Federal Budget turns a blind eye to Canada's military needs

By David Krayden, National Post 

Opinion: Were the Liberals ever serious about their big defence plan? They cut defence spending in 2018 and are ignoring it in 2019

Last week’s federal budget offered relatively modest spending with targeted funding after years of spending from a government that seemed to believe the deficit will solve itself. Unfortunately, the Canadian Armed Forces again escaped the finance minister’s gaze and for the second consecutive year, national defence is conspicuous by its absence from the budget.

A Canadian soldier provides security as medics assist German troops during a medical evacuation demonstration on the United Nations base in Gao, Mali, on Dec. 22, 2018.Adrian Wyld/CP

You might recall the fanfare when Defence Minister Harjit Sajjan released the Liberals’ defence policy review in 2017: “Strong, Secure, Engaged.” It was already more than six months overdue and there was a feeling among defence analysts and most journalists that the Liberals had to deliver a document that suggested serious resolve.

HMCS Windsor, one of Canada’s Victoria-class long range patrol submarines, returns to port in Halifax on June 20, 2018. Andrew Vaughan/CP

Sajjan promised a whopping 70-per-cent increase in defence spending, pledging to drive funding up to $32.7 billion from $18.9 billion. Naval ships, combat-support vehicles and 88 fighter jets would be replaced through “an open and transparent competition.”

But there was one large disclaimer. All of this would happen over the next decade, assuming the realities of 2017 would remain constant during that period. How well would any government have done predicting the military needs of 1942 based on the geopolitics of 1932?

In any case, we’ve yet to see any indication that the Liberals were serious about the plan. They cut defence spending in 2018 and have ignored it in 2019.

A Canadian soldier prepares to leave base in Gao, Mali, on Aug. 1, 2018, to take part in an operation as part of the United Nations mission in that country. AFP/Getty Images

Was there an alternative motive to the 2017 defence review? Canada was still in the midst of NAFTA negotiations with an American president who was increasingly critical of our defence contribution, especially as it pertained to NATO. Donald Trump had repeatedly cited Canada as one of the deadbeat members of NATO that refuses to fund its military at two per cent of its GDP — despite having promised to do so and notwithstanding that we have done so in the past. With Budget 2019, Canada is no closer to meeting that pledge, spending 1.23 per cent of its GDP on national defence.

A photograph taken out the window of a Canadian Forces CC-150 Polaris tanker shows a CF-18 Hornet fighter jet being refuelled in the air over Vancouver on Feb. 18, 2010. Master Corporal Andrew Collins, 14 Wing Imaging

Prime Minister Justin Trudeau’s desultory approach to defence capital acquisition may well be defined by the fighter jet fiasco that grows more bizarre with every twist and turn of the story. It was the Liberal government of Jean Chrétien that joined the F-35 Joint Strike Fighter development program. It was Stephen Harper’s Conservative government that dithered on procuring the aircraft. It is the current Trudeau government that decided to start the whole process again. In the meantime, the Liberals considered buying some interim Super Hornets from Boeing before ultimately deciding to pick up some used Australian F-18s — just as the Royal Australian Air Force took delivery of its first F-35s.A

Perhaps the best speech of this year’s just-concluded Manning Networking Conference in Ottawa was delivered by former chief of defence staff Gen. Rick Hillier. Hillier, whose career was defined by integrity and a politics-be-damned leadership style, told the conservative gathering that if Canada “buys a fighter aircraft that is anything but the F-35, we will have lost our minds.”

The last prime minister who consistently funded the Canadian military was Louis St-Laurent. All successive administrations — Liberal and Conservative — have to varying degrees played the shell game with defence spending. While lauding a capital acquisition project here, they will starve another project over there to pay for it. While promising consistent funding, they will squeeze the military at the first opportunity when a fiscal need emerges elsewhere.


They will squeeze the military at the first opportunity

With defence procurement being so hamstrung by petty politics and policy inertia, no amount of government funding can guarantee a combat-capable military if those dollars are not efficiently and effectively spent. As Hillier said, “Our acquisition process in Canada, in particular for the Department of National Defence, is abhorrent. It is pointless to give the Department of National Defence increased spending if you then tie them in a Gordian knot where they can’t actually spend the money.”

