CAF Grows More Top Heavy

By: Lee Berthiaume, The Canadian Press

OTTAWA — The Canadian military has been getting heavier up top and not in the muffin sort of way.

New figures show the ranks of the Canadian Forces' senior brass have been growing at a much faster rate than the rest of the military over the last 15 years as dozens of generals and admirals have been added.

How much faster? There were 130 generals and admirals in January 2018 compared with 81 during same month in 2003 — a 60 per cent increase over a period in which the rest of the military grew by less than two per cent.

Defence chief Gen. Jonathan Vance stood by the additional brass in an interview on Wednesday and said he plans to grow the senior ranks even more in the coming years in response to new demands and challenges.

"The number of general officers in militaries is not a direct reflection or correlation to the number of people you have in your military," he told The Canadian Press. "We don't grow generals because we want more generals."

Defence experts are divided over the rapid rate of expansion, with some saying it is necessary and others warning about the potential draw on resources from other parts of the military, particularly in terms of combat readiness.

One high-profile review conducted in 2010 by then-lieutenant-general Andrew Leslie, now a Liberal MP and parliamentary secretary for Canada-U.S. relations, specifically called for a reduction in senior military positions.

"Initiatives to reduce overhead should target the disproportionate increases in senior management ... aiming to restore civilian and military (executive) positions to roughly 2004 levels," Leslie wrote.

Vance pushed back against suggestions the Canadian Forces is in danger of getting a brass bulge, saying there have been important changes over the past 15 years that require more generals.

For example, he said, Canada has deployed more senior officers to act as liaison officers with various U.S. and foreign commands in response to evolving threats and the need for greater understanding of what is happening overseas.

New priorities have also emerged with regards to space and cyber operations, while Vance said he has specifically appointed senior officers to manage sensitive personnel files such as sexual misconduct and veterans' issues.

"So those are positions that get filled as a result of how it is that we want to improve our own performance in a force that's growing or has gotten new needs," he said.

"I put a general officer in a place where I need a general officer. And there are a number of factors that lead to that. It's not always how many people are you leading. It might be the job that you're doing."

Defence analysts were largely united in their belief that some type of growth at the top of the military over the past 15 years was to be expected — and even necessary.

"The business of defence has become increasingly complex over the last 20 years," Canadian Forces College professor Eric Ouellet said in an email. "So, there is a need for more 'management' and therefore more (senior officers)."

But David Perry of the Canadian Global Affairs Institute was among those who questioned the extent of the "rank creep," especially since the numbers continued to climb even as the Harper government cut the Forces earlier this decade.

Many units were forced to park vehicles or cut training as they faced budget reductions of up to 15 per cent, which has only been reversed in the past couple of years.

"I'm sure there are defensible explanations for all of them," Perry said of the continued increase in senior officers.

"It's just when you step back and look at 50 positions and that kind of percentage increase which vastly exceeds the overall increase in the size of the force, then it's a little bit harder to rationalize the collective picture."

Full Operational Capability of Canada’s New Fighter Jets Won’t Happen until 2031

By Tim Naumetz, iPolitics

The planned government acquisition of a new fleet of 88 fighter jets will not be completed with full operational capability until 2031 – 14 years after defence and procurement officials launched the project last December.

A timetable for the acquisition that was shared with aerospace industry representatives at an industry event on Jan. 22 confirms there will be at least four years of information exchanges with potential suppliers and contract bidders before a contract award in either 2021 or 2022.

Following another two-years set-up phase for aspects involving infrastructure, future maintenance, facility development, operations and “initial cadre training” at the “host nation” producing the aircraft, the first aircraft delivery is scheduled for 2025.

After that, another six years are slated for gradual acquisition of the fleet and pilot training, with an acquisition average of at least 12 jets each year and “steady state full operational capacity” in 2031.

By then, three federal elections will have been held since the project’s launch in December 2017.

2031 is also the year the timetable projects for the retirement of what remains of Canada’s legacy fleet of CF-18 hornets – already upgraded and modernized several times since their acquisition under the government of Prime Minister Pierre Trudeau in the 1980s.

A military expert says the time frame would be routine for a project of similar scope and complexity, but the CF-18 replacement project has been in the works since at least 2007.

