Thursday, June 9, 2016

The CF-18 and procurement: Oh God, here we go again

By Alan Williams, iPolitics 

Many people believe we can’t trust politicians to live up to their campaign promises. Maybe they’re right. But there was one item in the Liberals’ 2015 campaign platform that I really thought was going to happen.

“We will immediately launch an open and transparent competition to replace the CF-18 fighter aircraft,” reads the Liberals’ platform document. “The primary mission of our fighter aircraft should remain the defence of North America, not stealth first-strike capability.”

Now we’re told that the government may have made up its mind to purchase Super Hornet fighter jets to replace the CF-18s, and is casting around for a political narrative to justify buying them without a competition. Call me na├»ve, but I felt the Trudeau Liberals could at least be counted on to keep their word on replacing the CF-18s through an open competition — for three excellent reasons.

Reason one: No government in its right mind would want a repeat of the disaster that befell the Conservatives when they announced the sole-source purchase of the F-35. On July 16, 2010, the Harper government announced it would purchase the F-35 as it was “the best plane at the best price.” It went on to claim that the F-35 offered the best industrial benefits for Canadian businesses and the highest level of interoperability with NATO allies. It also claimed that no competition was necessary because one had already taken place.

As the person who signed the Memorandum of Understanding committing Canada to Phase II of the F-35 program, I was in a position to know that none of those statements was true. From my own articles, from the criticisms of the Parliamentary Budget Officer and the Office of the Auditor General, from probing questions by the media and members of the opposition parties, Canadians learned that our elected officials were knowingly and purposely misleading them.

"Unless the government can contend that a contract must be sole-sourced for national security reasons (and in this case, it can’t), it has no legal basis to undertake a sole-source contract.

When citizens can’t trust their elected officials, those officials relinquish their right to govern. Less than a year into their mandate, I was certain that the Trudeau government would not want to share the last government’s stigma.

Reason two: Sole-sourcing is bad business. Only governments that have little or no understanding of defence procurement resort to sole-sourcing purchases. While there are rare circumstances which make sole-sourcing appropriate (an unforeseen emergency, for example), they don’t apply here. Anyone who’s ever hired a contractor understands that when you tell someone you’re going to buy their product, you lose all bargaining power.

Sole-sourcing is bad policy. It’s bad for industry because it imposes no incentive on the seller to provide high-quality jobs. It’s bad for the taxpayer because sole-sourced acquisitions can cost up to 20 per cent more than those purchased through a competition.

And sole-sourcing is a double disaster for the military. The extra cost comes out of the limited National Defence capital budget. And without an open, fair and transparent competition, you can never be certain you’re getting the best product.

Reason three: the law. Unless the government can contend that a contract must be sole-sourced for national security reasons (and in this case, it can’t), it has no legal basis to undertake a sole-source contract.

In Canada, defence procurement is subject to the Agreement on Internal Trade (AIT). Article 506.2 of this agreement lays out the requirement for competitive tenders in all cases — unless clearly identifiable exceptional circumstances exist. No such exceptions apply to the CF-18’s replacement. The only way Ottawa can sole-source this contract is to invoke article 1804 of the agreement, citing national security. Whether any company would end up challenging the government in court isn’t certain — but for a government to undertake an action that cannot be legally justified certainly suggests moral decay.

To this day, nobody seems to know why the Conservative government remained so steadfast in its commitment to sole-sourcing the F-35. For more than five years it was offered a great many opportunities to take an off-ramp and commit to an open, fair and transparent competition. It chose not to. It paid a price.

The current government’s contention that it needs the jets as soon as possible to meet the country’s defence needs is mere nonsense. Spinning this as an “interim” acquisition is insulting. The government has a detailed statement of requirements for the CF-18’s replacement, which means it could choose that replacement less than a year after launching a competition.

It would be simple. It would be fair. It would be legal. And it would send the Canadian public a message: Promise kept.
The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

Alan Williams is a former assistant deputy minister of materiel at the Department of National Defence. 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”.