Sadly, that’s exactly what we’re doing.

— David Krayden is a former Royal Canadian Air Force public affairs officer and legislative assistant on Parliament Hill. He has worked in print, radio and television journalism and is currently the Ottawa bureau chief for The Daily Caller, a Washington-based media outlet.

Bad News for Defence: Budget 2017

By: David Perry, CGAI Senior Analyst

On March 22, the Government of Canada published a federal budget with nothing but bad news for Canada’s Department of National Defence (DND). This budget, the second for Prime Minister Justin Trudeau has removed a massive amount of money - $8.48 billion - set aside to buy Capital equipment and build infrastructure over the next twenty years. This shift, the largest ever re-profiling of the money earmarked to buy new kit and buildings for the military, is bad news for three reasons. First, the budget indicates that either the defence procurement system the Liberals inherited has not improved over the last year, or that the Trudeau government is choosing to remove the funding. Second, while defence funding has been shifted before, never have defence dollars been removed more than six years into the future. This budget removes defence funding allocated out through 2035-36, taking away future procurement funding that was scarce to start with. Third, the budget signals that Canadians should expect their new defence policy to reflect a military with significantly less money than it had prior to March 22, 2017.

Budget 2017 And Defence – Disappearing Capital Funds

The only statement of major significance for DND in Budget 2017 relates to a major shift in procurement funds. This is the fourth such shift of procurement money announced since 2012, but the first to announce a reallocation spanning more than six years (these shifts are outlined in Table 1 below). As the budget states:

The reallocation of $8.48 billion of funding from the 2015 – 16 to 2035 – 36 period to future years is required to accommodate two key capital projects: the procurement of fixed-wing search and rescue aircraft, and the modernization of light armoured vehicles that were originally scheduled to receive only partial upgrades. While there is sufficient funding available for these projects, the expected profile of large-scale capital funding does not align with the timing of expenditures associated with these projects.1

Aside from the two projects identified in the budget plan itself, finance officials in the budget lock-up were unable to identify any other projects implicated in the shift of funds. This leaves the move largely unexplained. The contract for the Fixed-Wing Search and Rescue Aircraft was signed late last fall and the one for the most recent tranche of Light Armoured Vehicle Upgrades announced in February 2017. The contract for the former is worth $2.4 billion in the acquisition stage, while the one for the latter only $440 million. Even if both projects were cancelled completely or delayed in their entirety beyond 2036 (and there is no indication that they were cancelled or delayed at all) they could account for at most $2.84 billion of the funding that is being shifted. This leaves another $5.6 billion worth of shifted funds totally unaccounted for, and the overall move effectively un-explained.

Procurement Problems or Reductions by Choice?

The Trudeau government inherited a procurement system chronically unable to spend all of the funding allocated for DND to buy new equipment and build infrastructure. In his first budget in 2016, Finance Minister Bill Morneau reprofiled $3.7 billion in Capital funds, citing an inability to spend the money. Having been in office for only five months at the time of the 2016 Budget, the Liberals cannot not be faulted for having shifted money that the previous government was unable to spend.

Twelve months later, however, responsibility for the shift of Capital funding outlined in the 2017 Budget, more than twice as large as any that preceded it, falls squarely on the Liberal government. Either $8.48 billion worth of procurement delays have developed since March 2016, or the money was reprofiled for other reasons.

Table 1: Budgetary Reprofiling of DND Capital Funds ($B)
	11/12	12/13	13/14	14/15	15/16	16/17	17/18	18/19	19/20	20/21	21/22	Total
Budget 2012*	-0.400	-0.500	-1.300	-0.700	-0.300	-0.100						-3.540
Budget 2014**			-0.592	-0.575	-0.900	-1.075						-3.142
Budget 2016***					-0.205	-0.090	-1.319	-0.911	-0.684	-0.507		-3.716
Budget 2017****						-0.197	-0.017	-0.102	-0.014	-0.091	-0.512	-8.480
Total	-0.400	-0.500	-1.892	-1.275	-1.405	-1.462	-1.336	-1.013	-0.698	-0.598	-0.512	-18.878
*A total impact of $3.54 billion was announced in Budget 2012, Table 6.3, p. 236. The annual reductions depicted are those shown in Budget 2012, Table 6.3, p. 236, and do not sum to $3.54 billion
** Budget 2014 Table 4.1.1, p. 260.
***Budget 2016 Table 6.1, p. 204 and Information provided by Government of Canada Officials
**** Budget 2017 Table 3.2, p. 204 and p. 186. Only $933 million was accounted for in the budget document - leaving the total depicted well short of the $8.48 billion that was indicated to have been shifted.