“If you’re looking at a project of that degree and complexity, from a genuine start point 14 years is probably not at all out of the ordinary,” said David Perry, senior analyst and a vice-president of the Canadian Global Affairs Institute.

“But the thing is, this file did not start on December 12. The previous government did an exhaustive review of options. The clock on this starts at least a decade ago,”

All of the aircraft from five different companies in Europe and the United States who have been invited to compete underwent a thorough market analysis under the Conservatives. The Harper government suspended its plan to acquire 65 Lockheed-Martin F-35 warplanes following a raging controversy after the 2011 federal election.

“All timelines are estimated and subject to change,” the briefing document said, a copy of which was obtained by iPolitics.

National Defence and Procurement Canada officials at the project’s launch last Dec. 12 said the acquisition is expected to cost between $15 billion and $19 billion, not counting infrastructure, training, other development aspects and sustainment through the fleet’s lifetime.

The estimate works out to an expected cost of between $170 million and $216 million per fighter jet with a fleet of 88.

Perry: 5-year search for Canada's new fighter jets 'ridiculous'

By: Graham Slaughter, CTVNews.ca Writer

An expert on defence budgeting says the federal government’s plan to hold a five-year competition to scout out a replacement for the military’s aging aircraft fleet is “ridiculous” and could be done much quicker.

“The question of why we need five years I think is one that hasn’t really been fully answered,” David Perry, a senior analyst and fellow with Canadian Global Affairs Institute, told CTV’s Power Play.

The Liberal government announced Tuesday that it plans to “explore the acquisition” of 18 Boeing Super Hornet jets until it has settled on a new, permanent aircraft purchase to replace the current fighter jets, which are more than 30 years old.

RELATED STORIES
A timeline of Canada's march to getting new fighter jets

A US Navy Super Hornet aircraft assigned to Strike Fighter Squadron (VFA) 115 makes an arrested landing on the flight deck of the aircraft carrier USS George Washington (CVN 73) Aug 20 2013

A competition will be held to allow the federal government to consider a variety of jet models. Defence Minister Harjit Sajjan said the process is expected to last five years.

It’s hardly the first time the issue has been studied, Perry said.

“The air force leading up to 2010 had made a recommendation, after which point the last government was unhappy with how that proceeded, and basically went through a full analysis starting from scratch. This government came in and has done the same thing,” he said.

“So since 2012, there’s basically been four years of looking at this issue. So I just find it incredulous that it would then take five years in addition to this to actually run a competition.”

Perry also cast doubt on the government’s proposed timeline to purchase the Super Hornets, which are considered a temporary placeholder until a permanent solution is made.

“If you look at the past two big aircraft we’ve purchased through non-competitive processes -- our Hercules and our Chinook aircraft -- those took three and five years, respectively,” he said.

Asked whether Canada could receive the Super Hornet jets by the time the five-year competition is over, Perry said: “I don’t think that’s out of the question.”

Perry insisted that the government could slash the competition’s timeline to as short as one to three years.

“I think five years to actually compete this thing sometime starting next spring is ridiculous. It could start today,” he said.

Sajjan: Jets should arrive by late 2020s

Sajjan defended the government’s time-frame, saying the process must be done “in a thorough manner.”

“By having an open competition that we don’t cut corners on allows us to make sure that we can look at every aspect,” Sajjan told CTV’s Power Play. “This is a significant investment, so we’re going to make sure that we get this right.”

Sajjan said the timeline was developed based on the advice of government officials with knowledge of the fighter jets.

“We’d love to be able to move it faster, but we want to make sure that the process itself is going to be thorough.”

But the five-year competition doesn’t mean Canada’s new jets will be in the sky by 2021. Sajjan said the new aircraft will require new training for pilots and mechanics, and the fleet will be gradually phased in.

“It’ll start as early as in five years, but it will take until the late 2020s to get the full fleet in,” the minister said.

The minister also slammed the previous Conservative government for failing to solve the problem while it was in power.

“We should have replaced our jets a long time ago. The previous government should have done this. Our fighters are over 30 years old,” he said. “We cannot take a chance with flying older aircraft.”

