Defence buys should focus on building industry, report says

Canada needs an independent institute to analyze defence policy, an expert panel is recommending.

The panel, set up by the federal government to look at military purchasing strategy, is recommending ways to encourage more Canadian innovation, focused on building a stronger industry. 

With U.S. defence spending falling and Canada focusing on getting $240 billion in new military equipment, including trucks, helicopters, ships and fighter jets, over 20 years, the country has an opportunity to demand benefits for key industries, business executive Tom Jenkins says.

"Our report today was [looking at] areas that Canada can focus on where we can be part of the defence procurement that Canada is doing, but in such a way that we can take what we build in Canada and actually export it," Jenkins said.

But the most important recommendation to put in place the report, Jenkins said Tuesday, is to set up an independent, third-party defence analysis institute.

Canada would be served by one common set of numbers, Jenkins said as he released his report, titled "Canada First: Leveraging Defence Procurement Through Key Industrial Capabilities," to an industry audience. 

"I think all of us in this room and our country would be served by one common source of the so-called truth — one common set of numbers that everyone can agree to because that gives us a common nomenclature," he said.

More industrial benefits needed

The report says Canada should tie its defence contracts to getting business for firms in the industry.

Canada already requires industrial regional benefits (IRBs), which force winners of major defence contracts to spend the equivalent of the dollar value of contracts awarded to foreign firms to support Canadian industry, the report explains.

"Potential IRB-related business for Canadian firms, if effectively targeted, represents a significant opportunity to foster more innovative and globally competitive defence-related industries in this country," the report says.

Those benefits were worth $23 billion by 2011.

The report recommends choosing six "key industrial capabilities":

• Arctic and maritime security.
• Protecting the soldier.
• Command and support.
• Cybersecurity.
• Training systems.
• In-service support.

Public Works Minister Rona Ambrose asked Jenkins to report on how to develop Canada's defence purchasing strategy last fall.

The report is part of Ambrose's push to improve the entire military procurement system, cracking down on the delays and budget controversies that have plagued the Department of National Defence's major purchases of everything from planes to trucks.

Lost capacity for independent analysis

Jenkins says Canada used to have more independent defence analysis, but has lost the capacity over the years. Having an organization that specializes in that would help with debate over military procurement, he suggested.

"Everyone [in the industry] has a different set of numbers and it's from their perspective. It's not that they're wrong with their numbers, but we didn't have a unified set of numbers," Jenkins said.

The Canada First Defence Strategy, the plan set out by the Conservative government when it took office, alone had two different numbers, he said. The total cost of the strategy is $490 billion over 20 years, but nearly half of that — $240 billion — involves purchasing equipment. 

"In the $490 billion, that's the entire budget. That includes all the labour, all the bases, all the operations and maintenance, all the asset purchases. But if you were to just talk about the procurement part, which is what most of the industry would be interested in, that's $240 billion," Jenkins said.

But it's also about the language used, he added.

"Partly it's because the technology is so sophisticated. One would say, 'Oh, I'm buliding a platinum silicide infrared sensor,' and you'd go, 'My God, what's that?' But if you said, 'I'm building a surveillance capability,' then you can sort of get there. And that's an example of some of the nomenclature challenges that we had."

The Conservative government weathered months of controversy over its planned purchase of F-35 fighter jets, with Parliamentary Budget Officer Kevin Page and Auditor General Michael Ferguson disputing the government's estimated cost.

The Conservatives scrapped the plan to buy the F-35s after last spring's auditor general report and started over on the process to find a replacement for the CF-18, which is nearly at the end of its useable life.