A Long-Term Capital Crunch

All three of the previous shifts of budgeted procurement funds have occurred citing procurement problems and an inability to actually spend the money available. This budget defers funding over the next two decades. This is especially surprising because prior to Budget 2017, DND was facing an acute shortage of funds needed to buy new equipment and rebuild infrastructure in the future. Public documents indicated that before the changes made in Budget 2017, DND needed roughly another $2 billion a year annually, on average, in additional Capital money to acquire all of its planned projects and that was before the Liberals announced plans to buy not one, but two fleets of fighter jets. Budget 2017 indicates that after 2021-22, DND will have $7.5 billion less funding through 2035-36 to buy new kit and build new buildings, just when it needed the money the most.

A Less Ambitious Defence Policy

The 2017 federal budget is particularly important for DND because it sets the fiscal framework for the Liberal’s new defence policy. This budget is a crucial indicator of the type of defence policy the Trudeau government will publish because, in Canada, defence policy has historically followed defence dollars, not the other way around.

In an interview during the budget lock-up, Finance Minister Bill Morneau indicated that the Defence Policy Review will indicate the Liberal government’s level of ambition for Canadian defence policy. Budget 2017, by removing funding over the next two decades, suggests quite strongly that the forthcoming defence policy will lower Canada’s level of defence ambition.

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.

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

Conservatives to Question Sajjan and Defence Budget

By: Amanda Connolly, iPolitics 

Defence Minister Harjit Sajjan will face a grilling tonight on the main estimates for his department.

The Conservative opposition gave notice on May 2 that they would be calling Sajjan and Finance Minister Bill Morneau to committees of the whole to answer questions about their department’s fiscal plans.

Liberal House Leader Dominic Leblanc announced on Thursday that Sajjan’s appearance would happen today.

The opposition parties will get four hours to question Sajjan about his department’s fiscal priorities.

It’s not clear yet whether Interim Conservative Leader Rona Ambrose will be in the House for the questioning but defence critic James Bezan will be.

Bezan said in an email to iPolitics that the party is concerned about the government’s decision to punt funding for major procurements until 2022, in its last budget.

“The Conservative Party holds the Canadian Armed Forces in high regard and this is an opportunity to question the Minister on issues that affect our troops and national defence policy,” Bezan said.

“We have concerns over the Liberals’ decision to cut funding for major procurement projects in their first budget. DND was the only department to have its budget cut. We want to know how these cuts will impact our troops. The committee of the wholeon Monday will be an opportunity for our caucus to raise these concerns directly with the minister.”

The committee of the whole is expected to wrap up around midnight.

Conservative and Liberal MPs trade blame for failed Military Procurement

By: David Pugliese, The Ottawa Citizen

OTTAWA — The Conservatives and Liberals traded barbs in the Commons Wednesday, arguing about who was to blame for failed military equipment purchases after an Ottawa Citizen article revealed some of the Canadian Forces key acquisitions will see their funding delayed.

The Liberal government’s budget, released in late March, calls for $3.7 billion in spending on equipment to be delayed until 2021 or later.

But the Citizen revealed that some of the military’s top equipment programs — including projects to buy new Cyclone maritime helicopters and Arctic patrol vessels — will be among the projects to see their funding delayed.

Citing the Citizen article, a trio of Conservative MPs launched attacks on the government, accusing the Liberals of cutting the defence budget.

“Unfortunately, here in Ottawa our military is entering another era of darkness,” said Tory defence critic James Bezan.