Canada not Required to provide a minimum number of jets to NATO: Report

OTTAWA — A Defence Department report says Canada is not required to provide a certain number of fighter jets to NATO, raising fresh questions about the Liberal government's rush to buy a new warplane.

The government has repeatedly stated the military does not have enough CF-18 fighter jets to both defend North America and fulfil its obligations to NATO, which is why a new airplane is needed sooner rather than later.

But a report published by National Defence's research arm in June 2014 says there is actually no minimum requirement for NATO, meaning any aircraft Canada does commit are completely optional.

A National Defence spokesman says while it's true NATO does not have a set minimum requirement for fighter jets, Canada nonetheless regularly commits aircraft to the alliance to ensure it remains strong and is able to meet any threat.

Defence analyst David Perry of the Canadian Global Affairs Institute says the report highlights the many questions that continue to swirl over the Liberal government's plan to buy a new fighter.

Critics have accused the Liberals of making up stories of a fighter-jet shortage to justify buying a new plane other than the F-35 stealth fighter without a competition.

The Canadian Press

Perry: Defence Budget (not as bad as you think)

BY DAVID PERRY
© 2016 FrontLine Defence (Vol 11, No 3)

Budget 2016 provided a mix of good news, pleasant surprises and disappointing news for Canada’s military. Despite the scant discussion of the Department of National Defence (DND), the budget actually contained several noteworthy defence related items. DND received some modest new money for infrastructure upgrades, incremental funding for its operations in Syria and Iraq, its planned (but unmentioned) 2% increase to its defence escalator, and the third major deferment of DND’s budgeted procurement money in three years.

The latter measure has attracted by far the most attention, and coloured overall perceptions about the impact for DND. But if the 2016 Budget provides a window into the current government’s thinking about defence, it reflects, on balance, a slightly positive signal. The government kept the big budgetary promise it made during the campaign (the good news), introduced a spending review smaller, thus far, than pledged (some uncertainty), provided some unexpected, albeit small, cash infusions (the pleasant surprises), and continued a trend of deferring procurement funds (the disappointing news), but actually demonstrated how difficult it would have been to actually use the money.

The Good News
Despite pre-budget speculation to the contrary, there was no outright cut to DND’s budget in 2016. While two weeks prior to Budget day it was reported that there would be a $400 million reduction to the DND ‘budget’, this reference was to the cash-based spending in the Estimates. The Report on Plans and Priorities for 2016/2017 showed that final, year-end spending for Fiscal Year 2015/2016 was just over $19 billion, whereas the spending requested in the 2016/2017 Main Estimates was $18.64 B.

While the requested funding for 2016/17 is less than for the previous year, this is largely the result of DND asking for less money for Capital equipment funding than the year before, rather than an actual budget cut.

The requirements for Capital funding vary from year to year, so reductions in the amount requested do not equate to an actual cut to this funding.

Notwithstanding the slight year after year budget reductions, DND actually saw an increase to its baseline Vote 1 (Personnel, Operations and Maintenance) operating budget – as planned.

National Defence has a unique funding arrangement, whereby an automatic annual increase to its budget (known as the defence escalator) is built into the fiscal framework. This funding arrangement means that the department automatically receives a budget increase every year, unless otherwise indicated. While Budget 2016 made no mention of this funding, Department of Finance officials in the budget lock-up confirmed that this escalator was in fact provided.

Under the terms of the Canada First Defence Strategy (CFDS) funding arrangements, DND’s escalator increases by 2% each year. That is, each year, the amount by which the National Defence budget increases is 2% larger than the increase of the year before. Of note, this does not mean that either the defence budget (on an accrual basis) or defence spending (on a modified cash basis) actually increases by 2% annually. In fact, the impact of the annual increase to the defence escalator is less than a 2% rise in either the defence budget or defence spending. Nonetheless, the escalator does provide the department with a predictable funding increase, so long as no other cuts or freezes are applied to the defence budget.

The Harper government’s 2015 budget included a pledge that the annual escalator will increase to 3% annually for 10 years (between 2017/2018 and 2026/2027). In its campaign platform, the Liberal Party of Canada pledged to “maintain current National Defence spending levels, including current planned increases.” The additional $361 million DND received for 2016/2017 is evidence that the new Liberal government has stuck to that campaign commitment thus far.

