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WILLIAMS: Canada’s Naval procurement costs are skyrocketing — how did this happen? - VTBeyond

WILLIAMS: Canada’s Naval procurement costs are skyrocketing — how did this happen?

In a recent op-ed in this paper, I outlined how a distorted procurement process led to a ten-fold increase in costs, from $26 billion to $286 billion, for 15 Canadian Surface Combatant (CSC) ships for the Royal Canadian Navy. There isan obvious follow-up question — where were the red flags that should have alerted the government to these escalating costs? Allow me to suggest three fundamental failings and to recommend solutions.

First, our inability to ask the right question. Last year, the Standing Committee on Government Operations and Estimates requested that the Office of the Parliamentary Budgetary Officer (PBO) undertake a costing analysis to build the CSC. Unfortunately, it was not tasked to report on the costs to both build and to maintain the ships throughout their lifetime. Its report, tabled in Feb. 2021, identified acquisition costs of $77.3 billion but, as it was not requested to do so, made no estimate on the follow-on costs to operate and maintain these ships.


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Equally puzzling is that none of the bureaucrats or ministers involved in this program have been questioned on the long-term costs. Fact is, acquisition costs only represent about 30% of the total life-cycle costs of a capital good. Internal costing documents within both Canada’s Department of National Defence (DND) as well as the U.S. Department of Defense utilize a ratio of 2.7 in comparing long-term support to acquisition costs. Applying this ratio to the PBO’s estimate, yields long term costs of $208 billion and total costs of $286 billion. Surely, a public debate on a program this costly is worthwhile.

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Second, faulty reporting. In 2018, DND published its first Defence Investment Plan (DIP) and updated this plan in 2019. The DIP is designed to offer Canadians a comprehensive view on hundreds of projects and contracts and to share the latest available data to reflect changes in the spending profile.

Unfortunately, the data contained in this report excludes the long-term costs of the CSC or any other acquisition. Had it included this cost information, the unaffordability issue would have been determined years earlier and alternative options could have been pursued. Going forward, the DIP should include a comprehensive schedule of all capital programs with full life-cycle costs displayed year-by-year. It should be updated and reviewed annually by the Standing Committee on National Defence.

Third, the lack of a single minister accountable for defence procurement. In this regard, amongst our closest allies, Canada stands alone. As I outlined in my book, Reinventing Defence Procurement: A View From The Inside, the overlap and duplication of the roles of the Minister of National Defence and the Minister of Public Service and Procurement Canada (PSPC), muddies accountability and squanders precious scarce resources.


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Fact is, even today we cannot identify the minister accountable for the CSC debacle. As long as accountability is shared, the discipline, rigour and attention to detail present when one single individual is held to account will be lacking. Creating a “Defence Procurement Organization” with one minister in charge will also allow for the creation of system-wide, publicly accessible performance measures.

Such measures, not in existence today, are vital in encouraging excellence, in identifying and addressing problem areas and in facilitating proper oversight. In Dec. 2019, the prime minister directed Anita Anand, Minister of PSPC, to “bring forward analyses and options for the creation of Defence Procurement Canada.” To-date, we have had no update on this initiative.

Our elected officials have a responsibility to manage the funds we entrust to them. If they are unwilling or unable to do so, we should elect others that can and will.

Alan Williams is a former assistant deputy minister of materiel at DND. He is now president of The Williams Group providing expertise in the areas of policy, programs and procurement. He has authored two books, Reinventing Canadian Defence Procurement: A View From the Inside, and Canada, Democracy, and the F-35. He can be reached at williamsgroup691@gmail.com.


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