But John McKay, parliamentary secretary to Defence Minister Harjit Sajjan, said it was the Conservative government that left military procurement and funding in a mess.

McKay said no money is being cut from the defence budget. Instead of fixing procurement and financial problems, he said the Conservatives were “climbing in and out of fake airplanes,” a reference to former defence minister Peter MacKay’s $40,000 press conference during which he posed in a model F-35 jet.

THE CANADIAN PRESS/Adrian Wyld/File - Then-defence minister Peter MacKay checks out the cockpit of a mock F-35 Joint Strike Fighter following an announcement in July 2010 that the federal government would be purchasing a number of the jets. The purchase never went through.

“Had the former government actually done its work, then the procurement cycle would have matched the fiscal cycle and accordingly we possibly would have had some procurements met,” McKay said.

Besides delays in funding for the Arctic patrol ships and Cyclone helicopters, the budget plan would affect the CF-18 replacement, the modernization of the Halifax-class frigates and a program to provide new communications equipment to soldiers. Another $2.6 billion in equipment funding – not yet earmarked for specific gear — will also be withheld until 2021 or beyond.

It is unclear how some of the programs, such as the Cyclone helicopters, which are now being delivered, might be affected by the decision.

Conservative MP Cheryl Gallant said the plan to delay funding for the Cyclones is similar to then Liberal prime minister Jean Chéetien’s decision in the 1990s to cancel the EH-101 maritime helicopters.

Some analysts have voiced concern the $3.7 billion won’t be returned to the DND.

But Ashley Lemire, a DND spokeswoman, noted in an email, “some major projects experienced delays in their original timelines, which resulted in funds needing to be moved forward to future years.”

Military Budget 2016: Funds frozen for ships, choppers, fighters

By: David Pugliese, National Post (National Edition)

Key programs not immune to budget delays

Some of the Canadian military’s top equipment programs already underway — including projects to buy maritime helicopters and Arctic patrol vessels — will have their funding delayed as the Defence Department tries to deal with the Liberal government’s first budget.

Released in late March, the budget delays $3.7 billion in spending on equipment until 2021 or later.

But details provided to Postmedia by the department outline how even key military equipment programs just getting underway are not spared the funding freeze. Money is being withheld from programs that include:

Arctic offshore patrol ships ($173 million withheld)

Future fighter aircraft (CF18 replacement; $109 million withheld)

Cyclone maritime helicopter ($90 million withheld)

Halifax Class modernization and frigate life extension ($71.1 million withheld)

Integrated soldier system project ($39.4 million withheld)

Another $2.6 billion in equipment funding — not yet earmarked for specific gear — will be withheld until 2021 or beyond.

It is unclear how some of the programs — such as the Cyclone helicopters now being delivered — might be affected by the removal of funding.

In addition, construction has already begun on the Arctic offshore patrol ships; the first ship is to be in the water by 2018.

Defence sources have suggested the government could account for the $3.7 billion by delaying or cutting back on buying spare parts or other equipment for the ongoing projects, or delaying the arrival of some of the equipment.


Defence analyst Martin Shadwick said he was surprised active programs were being targeted. He noted that the Cyclones are supposed to be replacing the Air Force’s aging Sea King helicopters, a contract originally signed under Liberal prime minister Paul Martin in 2004.

“One possibility is that the Sea Kings will have to keep flying longer,” said Shadwick, who teaches strategic studies at York University in Toronto. “Or maybe systems that were supposed to be added to the aircraft won’t be.”

In some cases, the equipment projects are relatively new. In late July, the Conservative government announced that it had awarded an initial contract to Quebec-based Rheinmetall Canada Inc. to provide gear for the integrated soldier system project. That project aims to outfit soldiers with improved communications and computer equipment that can be worn on the battlefield.

Defence sources say the budget decision could affect later portions of the project.

In other cases, such as the recently upgraded Halifax Class frigates, the Royal Canadian Navy had planned a series of follow-on enhancements to keep the ships sailing until they can be replaced starting sometime after 2026.

During the election the Liberals promised to immediately launch a project to buy replacement aircraft for the CF-18s.

But the CF-18 fighter replacement project is one of the areas in which spending is being delayed, indicating that it won’t move as quickly as the Liberals originally claimed, said Shadwick.

