Canada revamps military procurement policy after controversies

by Reuters
Wednesday, 5 February 2014 17:33 GMT

By Randall Palmer

OTTAWA, Feb 5 (Reuters) - Canada will change the way it buys military equipment, the government said Wednesday, as it tries to provide more benefits to local companies and include safeguards to avoid fiascos such as its aborted plan to buy F-35 fighter jets.

"It's no secret that businesses in Canada have been telling us that defense procurement needs to be fixed," Public Works Diane Finley said in a speech to representatives of the defense industry.

"What we found was that requirements are too complex. Too often they appear to be set to achieve predetermined outcomes, and industry is not engaged early enough."

The Conservative government is smarting from criticism over its decision, since put on ice, to buy Lockheed Martin Corp's F-35 stealth fighters without allowing an open competition for fighter jets to replace Canada's aging fleet of F-18s.

The government also scrapped a plan to buy military trucks in July 2012 just minutes before the final deadline for applications.

Under the new procurement strategy, a group of ministers from different departments will oversee acquisitions, and an independent third party will review the requirements that the military sets out for major purchases.

A central criticism of the F-35 process was that the defense department essentially said it needed a fifth-generation fighter like the F-35 with its advanced capability to avoid detection.

This effectively ruled out other planes, whereas an independent reviewer might have questioned whether the F-35 was the only aircraft that could meet Canada's needs.

The federal government has put its F-35 plans on hold and has been talking to the makers of four other fighters in addition to Lockheed Martin, including Boeing Co and Dassault Aviation

In addition to the governance changes, Finley will also now require that bidders for major projects put together a "value proposition" that will show what industrial spinoffs and subcontracts would go to Canadian companies.

This would be given a 10 percent weight, suggesting that companies promising rich industrial benefits to Canada could still win even if their costs are slightly higher than those of their rivals.

Defense is one area where countries are allowed under international trade rules to favor their own industries. The question then becomes one of how much more governments are willing to pay to get domestic benefits.

Opposition Liberal legislator Joyce Murray said the new plan is effectively an admission of failure by the Conservatives, who came to power in 2006.

"Procurement has been an utter failure for eight years," Murray said, adding that she was not sure that adding more bureaucracy and more ministers to the procurement process is the required antidote.

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