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A while ago when perusing a weekly from the Australian Strategic Policy Institute (ASPI), I realized from two articles by different authors just how similar the recently announced Australian and Canadian major procurement acquisition project reform initiatives are.
The first addressed stewardship of the defence industry head on, and the second focused on the creation and scaling of sovereign defence prime contractors. And both identified the significant challenges of what is being pursued.
Concurrently, a recent Functionary Newsletter in early July by Kathryn May nicely captures the government’s focus on delivery and highlights the expectations expected of public servants, which nicely rounds out what the Defence Investment Agency (DIA) is expected to deliver as it goes about accelerating major defence acquisitions and implementing the Defence Industrial Strategy.
Let’s dig in by drawing information from all three.
Australia’s Military Procurement Reforms
The parallels between the innovations in Canada and Australia regarding military acquisition are somewhat surprising. Both nations are seeing a considerable increase in the defence spend. Australia has released a Defence Industry Development Strategy (DIDS); Canada released a Defence Industrial Strategy (DIS). And Australia created a new Defence Delivery Agency (DDA), whereas Canada has established the Defence Investment Agency (DIA).
One of the DDA’s purposes is “long-term stewardship of the sovereign defence industrial base” as defined by the Australian DIDS. So too with Canada’s DIA and the DIS , and both reflect themes of more trust and partnership.
The DDA is intended to build on the commercial practices of the organization it replaced, implying less complicated and time-consuming processes to enable improved speed of delivery. Canada’s DIA is expected to reform fundamental acquisition processes to speed up delivery.
Finally, the DDA is also expected to address “poor through-life costing and incomplete implementation of clear, senior accountability for capability outcomes.” These too are expected from the DIA.
The first Australian paper identifies what the author sees as the major risk:
The reform plan “envisions both the DDA and Defence having a cozier relationship with industry: to know industry better, engage earlier and, where necessary, protect industrial capacity that the market otherwise wouldn’t... [so] DDA officials walk a much finer ethical line.
“Building a domestic defence industrial base will be messy and uncomfortable... The need to assure Parliament and the public that the risk of stewardship edging into regulatory capture is being managed is imperative... [Measuring] contract performance... [through] public scrutiny and audit...[as a] vision of ecosystem performance will be much more difficult.”
The second paper tackles a related risk which sheds light on the rise of more Australian prime contractors to grow sovereign capabilities::
“[The policy] uses scale and expertise to create sophisticated, integrated systems that can’t be cobbled together piecemeal... [but] an environment in which a prime contractor can thrive possesses a high level of independent capacity... [and] symbiotic relationships between government and industry that walk a fine ethical line... [because] primes grow through regulatory capture.”
[To address primes] “Governments carefully monitor profits and margins... [but] small companies can’t compete with big ones when margins are thin... big fish eat the little fish... only large companies can afford the legal departments to remain compliant... governments often must rely on industry advice when writing regulations.”
“Throwing money at the problem may be good politics, but it is a poor strategy.”
Both papers focus on the ethical challenges, something that has not received significant discussion in Canada that I am aware of. The second paper addresses the growth of prime contractors to better enable sovereign capability and exports, much as Canada’s DIS introduces strategic partners. The one area where Canada has attempted to address some of the related ethical challenges is in the recently released Strategic Partnership Framework, in which “strategic partners” have replaced “Canadian Champions.”
The Broader Canadian Government Direction
Kathryn May’s recent piece sums up the prime minister and clerk’s expectation of the public service to implement a “delivery era.”
May then quotes from a report to the PM about a culture change in the public service to one that “acts with speed and resolve, focused on outcomes... powered by high-performing... teams that innovate, simplify and take personal accountability for delivering results.”
One can draw key phrases and words from the fulsome directive, indicating the public servants are to deliver priorities, measure success, simplify processes, make decisions faster, embrace digital tools, respond to clear expectations and take personal accountability for results.
Clear accountability for these attributes is thus expected of the DIA and its partner departments: National Defence, Public Services and Procurement Canada and Industry, Science, Economic Development Canada. This includes facilitating faster decisions, simplifying processes and embracing empowerment. And for those changes to occur, they must be enabled by a significant reduction in risk aversion, something rarely spoken of in depth.
Two other comments in her article are pertinent to military procurement:
It’s “about culture, which the Carney government has been itching to change since it took office, but without putting any big reform agenda in the window.” Given the 60 pages in the DIS, my personal expectation of a companion document on acquisition reforms such as a higher risk tolerance and process re- engineering was clearly way wide of the mark.
“Delivery is also about execution.” I would have said that execution was 75% or more of delivery. Therefore, it would make sense that selected major military platform acquisition project offices would be housed in DIA, something that I have yet to confirm. And while the period between acquisition project conception and the award of an implementation contract is where much time can be saved as witnessed in the Canadian Patrol Submarine Project, execution is also very much the business of industry. Yet, we hear much less about speeding up implementation.
So What
The articles relating to Australia’s acquisition reforms are useful reminders that we must start this rather unique journey by developing a comprehensive compendium of the likely risks to be faced in the coming months and years.
It is easy to assume that the potential risks to the DIA and the DIS are understood by DIA officials, and are being addressed using an advanced risk treatment system which employs worst case scenarios and vulnerability analysis. The ongoing military acquisition transition is complex, so surprises from emerging risks are likely and missteps are inevitable. It would therefore be wise to embrace transparency and manage expectations as this journey gets underway.
Noting that Canada Minister Fuhr has visited Australia more than once, surely the DIA and DDA will routinely compare notes on methods being employed and lessons learned.
In essence, this is the first major change project of the complex military acquisition system in many decades for Canada. We must ensure we move forward with our eyes wide open, and that means understanding how to better navigate complexity.