Finance Minister Bill Morneau has insisted that moving the funding to a later date does not mean the defence budget is being cut.

Sajjan: Liberals ‘absolutely’ committed to military

 

BY LEE BERTHIAUME, OTTAWA CITIZEN APRIL 7, 2016

Reposed from Canada.com

OTTAWA — Defence Minister Harjit Sajjan says the Liberal government is “absolutely” committed to the Canadian Armed Forces, but that need — not want — will decide the size of the military and what kind of equipment it fields.

Sajjan made the remarks in an interview Thursday, as the government conducts Canada’s first comprehensive defence review in a generation. The Liberals promised the review during the election campaign, and a new defence policy is expected in early 2017.

Military officials as well as industry representatives and defence experts have largely welcomed the review, saying a medium- to long-term assessment of Canada’s military requirements was long overdue. But the Liberals also promised a “leaner, more agile” military, prompting fears of a stripped-down force.

Sajjan insisted the Liberal government is looking to strengthen the Armed Forces, not weaken it.

“I think what many Canadians are asking for is: Is this government committed to the military?” he said. “And the answer is absolutely yes.”

But Sajjan also left the door open to cancelling some planned defence purchases, saying the guiding principle will be whether the armed forces actually needs certain equipment or capabilities.

“I want to make sure if we’re going to be looking at purchasing certain things, that we are actually going to need it,” he said.

Earlier this week, Sajjan launched public consultations as part of the defence review. Among the questions being asked are whether the military needs to continue search-and-rescue operations and disaster-relief missions abroad, or if other organizations are better placed to do so.

The Canadian military has in the past tried to do everything, Sajjan said. He would like instead to maintain “a complete, sound foundation of our combat capability,” while focusing on some niche areas where Canada can specialize.

“So it’s not ‘do everything’,” he said. “It’s core foundation, with a few niches, but flexible enough within enough time to be able to switch.”

While some may interpret that as indicative of plans to slash the military, Sajjan defended the government’s record. He noted that last month’s budget included $200 million to fix up military bases and maintained small annual increases to the department’s operating budget.

He also took credit for the controversial decision to delay $3.7 billion in planned equipment purchases over the next few years, saying it ensures the money will be available when needed. Some experts and critics have panned the so-called re-profiling as a budget cut.

At the same time, Sajjan said plans to buy new fighter aircraft and warships will proceed independently of the defence review. He said the review won’t change those two procurement projects, the largest in Canadian history, because they address some of the military’s “staple” needs.

“We know we need to replace our frigates,” he said. “Our supply ships, we don’t even have any right now. So if anybody right now says ‘Hold off on building your supply ships,’ well, if we want a navy, we need supply ships.”

Defence analyst David Perry of the Canadian Global Affairs Institute has estimated a $60-billion gap between current funding for new military equipment, and what the military is planning to purchase over the next 20 years.

But Perry said many of those things are essential for the military to operate, including trucks, communications gear and radar for defending North American airspace. “A big chunk of those unfunded priorities are systems that you’re going to need, no matter what your defence policy is,” Perry said.

Conservative defence critic James Bezan said every government faces the challenge of separating what the military wants from what it needs. But he worried the Liberals had already determined they wanted a smaller force, “and I hope (the review) isn’t the catalyst to put us into another era of darkness for our troops.”

Twitter.com/leeberthiaume
© Copyright (c) National Post

Audit says DND waste in the Millions

Written by David Pugliese, published in The Ottawa Citizen, March 30, 2016

Is the Department of National Defence wasting millions on parts for equipment that could be obsolete or that it plans to dispose of?

That’s the suggestion put forward in a newly released audit.

The 2015 document contends that DND doesn’t know how many private contractors it’s paying to repair its equipment. The situation, critics allege, was cultivated by deep cuts to full-time federal staff by the previous Conservative government.

While contesting some of the suggestions in the report — especially the notion of spending millions on obsolete parts — DND says it’s trying to improve, based on the recommendations. The Defence Department doesn’t know how many private contractors it is paying to repair vehicles and other army equipment, while at the same time it spends millions of dollars buying parts for equipment that could be obsolete or it plans to dispose of, according to a newly released audit.

