Procurement
June 3, 2012

Money, politics and the ‘requirements’ of defence procurement

There is defence procurement, and then there is Defence Procurement.

The Department of National Defence – by itself, or through PWGSC – buys a gazillion dollars of “stuff” every year. Judging by the lack of media coverage, Parliamentary Committee discussion and questions in the House, the process works: the military gets its food, uniforms and spare parts with little fanfare and inadequate recognition.
 
What makes headlines is Defence Procurement, the big stuff like ships, planes, trucks and the like. Here are six reasons.

First, money. Talk billions of dollars, and everyone pays attention – users, budget setters, suppliers, reporters and lowly taxpayers.

Second, politics. Typically, one party proposes and the others, by definition, oppose.
 
Third, priorities that link the two. It starts with the political decision of what is needed but then gets into the contentious spectrum of who should get the money. Governments can buy what they need wherever it comes from; buy what they need but make sure as much of the money as possible stays in Canada; or buy what is something like what they need, as long as the money stays here.  

Fourth, principal-agent relationships. These flow from the priorities. Technically there is a divergence of interests between those who own a business and the people who actually run it. If there is no congruence between the interests of the military, the politicians and the taxpayers, there are headlines.

Fifth, and perhaps less obvious, there is human nature. Confirmation bias and the sunk-cost effect can have significant influence on defence procurement. Confirmation bias has individuals seeking and valuing information that supports their point of view, while discounting anything that argues to the contrary. Sunk-cost is the tendency to continue down a chosen path, investing time, money and other resources in something that is known or appears to be sub-optimal.  

Finally, hiding in the shadows is self-interest, the real reason for those decisions. They include re-election, promotion, power and money. Spin encompasses everything. It operationalizes confirmation bias and the sunk-cost effect, and tries to sanitize self-interest. Without them, the spin industry would wither.  

Defence procurement in all its forms is for the war fighters. They need – they deserve – our full and unconditional support. By the way, this also applies to police, fire fighters and border guards.

There is hope. Recently the government used its new National Shipbuilding Procurement Strategy (NSPS) to contract for the building of ships. All parties seem to agree about “…years of work that went into making the NSPS a revolutionary procurement activity free from political influence or regional favouritism, one that, in the words of the third-party fairness monitor who helped oversee the NSPS, was ‘rigorous, fair and transparent’.”

Let’s be careful, though – in this case and more generally. This is a success of process; we must now focus on the success of outcome. The strategy is not a complete success until those ships are in the water, working as they should, meeting the needs they were designed for, and for the right price.

There are growing suggestions that the government is rethinking the possible purchase of the F-35 fighter jet plane. Initially the F-35 was the only fighter that could meet Canada’s needs; now “…it’s a question of relative choices. You take the one that meets most of [the requirements].”

The moment the government chooses to meet only most of the requirements, it destroys any rationale for procurement without competition. And that makes it hard to maintain a consistent story.

With the F-35 file now in the hands of PWGSC, let’s hope they can repeat their shipbuilding success.

John Read provides procurement consulting services to pubic sector clients. He served for almost 15 years in the Public Works procurement arena.

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