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Monday, December 5, 2016

Williams: 3 ways the Liberals are making a mess of Defence Procurement

By: Allan Williams,

The government’s strategy to replace Canada’s CF-18s is reflective of a government that either has no comprehension of how to conduct the business of defence procurement, or understands the business all too well but has put political expediency ahead of the best interests of the military.

There are three fundamental problems with the decision to sole-source for 18 “interim” Super Hornets:

• First, whether or not you believe there is a “capability gap,” the fact is that an open, fair and transparent competition can be concluded within one year. Normally, a competition could take up to four years: two years for the military to prepare its statement of requirements (SOR) and two years for the civilian authorities to conduct the competition.

In this instance, a shortened time period is feasible. The military’s SOR has already been prepared. In its current form, it is wired or fixed so that only the F-35 could bid successfully to replace our current jets. However, these biased criteria are few in number and easily modifiable to ensure fairness to all suppliers. As such, it would take no more than a few weeks to redraft the SOR. In addition, over the past six years, the potential suppliers have been visited, have filled out questionnaires and have been subject to inspection ad nauseam. This consultative time need not be repeated. The process can easily be concluded within 12 months.

• Second, the “interim” solution is illegal. The government is wrong when it claims that an “urgent” need allows it to bypass competition. The specific wording in article 506.11(a) in the Agreement on Internal Trade reads in part: “Where an unforeseeable sense of urgency exists …” Note the word “unforeseeable.”

Bad planning is not an excuse for sole-sourcing. A “capability gap” that was allowed to grow over many years is hardly “unforeseeable.” The article was designed to allow for sole-sourcing in the event, for example, that the government announced that it was sending our troops into a theatre of operation and there would be insufficient time to conduct competitions to provide the troops with the goods and services they require. Surely, it is not unreasonable for us to hold our government leaders accountable for obeying the law.

• Finally, a problem with acquiring the Super Hornets is the incremental cost of such an option. The capital budget of the Department of National Defence is already stretched to its limit. To impose upon it an extra burden of billions of dollars is unconscionable and unnecessary.

It’s very easy to identify the losers in this flawed strategy. The government, for its galling hypocrisy; the military, as its capital budget is pressured and it is forced to endure another decade without a long-term replacement of its jets; us taxpayers, as it is our billions of dollars being squandered; and Canadian industry now deprived of high-quality jobs that would have been guaranteed under a competition.

However, this delaying tactic does produce two winners. First, Boeing and its shareholders for having been given a multi-billion dollar gift. Second, ironically and undoubtedly much to the chagrin of the prime minister, Lockheed Martin. The F-35 would have a much harder time winning a competition now than it will in five years. While it has been declared operational by the U.S. Marines and Air Force, the fact is that not all software has been installed. Five years from now, I have little doubt, all the software will have been implemented with the bugs worked out.

Furthermore, in five years the unit price for the jet will have continued to decline.

To borrow from Shakespeare, the Liberal party may find itself “hoist with (its) own petard.”
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Alan Williams is a former assistant deputy minister of matériel 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.