The June 2015 evaluation by the Department of National Defence’s auditors suggested overall productivity for the organization that repairs and maintains land equipment and systems has been significantly reduced. But it is unclear why.

The auditors noted that private contractors are playing a significant role in maintenance management activities, jobs once held by military personnel and DND civilian workers.

“The number of contractors is not tracked,” the evaluation concluded. “The lack of availability of actual worker numbers is problematic,” it added. “Accessing the productivity of employees without this key data is not possible.”

The organization has 952 DND employees, 273 military personnel and an unknown number of contractors. It is responsible for maintaining and repairing thousands of pieces of equipment.

The DND says it is following up on the evaluation’s recommendations and will try to determine the number of contractors it has as well as establish management performance indicators by early next year.

But in its response to the auditors, DND officials dismissed concerns that parts are being purchased for equipment that could be obsolete. They countered that a majority of the purchases were legitimate. In some cases, large numbers of parts had to be bought to cover the life of specific equipment.

Defence union president John MacLennan said he wasn’t surprised by the warnings about private contractors. The Conservative government tried to save money by cutting full-time federal staff, he noted.

“What happened was that public servants were forced to leave and management brought in the contractors,” said MacLennan, president of the Union of National Defence Employees. “But it got out of control and you have the situation they find themselves in today.

“They cut vehicle mechanics, they cut maintenance people,” he said. “It was mismanagement, for sure.”

Since there are numerous contracts and subcontracts, it is difficult to figure out exactly how many private contractors are on the payroll, he added.

The government has promised to reduce spending on consultants and contractors. It wants to cut around $170 million annually.

Earlier this year, Postmedia News obtained a report prepared for DND that outlined plans to have private companies play more of a role in the maintenance of military equipment. But the report, produced by consulting firm KPMG, pointed out that there was a lack of accountability governing the plan. In addition, federal public servants were resistant.

The DND has already started a number of pilot projects on what it is calling its “Sustainment Initiative” and hopes to launch the program in June. Initially, most of the work is aimed at maintenance of ships but public service unions are worried the program will be expanded to include other equipment.

“Risks and issues are not well understood or clearly reported,” the KPMG report noted. “No consensus exists on progress to date and chances of success.

“The Sustainment Initiative has not utilized a number of fundamental program management components necessary for the success of such a large and complex initiative,” the KPMG report added.

On the positive side, the KPMG report points out that the initiative has strong support from DND leadership and industry.

But those involved in the initiative have also raised concerns there is a lack of a formal schedule or a detailed plan.

“There is a lack of a clear understanding of how decisions are made, or on what timeline results are expected,” the KPMG report added.

Kilford: Military forgotten in big-spending Liberal budget

Opinion Piece Written by: Chris Kilford
Defence will never be party’s priority,

For the new Liberal government and despite plenty of evidence to the contrary, it appears that maintaining military hard power is, like … so yesterday.

Pity, then, the poor staff in National Defence Headquarters as they set about transforming our “multi-purpose, combat-capable” Canadian Armed Forces into something, well, less so.

With this latest federal budget, and with a larger than forecasted deficit, we now know the money for defence just isn’t there.

Instead, the capital spending needed to keep our existing military forces even barely afloat has been postponed until at least the next election in 2020.

Of course, the previous government also deferred big-ticket procurement spending. And to be fair, this government needs time to consider what our defence priorities will be and how best to meet them.

But then again, with deficit spending set for at least the next five years, it’s unlikely defence will ever be a spending priority.

Indeed, we appear to be re-visiting the past and heading back to a time very much like that in which then-prime minister Pierre Trudeau found himself almost 50 years ago. Shortly after the 1968 election, he launched a formal defence review, rejecting the military’s first draft “on the grounds that it amounted to nothing more than a reaffirmation of current policy” that was simply unaffordable but, more so, unnecessary.

What he wanted was “fresh thinking” but in truth his mind had already been made up. For him, defence spending was wasteful, especially when there were far more pressing domestic needs.