The total absence of any mention that this campaign promise had been kept, however, is curious. What this means about future defence budgetary intentions, and whether DND will see its escalator increase by 3% in 2017, remains to be seen – will this migrate from the “good news” category to “uncertain” or “disappointing”?

Some Uncertainty
The Budget did provide an indication that the government will conduct a spending review – another campaign promise. Whereas the Liberal Party campaign platform had pledged roughly $3 billion in spending efficiencies, the 2016 Budget announced government-wide “annual reductions of $221 million in professional services, travel and government advertising.” This was described as “a first step” in the spending review, with a pledge that other changes would be forthcoming to “better align government spending with priorities.” The Finance officials in the federal budget lock-up were unable to provide any assessment of the impact of the measures announced so far to DND, however, since National Defence accounts for a fifth of Direct Program spending, it is unlikely that defence spending will be spared. So far, however, the spending review is far less aggressive than what had been discussed in the platform.

The Pleasant Surprises
Two modest budget measures were unforecasted good news for defence. First, DND received an unexpected increment for addressing its infrastructure requirements. The $200.5 million over two years is a modest boost for a department with tens of thousands of buildings and works across dozens of bases nationwide. It is nonetheless a welcome infusion of money in an under-resourced sector of its budget. The funding, to be dispersed across upgrades to jetties, air fields, ranges, housing units, reserve armouries and northern operating infrastructure, represents investments DND will no longer have to fund within its own budget.

The budget also contained incremental funding for the mission in Syria and Iraq. For most of the past decade, the Canadian military has funded some or all of its incremental expeditionary mission costs out of its existing budget envelope. For example, during the mission in Afghanistan, DND had to absorb over $3 billion dollars in operational costs out of its existing budget. Redirecting funding in such a manner to offset unforeseen contingency operations makes it difficult to conduct sound long term budget planning. If this indicates a return to the previous practice of providing DND with incremental funding for the bulk of its operational costs, it will be a welcome change. In recent years, the $306 million provided in Budget 2016 would have been redirected from other planned DND budget items.

The Disappointing News
The aforementioned items were all positive news for DND’s Operations and Maintenance, Personnel and Infrastructure funds. In contrast, the outlook for its Capital Equipment purchases wasdisappointing, as some of the funding that had been set aside in the fiscal framework for procuring Capital equipment was removed.

A total of $3.7 billion in DND’s accrual space that had been set aside in the fiscal framework between 2015/16 and 2020/21 was removed and redistributed evenly between 2021/22 and 2044/45. The accrual space is a budgeting construct that had been introduced with the CFDS in 2008. It set aside a portion of DND’s budget to account for the annual amortization expenses associated with the purchases of major defence equipment.

The funding construct is somewhat analogous to a home mortgage in the sense that, for most Canadians, the purchase cost of your home does not count against your monthly budget, and instead only your mortgage payment does. To relate this back to the Capital Equipment funding dynamic, while the Bank (in this case Finance Canada) has to pay the seller in full for the cost of your house (or for DND, Irving or Seaspan for naval ships), you only pay the Bank your monthly mortgage payment (for DND, its annual amortization charges for the ships). While you might have the money set aside to pay your monthly mortgage payments, if your real estate agent can’t actually close a deal for you to buy a house, you don’t actually have to pay your mortgage (even though you could have, financially).

The 2016 budget made clear by publishing a table depicting both the previous and revised profile of the accrual space that this basic dynamic explains why DND could not use all the money set aside.

The CFDS created the accrual space construct for DND in 2008 on the premise the DND could immediately start recapitalizing all of its combat fleets. To make full use, right away, of all the accrual space set aside for this recapitalizaiton would have required several 10s of billions worth of purchases and delivery of major equipment, in just a few years. While some progress has been made, the full scope of planned reinvestment simply has not happened on schedule, because the procurement system cannot move the money fast enough.

As a result, the Department of Finance is moving the money into the future, not to prevent purchases, but because DND has been unable to buy equipment.

In doing so, the funding was redistributed evenly over the subsequent 25 years, increasing the annual budget allotment for Capital equipment. This will actually provide defence with a small degree of additional flexibility to account budgetarily for additional equipment purchases in future years.

