making process for procurement at the Department of National Defence. It is essential that we be able to strike a better civilian/military balance within the Department of National Defence.

2. INDUSTRIAL DIMENSION

With billions of dollars expended annually on defence procurement, it is only natural that our Canadian defence industry should reap significant benefits and that Canadians benefit from the addition of skilled job opportunities. Yet, our policy framework is virtually non-existent and decades old. At the present time only procurements involving munitions and shipbuilding are limited to companies in Canada.  While other countries are reevaluating their defence industrial policy we are languishing behind. Accordingly,

RECOMMENDATION 4
The minister of Industry Canada should lead an evaluation of our industrial base with a view to recommending which capabilities should be retained in Canada.

3. LEGAL FRAMEWORK

The Canadian International Trade Tribunal (CITT) has been mandated to hear complaints stemming from defence procurements. The tribunal provides a valuable redress mechanism. However, as we have heard its mandate is too broad (A company need not even bid in order to submit a complaint) and its standard for assessing conduct is too severe (reasonable behaviour is not good enough). Furthermore, in coming to decisions on these large, complex procurements it should be mandatory that those individuals making the determinations have procurement experience. Today none do. Accordingly,

RECOMMENDATION 5
The minister of Finance should:

1. Modify the mandate of the CITT so that a standard of reasonableness be the basis of rulings and that to be accepted, a complainant must have bid and must show that were it not for the grievance, the complainant would have won; and
2. Appoint decision makers to the CITT that possess procurement    experience.
4. INSPECTOR GENERAL

Procurements have to pass the "smell test." We cannot continue to select equipment by "drawing a line in the sand" - to quote a phrase used by CDS General Hillier. We need to know that what we are buying is the result of a genuinely competitive process that best meets long-term needs at the best cost.

The best way to achieve this is to appoint a defence department Inspector General with full powers to examine the actions of the government, the defence department and the contracts. This IG would audit operations to ensure they are in compliance with general established government policies. The office would have a mandate to seek out waste and investigate possible misconduct or misuse of funds. Furthermore, this new IG should have power to reopen contracts and lay charges if necessary. Accordingly,

RECOMMENDATION 6
The Department of National Defence should establish an Inspector General (IG) position, which would be provided with the tools and financing needed to function effectively. The position would report to the Minister of National Defence and have all the powers required to intervene, check and investigate at both military and judicial levels.

It is essential to have within the Canadian Armed Forces an independent body accountable to the Minister with the authority to evaluate and monitor every step in the procurement process to prevent any administrative tangles and ensure that the interests of taxpayers and the military converge. However, what is needed is a body that has powers beyond mere auditing and recommendation functions. In the public interest, what is needed is not only the power to prevent, but also to intervene and conduct judicial inquiries that could even reopen contracts and lay criminal and civil charges if there are abuses, or if there is any misappropriation, fraud or the inability to comply with the objectives set out in the procurement contract.

Many countries, including France, Great Britain, Poland, Romania and the United States, have a body like this, whether under the aegis of the Department of Finance, the National Police or the Department of Defence.

CONCLUSION

The Liberal Party of Canada recommends a set of additional recommendations to the report to ensure that the military equipment procurement process is more transparent, more effective, and more respectful of taxpayers. The approach should be a middle ground between the legitimate needs of our service personnel and an undeniable need to establish guiding principles for a procurement process that shows accountability, accompanied by a structure that can prevent and remedy any serious complications or blunders. Needless to say, we feel that the new structure we are proposing will allow for a flexible decision-making process that can deal with urgent (and special) requirements.

We believe we should provide good equipment for our troops, but we also believe in due diligence. We need to bring checks and balances to National Defence by reorganizing the department to create more transparency to the procurement process and ensure accountability for the decisions that are made. We need an independent expert agency that can give us confidence that any acquisition is based on true merits and not perceived as the result of individuals picking their personal favorites.

All of the additional measures proposed, under the authority of the Inspector General (IG) would improve the current procurement process, meet the military objectives established by the Government (and by our Armed Forces) and protect the public interest.