Two opposition parties have recently tried to put the brakes on the government’s problem-plagued military spending spree. Last week, Liberal defence critic Denis Coderre and NDP defence critic Dawn Black demanded that the government not sign any new major military contracts until the auditor general finishes her study on military contracting. The study is expected to be completed in the fall of this year.
The call from the opposition benches comes on the heels of the June 11, 2007 report by the Rideau Institute for the Canadian Centre for Policy Alternatives titled, No Bang for the Buck: Military Contracting and Public Accountability. The report examines the state of military contracting and public accountability, and raises serious concerns about how the government is handing out billions in contracts.
A year has passed since the government announced more than $17-billion in military equipment programs, and in that time the process for awarding these contracts has been subject to numerous complaints of unfair competition, favouritism, and secrecy.
In June of 2006, the government announced a very long, expensive shopping list for the military: $3.4-billion for four strategic lift aircraft; $4.9-billion for 17 tactical lift aircraft; $4.7-billion for 16 medium- to heavy-lift helicopters; $1.2-billion for more than 1,000 medium-sized trucks; $2.9-billion for three support ships.
So far, only the strategic lift aircraft contract has been signed. Boeing walked away with the $3.4-billion deal for a fleet of four C-17 long-range transport aircraft in February, and then subcontracted the in-service support to the U.S. Air Force.
Many alarming reports have appeared in the media calling into question the Department of National Defence (DND)’s secretive military procurement process, which appears to favour certain military suppliers–in particular, American manufacturers Boeing and Lockheed Martin.
European firms, such as Augusta Westland, Airbus Military, EADS-CASA, and some Russian aircraft-makers have all been rejected by the government as potential bidders, despite offering comparable products at potentially lower costs.
At the heart of DND’s controversial procurement process is the government’s increasing reliance on non-competitive and limited tendering processes.
The Rideau Institute’s study used the Contracts History database maintained by Business Access Canada, a service of Public Works and Government Services. While the database is not an exhaustive record of all contracts, we were able to query nearly 60,000 contracts awarded by Public Works on behalf of DND in the last three years.
“Non-competitive” contracts, as Public Works calls them, are commonplace these days, and are being used with increasing frequency. For instance, more than 40 per cent of DND contracts reported by Business Access Canada in fiscal year 2006‚Äì07 were classified as non-competitive. Looking further, we found that the percentage in value of all DND contracts classified as “non-competitive” more than doubled over two years between 2004‚Äì05 and 2006‚Äì07.
Of particular concern is the use of the Advance Contract Award Notice (ACAN) tendering process. In this procedure, the government announces the commencement of a procurement process … and at the same time declares the winner.
When the ACAN for the strategic lift aircraft was posted on the government’s public tendering system last year, the announcement also said that the contract was going to Boeing, the largest builder of military aircraft in the world. The ACAN itself, under the heading “Tendering Procedures,” said, “Generally, only one firm has been invited to bid.”
According to Treasury Board rules, ACANs and other similar limited tending procedures are considered “competitive.”
While the government considers ACANs to be competitive, Auditor General Sheila Fraser testified that an ACAN “means greater transparency, but it is not a competitive process.”
Recent cases highlight the need to move away from ACANs to a more competitive procurement system. The existing system is susceptible to the manipulation of requirements to exclude competing military suppliers. For example, European aircraft manufacturer Airbus Military was disqualified from bidding on the $3.4-billion contract that went to Boeing. It was later learned that only weeks before the ACAN was released, military planners had doubled the payload requirements for the strategic lift aircraft for unexplained reasons, effectively eliminating the Airbus A400M.
Government and military officials have justified reliance on ACANs, based on the need to rebuild Canada’s military infrastructure quickly, for the safety of soldiers in the field.
However, Alan Williams, DND’s former assistant deputy minister for procurement, has stated that using these kinds of contracts actually delay delivery of equipment because they spark lengthy internal debates by bureaucrats and politicians.
Some experts have declared that there is something wrong with the overall procurement system. The Rideau Institute agrees, and feels strongly that public confidence in the process must be restored.
However, the government has a stumbling block in this regard: Gordon O’Connor, the current defence minister.
Prior to being elected in 2004 and being appointed as defence minister in 2006, O’Connor was a lobbyist for 28 firms–many of which were defence firms–seeking government contracts. Our study did not find evidence of favouritism to previous clients, but the whiff of potential impropriety remains.
Government watchdogs say that Parliamentary oversight is needed where military contracts are involved. “DND’s recent history is not good,” said Democracy Watch coordinator Duff Conacher. “The purchase of military hardware is an area that is ripe for abuse.”
The former chief weapons tester for the Pentagon, Philip Coyle, also endorsed greater Parliamentary oversight. Drawing on his experience in the United States, Coyle said that, “generally, when the U.S. Congress maintains closer oversight and review, U.S. soldiers get better, more effective equipment, sooner and cheaper.”
Experts in government procurement argue that Canadian taxpayers suffer from non-competitive procurement.
Extrapolation of the results of a U.S. Air Force study to four major Canadian defence program contracts suggests that the government could save more than $3-billion by shifting to competitive bidding.
Faced with the current problems plaguing the government’s military procurement policies, we concluded that: (a) the government should not sign any new military contracts valued at over $100-million pending release of the reports by the Auditor General and the Commons Standing Committee on National Defence; (b) anyone involved in defence procurement for the government, including the Minister of National Defence, should not have worked or lobbied for any military firm supplying the government for a period of five years before holding office; and (c) as an additional guarantee of accountability, a new Parliamentary standing committee should be established to oversee defence procurement.Read More