Procurement
September 8, 2013

A different dynamic: Executive engagement on defence procurement

As the organization in National Defence responsible for procurement and management of all materiel, the 4,500-person Materiel Group oversees a massive program of acquisition, in-service support, and defence-specific regulation of defence equipment.

With the introduction of secretariats at Public Works and Government Services to coordinate several major defence projects, including the shipbuilding strategy, the next-generation fighter replacement and fixed-wing search and rescue, has its role changed?

Rear-Admiral Patrick Finn, Chief of Staff to the Assistant Deputy Minister (Material), has had a lengthy career in project management, including most recently on the Joint Support Ship and the Canadian Surface Combatant. He spoke with Vanguard about the impact of recent changes.

How has greater reliance on secretariats affected the role of ADM(Mat)?

The Canada Defence First Strategy is still a very active document that laid out a 20-year roadmap. Although it is a few years old, we are only at the beginning of what is a fundamental recapitalization of the Canadian Armed Forces. The strategy gives us a real roadmap, probably better than we have had in a very long time, and we are moving out on it. A lot of the changes, such as secretariats and third-party monitors, have come about because we have gone from working on one major project, 10 years ago, to now having between 15 and 20 major Crown projects and a significant number of major capital projects underway. The effect of the secretariats and other things has really been to help us facilitate and move out on the strategy.

Is there a concern, though, about retaining the military’s role in procurement, especially over requirements, as more players are introduced?

We’re not handing away the Minister’s or the military’s accountabilities. What we’ve tried to do is bring together those people who manage those accountabilities. Some of the individual department objectives of how to get there are a bit different, and can create some dynamic tension, but I think that is expected.

As a former project manager for major projects, I can tell you that getting time with senior folks to make a decision was always a challenge. Where we have secretariats, we’ve really changed the dynamic. At times it is more work, but in my almost 35-year career it is the first time I have observed that monthly phenomenon where we have directors general coming together, assistant deputy ministers coming together, deputy ministers coming together to talk about these things.

Ten years ago, when I was managing a major crown project, the idea of getting multiple deputy ministers in the room for me to stand in front of and say, “here is where I am, here are my challenges, here’s what I need” – it was unheard of. Now our project managers or their bosses are seeing it every four to six weeks.

Has that changed the relationship among the key departments? Are the processes any smoother?

For the major crown projects I think it has. Has it made the relationship any smoother? I would have described it as always quite positive. There are points of friction in any workplace. In National Defence, at times, there is friction between requirements and the technical authority. That human dynamic will always exist. Whether the secretariat is the best approach is something we are looking at, but it has brought focus to these programs. Again, what I see at assistant deputy minister level and above is real ownership of these programs and the need to deliver. I see that as a positive step.

Some in industry have responded positively to the regular consultation now conducted by the secretariats. Do you see a change in industry engagement?

We could always engage industry and I think we always did early on, but it may have been ad hoc. It is a very different dynamic now. As you saw in Budget 2013, there is work across the whole spectrum of procurement; there are lots of improvements to be made and we are trying to look at the complete spectrum. But we have to have the right probity and oversight, so there are now third-party validation of requirements and things like that. Where we have had some successes we are trying to grab the best practices; where we have had some struggles we are looking at them and trying to improve.

Has the Jenkins report, especially its emphasis on sustaining key industrial capabilities, affected your role yet?

It is something we, Public Works and Industry Canada are working on. The direction is clear, so now it’s about how we implement it. Public Works is responsible for the defence industrial base from a capability standpoint and Industry Canada from an economic one; we don’t do industrial capability per se – though we have a role to play there – but selfishly we have a desire for industry to be ready to help us.

We often have discussions about whether it costs more to build in Canada. And my counter from a shipbuilding perspective is, yes, but how often do you ask us if it is more expensive to not support it in Canada? It’s not just about getting the acquisition cost right, it’s about getting the through-life cost right. If you get the acquisition cheap but need twice the crew and it’s half as reliable and the through-life costs you twice the money, that’s not where you need to be. Having defence industry in Canada ready to step up and help us deliver and support Canada First Defence Strategy is actually an operational requirement.

Is the ADM(Mat) role primarily to facilitate defence procurement or do you also have a clear challenge function to statements of requirements, costs, etc?

For anybody who is working in the procurement game, it’s not an ‘or’, it has to be an ‘and’. There has to be a challenge function. Some might perceive that as a challenge to their work, but it’s really about making sure we get it right. Finding out we have a problem 2-3 years into things means we all suffer the consequences. We tell everybody, you need to make sure you are challenging what we are doing in a classic project management paradigm of time-cost-scope. As we translate a statement of requirements from a technical authority perspective, for example, we need the operational community to provide the challenge function to ensure we have not gone down a different path; Public Works to ensure it is contractible; our chief financial officer to ensure it is affordable.

Under Dan Ross, ADM(Mat) began a process to emphasize performance-based procurement and single point of accountability. Is that still your focus or have needs changed?