His real aim was to slash military expenditures as much as one could get away with, including withdrawal from NATO altogether. In the end, Canada’s NATO contribution was cut in half, important capabilities were shed and personnel numbers tumbled.


Pierre Trudeau was also very concerned that having Canadians train military forces in the developing world would lead to all sorts of foreign entanglements.

For example, the Canadian-trained and mentored Ghanaian military overthrew the government in 1966. So, in 1971, he put an end to foreign military training schemes.

Nor did he, unlike his son, think much of sending Canadian blue helmets overseas. Peacekeeping, according to his 1971 Defence White Paper, had “too often been frustrating and disillusioning.”

Presciently, the document noted that many conflicts “have their roots in subversion and insurgency, and therefore will not lend themselves easily to resolution through the use of internationally constituted peacekeeping bodies.” Not much has changed. Today’s peacekeeping missions, which more often involve UN troops in combat, continue to be thankless, miserable and never-ending.

What to do, then? Even when we do have an idea of what sort of military we need, finding the right balance between people, equipment, infrastructure and readiness is never easy. Military planners are also faced with numerous constraints.

Suggesting changes to the reserves or reducing the civilian workforce has always been a political hot potato, along with any talk of “divesting” bases.

Depriving Canadians of a chance to see the Snowbirds is also off the table, so no savings there. Nor can you opt for cheaper Chinese equipment.

Turkey tried that, and for some reason it just didn’t go over well in Washington.

Nevertheless, a government which appears to be in favour of a more robust and active foreign policy ought to be supported by a well-equipped, combat-capable armed forces. But this budget tells a different story. Canada is likely to end up with a much smaller, less responsive military than we have today, largely focused on the home front and the occasional, symbolic assignment abroad.

Major capabilities will wither or disappear. More importantly, so will our future policy options. 

-- 

Chris Kilford is a fellow at the Queen’s Centre for International and Defence Policy. He is also the former Canadian Defence Attaché to Turkey.

Budget 2016: Defence Takes a Hit

Written by JDM - CAFDispatch Author
Quotes from Dave Perry supplied by the Huffington Post
Published March 23, 2016

While I will boldly admit, I tend to lean fiscally conservative on a number of issues; I have no issue with running deficits. Especially in times of economic uncertainty, to help our economy, and to create jobs. So the infrastructure spending, first nations, or old age security spending does not bother me. However, it is the indefinite delay in close to $4 billion in defence procurement that does.

During the 2015 Election, the Liberals promised to re-outfit the Canadian Forces; while ensuring "More Bite, less Tail" for its command and operation structure...well not it seems that will not be the case.

In the 2016 Budget announced yesterday on Parliament Hill, the Finance Minister Morneau announced that the re-equipping of the Canadian Armed Forces will be delayed until after the next election. (For those who don't know the Canadian System - that is not until at least 2020 or later)

This delay is post-poining $3.7 Billion in already planned purchases - New Ships for the Navy, New Aircraft for the RCAF, and new vehicles for the entire CAF. However, Minister Morneau insists it’s not a cut to military funding, which the Liberals promised to maintain during the last election. Which in part is true; as they have pledged to maintain the 3% increase annually to keep up with inflation...so really it means no extra money.

The Liberals are not the first government to do this. The Conservatives did the same thing in two previous budgets; defence analyst Dave Perry of the Canadian Gobal Affairs Institute says the cumulative total of postponed defence purchases has now reached $10.4 billion! For the previous government, the postponement had a lot to do with the balancing the budget, Perry indicated.

What is the reasoning behind these dalays? The Liberal promise of a new Canadian Defence Review; or White Paper as they have been called. Morneau said the Liberals need a year to figure out Canada's defence priorities. "In order to make sure we have the funds available at the time when they need those funds, we've reprofiled some in the fiscal framework," he told a news conference prior to tabling the budget in the House of Commons."So, when we need the money, the money will be in the fiscal framework. So, we believe that is the appropriate action to take to ensure our military has the appropriate equipment, the planes and the ships they need."

The political significance of this delay, according to Perry, is that National Defence will be expecting its money at time when the Liberals will likely have to get serious about cutting the deficit, which is projected this year at $29.4 billion, and a plan to have it falling to $14.4 billion by 2020-21.

