With the Crown corporation model, the DIA will benefit from more flexibilities on everything from hiring to contracting, similar to other Crown corporations, such as the Business Development Bank of Canada or VIA Rail, write Siobhan Harty and Jeffrey F. Collins.Spencer Colby/The Canadian Press
Siobhan Harty is the Slater Family Visiting Scholar at McGill’s Max Bell School of Public Policy and former senior assistant deputy minister for defence and marine procurement.
Jeffrey F. Collins is the director of the Palmer Institute for Canadian Leadership, author of the book Canada’s Defence Procurement Woes, and a former senior policy analyst in the Department of National Defence.
Building a plane while flying really is the most apt description of the federal government’s restructuring of Canada’s approach to defence procurement.
The transformation of the one-year-old Defence Investment Agency into a new Crown corporation, with the introduction of today’s Bill C-40, Strengthening Canada’s Defence Sector Act, adds another alteration to the defence procurement fuselage. It’s exciting, but it’s also rife with uncertainty.
It can be easy to dismiss bureaucratic restructuring as simply shuffling people from one government entity to another. But Bill C-40, should it become law, represents the most significant change to Canada’s defence procurement landscape in 75 years.
The last statutory, separate defence procurement organization in Canada was the Department of Defence Production, presided over by C.D. Howe.
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It started at the height of the Korean War arms build-up in 1951 and was abolished in 1969 during the period of détente. That department’s success was due to innovations such as hiring industry experts on honoraria, special powers, and close collaboration with industry. It’s also interesting to note that the government spent around 5 per cent of GDP on defence from 1951 to 1957, which is similar to what Prime Minister Mark Carney wants to achieve.
With Bill C-40, the government is moving closer to that model by removing internal, bureaucratic barriers to decision-making, centralizing authority in the defence portfolio and enhancing leadership with a new associate minister of national defence for procurement. It’s hard not to disagree with these moves given the long history of delays and cost overruns associated with peacetime defence procurement. The subject of numerous parliamentary studies, the splitting of responsibilities and accountabilities among multiple departments and central agencies was known to foster slow decision-making and processing.
By creating an organization at arms-length from the executive, the tangle of red tape and bureaucracy that slows down decision-making largely disappears, and it should proceed on an accelerated basis. With the Crown corporation model, the DIA will benefit from more flexibilities on everything from hiring to contracting, similar to other Crown corporations, such as the Business Development Bank of Canada or VIA Rail. These changes will certainly make the DIA more agile, while providing enough oversight to ensure it remains aligned with Treasury Board practices and international trade obligations.
Likewise, by placing the DIA in the defence portfolio, the Bill C-40 approach aligns Canada with the best practices of many European NATO allies, the same allies the Prime Minister is keen to deepen this country’s defence and economic ties with. This includes collaborative production and preferential purchasing opportunities under the European Union’s Security Action for Europe (SAFE) agreement.
Yet, no matter the model selected, defence procurement in Canada requires close collaboration between procurement experts, the Canadian Armed Forces – who set the requirements, use and maintain the capabilities they seek – and industry and the local innovator space the Defence Industrial Strategy aims to grow. Can an arm’s-length Crown corporation really achieve that? It’s not clear.
A longstanding criticism of Crown corporations, be it federal or provincial, is their opaque decision-making and lack of transparency on the final cost of equipment. Think of the hydro-dams in Newfoundland and Labrador and British Columbia as examples. Direct ministerial accountability will be once removed, as will reporting requirements. The sum of these changes arguably weakens one of the biggest critiques of the pre-DIA procurement systems: the need for clearer and cleaner lines of ministerial accountability and responsibility.
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Creating a Crown corporation still does not bypass competing policy objectives, which has bedeviled defence procurement in Canada. The legislation includes a clear authority for the minister to direct the Crown, which will maintain a link to the government’s objectives and priorities. You can bet there will be intense debates at the cabinet table about how to prioritize economic and military objectives in those directives to the DIA. It remains to be seen how much independence the DIA will have.
Bill C-40 promises more clarity about ministerial responsibilities but by keeping the Defence Production Act with the Minister of Government Transformation, Public Works and Procurement, many questions are left unanswered about where real power and responsibility lie. At a time when the Parliamentary Budget Officer estimates that defence spending could reach $163.5-billion by 2035, Canadians deserve clear accountability and answers.