If Dan were sitting here today, he’d probably say the vision is performance-based logistics, and there is an understanding that it’s not one-size-fits-all – it can’t be. Our desire is to be cutting-edge in leveraging what our allies have done, and performance-based where we can be, recognizing there are areas where we will have to be somewhat prescriptive. Most of our acquisitions will probably always be a bit of a blend. For example, with ships, we have tried to move away from these very weighty specifications, but there are areas where we are still prescriptive, long-term reliability pieces where it’s hard to be performance-based and where if you are not careful you can find yourself paying an incredible premium on through-life. But our aim continues to be as performance-based as we can.

One of your bigger challenges has been sufficient project management personnel for all these large and complex programs. Do you have enough people and expertise?

The size of the programs that we are moving out on causes challenges in having all the right competencies of people, but it’s a challenge I really like having. It’s not the challenge of budgets disappearing and getting rid of things. We are fortunate: our allies are seeing a lot of their capital budgets going down and ours has been preserved.

The real challenge is around the competencies and experience of our people. We could probably add 10 people next week to one of our major capital projects, but if they are 10 apprentices, they are actually a burden on a small project office, not an asset. During Dan Ross’s tenure, he stood up Project Management Competency Development, where we looked at project management competencies in the private sector and among our close allies. The Australians, for example, have a Master’s level program, to which we have sent some of our people, and now we’re looking at what we can stand up here.

We have a fairly robust succession management program where we are grooming the future project managers. We’re making sure people show up with a fair amount of pedigree. We’ve also stood up a project management support office so that there is a body of knowledge and other resources you can go to to help kick start a project.

Also, if you go back 15-20 years when we were doing major projects, it would have been done by very large project offices, all internal to DND or government. It’s not that way anymore. It’s much leaner and most of our major project offices are supported directly or indirectly by some level of contracted support, often from industry, for expertise that allows us to surge.

In a public presentation earlier this year, Mr. Ross indicated that schedules rather than budgets were the primary cause of delays in programs: Is that a people problem?

In complex project management, schedule is king: the issue that will always get away from you is schedule. It could be because of lack of experience and what was set up in the first place – and we are trying to do that knowledge transfer – or process; like it or not, there is an internal process, a process to get you to Treasury Board, etc. You may want to go out to industry with a short, sharp 90-day request for proposal but all the bidders come back and say, we can’t give it to you in that amount of time. It can be a whole bunch of factors. Through our project management development, we do try to bring a lot of oversight to bear on schedule but it can be very difficult to predict. But we recognize that schedule is the biggest thing that will get away from you.

Is slippage in schedule the primary reason why money allocated to procurement has not been spent in recent years?

One of the things the government has done, particularly on the capital side, is move us into an accrual-based budget. That gives you more flexibility in reallocating budgets, but if you are not careful it will attrite your buying power as well. We spend $5 to $6 billion a year, so the program is moving. We do over 10,000 contracts a year. Most of the focus is on the big ones, but when you look at all we do – spare parts, smaller capital projects, obsolescence management – most of it moves successfully under radar.

But in the context of money not being spent, I would say it is a whole bunch of things. The volume of projects we are trying to move in parallel is a challenge. It is difficult to forecast into next year and the year after and predict what will happen in this RFP or with that evaluation. There is slippage: you take a given ship project, there could be slippage in the design phase because as you have made it more and more detailed, you’ve determined there is a flaw and you’re better off dealing with a weight or length issue which is going to cause a two-month delay but will have a positive impact for the next 50 years. And with so many government people involved in these large projects, getting it lined up and streamlined is complex. But if you go down the list of CFDS projects and look at where we have come in five years, a lot has been delivered.

Public Works recently announced a pilot specific to the Integrated Soldier System Project to address the delays to programs because of small technical issue. Can you elaborate on it?

Within a competitive RFP, you can’t have a process where you select a winner and then say, now let’s sit down and talk about the contract. You really have to lay out the roadmap for the entire acquisition, and potentially the in-service support. In the case of that particular project, it was issues around mandatory requirements and people’s ability to achieve them. We worked with Public Works to come up with a pilot project for a “two-pass approach” for these requirements which gives everyone an opportunity to revisit what would be a black and white technical thing, such as different costs numbers in two tables or a clerical error. I have had discussions with industry to identify the list of things we need to chip away at, not just the strategic pieces, but also some of the more technical things.

You began with the CFDS. It is expected to undergo a refresh. What role will ADM(Mat) play?

We would be involved in discussions around updates. It’s a 20-year roadmap and when I look at the policy – the three roles, the six missions, the list of equipment – I don’t see a lot of changes. Our Chief of Force Development has a robust process by which they look at the future security environment, the threats, capability-based planning and the equipment you then need. We participate on what that may mean from a cost perspective and things of that nature. It is a support role. I just don’t see anything that is going to dramatically change the list of work that we at ADM(Mat) have to do.

 

This article originally appeared in the August/September issue of Vanguard magazine.

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