The reaction to the defence portions of Budget 2016 has been largely pessimistic, particularly within the defence industry, due to the reprofiled Capital funding. The defence section placed by far the largest focus on that budget measure, understated the impact of the infrastructure and operational funding, and did not mention the escalator increase at all, so this reaction is understandable. This sentiment also likely reflects a widely held expectation that the Liberals would reduce defence spending. For those expecting that outcome, the Budget certainly lent itself to that interpretation.

The Future
It is impossible to know, at this point, what the future intentions are. This Liberal government inherited a situation where the procurement system remains unable to make full use of the funding available. Realistically, the new government could have done little to fix that situation in only five months in office. After all, the previous government was unable (or unwilling) to do so in the decade they were in power. Thus, the government may have been happy, or not, to remove this funding from the fiscal framework and punt it into the future. It does not seem as though they had much choice. Whether they choose to fix this situation to prevent it from happening again in 2018 will be the true test of whether they were happy to save the money in this budget, or actually would have preferred to spend it.

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Dave Perry is the Senior Analyst of the Canadian Global Affairs Institute.

Perry: Our broken military procurement system

Written by David Perry, The National Post 

Every two years, apparently, the Department of Finance announces that Canada’s system for procuring military equipment is under-performing.

The 2016 budget had little to say about defence, but what it did say was depressing. A total of $3.716 billion in funding that was set aside for capital projects is being removed from the fiscal framework over the next five years, and reallocated out into the future. The funding, intended to buy ships, aircraft and vehicles for the military in the short term, has been shoved out into the distant future, to be used between 2021 and 2045.

Sadly, this is a reoccurring theme. The same thing happened in 2012 and again in 2014. In those years, the Harper government similarly pushed that exact same pot of funding into the future. In total, the Tories deferred $6.7 billion in funding pledged for major defence purchases. At the time, there was significant speculation then-prime minister Stephen Harper had done so as part of the effort to balance the budget.

Since Prime Minister Justin Trudeau’s “modest” deficits will total $113 billion over five years, this shifting of procurement funds is certainly not part of an effort to curb spending. Rather, it reflects a system of procuring defence equipment that simply cannot deliver on schedule. The funds can be moved largely because they “cannot be spent due to unforeseen delays in planned projects.” In essence, no matter how badly the equipment is needed, the government just isn’t able to get this money out the door on schedule.

he Budget Plan contains at least a partial explanation why this is. The cumulative military recapitalization plans outlined by the Martin and Harper governments were extremely aggressive. They were intended to procure tens of billions worth of new equipment in a few years. But adhering to that schedule would have required a major expansion of the procurement system’s capacity.

Instead, a procurement workforce that lost a huge amount of capacity during the 1990s grew only marginally during the 2000s, and was then hammered by Harper’s attempts to balance the books. At the same time, longstanding problems defining and communicating military requirements and costing projects persisted, and new, more onerous policies regarding investment planning and managing major projects were introduced, which meant that procuring military equipment took more time and effort. Major problems with the procurement of military helicopters and fighter jets flagged by the auditor general contributed to a loss of trust in the bureaucracy, resulting in new governance regimes that added further steps to the procurement process. As a result, the aggressive schedules proved increasingly unrealistic.

This all drives home the importance of the commitment the budget makes to improving the process for making major defence purchases over the coming year. No matter what form the revised defence policy takes, it will require further, significant spending on military re-capitalization. Turning the available funding into actual military equipment requires sustained attention from the government.

The creation of an ad hoc cabinet committee for major procurement files is a positive indication of a commitment to improve the system. This needs to be matched by increasing the capacity of the system by growing the workforce and increasing its level of expertise. As part of the defence policy review, our true priorities need to be identified and have resources concentrated on moving them forward.

Finally, few areas of government stand to benefit more than defence procurement from the government’s pledge to reorient toward actual outcomes. Inordinate focus is placed at present on complying perfectly with policies interpreted to demand zero risk to the government, rather than the actual acquisition of military equipment.

If this situation doesn’t change, the 2018 budget will be telling the exact same story of a defence procurement system unable to deliver what Canada needs.

National Post

Dave Perry is a senior analyst at the Canadian Global Affairs Institute.