"They're literally going to have an issue five years from now because that's when the bill arrives," said Perry, who indicated that the military is at the point where it needs concrete guarantees that the money will be spent.

The CAF is facing a huge "rusting-out" issue. The RCN is already without AOR Vessels, and its fleet is aging and is not expected to be replaced before the mid-2020s. The RCAF CF-18's have already had their life expanded twice; and will need to be retired by 2025, unless billions more is spent retrofitting them a third time. The Army is looking for new troop transports as it retires it fleet of LAVs and just finished retrofitting its fleet of Leopart-2 Tanks for the war in Afghanistan.

"I think if I was National Defence, I would hope you'd already have the money in the bank, instead of having to rely on a promise of some year, some time in the future they'll be able to acquire this stuff," concluded Perry. 

All this at a time when the Government plans to redeploy the CAF on UN Peacekeeping missions around the world; where equipment will take on more damage, and require replacements even sooner. 

Defence spending expected to drop $400M — despite Liberal pledge to keep up with Tories: sources

By: Murray Brewster, National Post 

OTTAWA — The upcoming federal budget is not expected to commit to a broad increase in military spending, say several defence sources.

In fact, newly tabled fiscal planning documents suggest overall spending on the military could shrink by almost $400 million in the coming year.

During the election campaign, Prime Minister Justin Trudeau promised to maintain the former Conservative government’s defence spending levels and increase funding in 2017, as laid out in last year’s federal budget.

His government has been under pressure from allies to hike what it spends on defence, with both the United States and Britain asking Canada to aim for the NATO spending benchmark of two per cent of GDP.

Rick Bowmer / Associated Press An F-35 jet sits on the tarmac at an operational base

The demands have become particularly strident in the aftermath of the Paris terrorist attacks last November, which killed 130 people.

Preliminary budget estimates for the coming year show the military is expected to end the year with a budget of just over $19 billion, but planned spending for fiscal 2016-17 amounts to $18.64 billion.

National Defence does routinely goes back and top up its budget later in the year, but the amounts vary depending on what is going in the world.

Defence Minister Harjit Sajjan has denied there are spending cuts in the works, citing a Liberal promise to stick with planned annual increases through a budgetary mechanism known as the defence escalator.

The Conservatives used to use a similar line, insisting the military was getting its annual operating increase, only to cut spending elsewhere.

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Documents obtained by The Canadian Press under the Access to Information Act show those annual two per cent increases don’t keep up with inflation and have been more than offset by the previous Harper government’s earlier deficit spending cuts.

Under the previous government, the operating budget would increase by roughly $300 million per year, but all told some $2.1 billion ended up coming back into government coffers.

The escalator was introduced by the Conservatives as a way to provide stable and predictable funding to the military, but analysis has shown that inflation in the defence industry runs higher than in the broader economy.

A lot of that is driven by so-called “technological inflation” on high-tech military hardware, which the U.S.-based think-tank Rand Corporation estimates to range from two to five per cent annually.

National Defence is also forced to buy from a limited number of suppliers, which charge a premium.

Sean Kilpatrick / Canadian PressPrime Minister Justin Trudeau, Defence Harjit Sajjan, and Minister of International Development and La Francophonie Marie-Claude Bibeau during a press conference on Monday, Feb. 8, 2016

“The two per cent defence escalator appears to be more or less adequate to compensate for strict economic inflation factors; however, it is not adequate to compensate for other non-economic driven cost inflation factors,” said a memo written for the deputy defence minister on Nov. 12, 2014.

“The two per cent defence escalator does not provide the funding stability that will allow for the successful implementation of the (Canada First Defence Strategy) without access to the accrual envelope for additional funds to offset on-going non-economic cost pressures on the DND budget.”

Conservative defence critic James Bezan says at a minimum, the Liberals should honour the promise to maintain the planned escalator increases.

With all of the deficit spending going on in other departments, Bezan admits he’s getting nervous.

“Now that we’re talking a $30-billion deficit, there’s going to be increased pressure on National Defence is pare back their own funding requirements and that is something I’m going to be watching very closely.”