Military procurement chief wants defence firms to stop overpromising, underdelivering
April 20, 2023 By Lee Berthiaume, The Canadian Press
OTTAWA — The Defence Department’s top procurement official wants defence companies to put more focus on delivering what they have promised and less on trying to win the next contract.
Assistant deputy minister of materiel Troy Crosby says he respects that companies are in the business of trying to make money. But he says they also need to meet their commitments to the federal government, the military and Canadians.
“We all recognize they need to be able to earn a fair profit, and they need to know what work is coming,” Crosby said in an exclusive interview with The Canadian Press.
“But when we’re going through the industry consultation processes, and then we’re into contract and contract delivery, industry needs to be able to hit the mark. They need to be able to hit the milestones.”
Canadians have been inundated with reports of cost overruns and delays when it comes to the purchase and delivery of new military equipment for the Canadian Armed Forces.
Questions and concerns have been raised about Ottawa’s role in such delays, with dozens of former senior politicians and public servants having signed a letter released this week calling for more investments from the government.
That includes putting more money into ensuring the Defence Department has enough procurement experts, after The Canadian Press reported last week on an internal report that found 30 per cent of such positions were empty.
“Critically, the government needs to invest in improving DND’s ability to spend its budget in an expeditious and timely manner,” reads the letter, which was organized by the Conference of Defence Associations Institute.
The letter also calls for the Trudeau government to commit to meeting NATO’s target of spending two per cent of Canada’s gross domestic product on defence. Canada spent 1.29 per cent of its GDP on the military last year.
Crosby was quick to acknowledge that industry isn’t to blame for all of the problems facing the military procurement system, with federal officials and Armed Forces bearing responsibility for some of them while others are outside anyone’s control.
However, he added, “if I could write to Santa Claus and look for some things that I would like to see happen … on an industry side, I would like to see probably less — or a shift in the balance away from — business development to delivery.”
Defence companies like Airbus and Sikorsky Helicopters have come under scrutiny as they have struggled to make good on their promises to deliver search-and-rescue airplanes and maritime-patrol helicopters.
The government announced in 2016 that it was buying 16 Kingfisher planes from Airbus for $2.75 billion, at which point the European aerospace giant said the aircraft would be ready to fly search and rescue missions by 2020.
That didn’t happen as officials are still testing to ensure the Kingfisher, which is based on a specially modified version of the Airbus C-295 military transport used by more than a dozen countries around the world.
Some of those modifications were required to meet the Royal Canadian Air Force’s mandatory requirements, while others were optional and added by Airbus in an apparent effort to improve its bid.
Meanwhile, Sikorsky still hasn’t delivered on its promise to deliver a fully operational fleet of Cyclone helicopters after nearly two decades of developmental issues and delays, software problems and tail cracks.
The U.S.-based company, which is owned by Lockheed Martin, first won the helicopter contract in 2004.
When defence and procurement officials evaluate bids submitted by companies for multibillion-dollar contracts, Crosby said, companies “get points the more they offer against what we have valued.”
“So they’re motivated to put more on,” he said. “That’s how you win. But do they lean too far? And then do we find ourselves with a risky solution that isn’t actually going to be delivered?”
The Defence Department has adopted new ways to determine whether companies can actually meet their commitments, one of which was used for the first time during the search-and-rescue airplane competition won by Airbus.
“It was the first time,” Crosby said of the test used for the Kingfisher. “And we’ve learned from that because it could have been done better. We’re now bringing the same philosophy to other competitive procurements.”
Crosby said companies aren’t paid until new equipment is actually delivered, which is one of the reasons the Defence Department lapsed or failed to spend $2.5 billion in the last fiscal year.
Whether that provides sufficient motivation is questionable as delays and other problems have often resulted in taxpayers paying more for the same equipment.
For example, the Kingfisher contract is currently valued at $2.9 billion. Meanwhile, the Air Force has been forced to relocate and reassign aircraft to continue providing search-and-rescue services after its ancient Buffalo planes were retired last year.
Defence officials have been talking to allies about ways to establish better schedules when it comes to military procurement, Crosby said, while there is a growing push toward buying more off-the-shelf equipment without Canadian-specific modifications.
But while emphasizing the need for government and industry to work together to find solutions, Crosby said he wants companies to be more forthright when it comes to what they can really deliver — and when.
“We need to have genuine conversations about what is realistic,” he said. “We need to make sure through our consultations with industry that we are establishing good planning baselines on how long things are going to take.”