DND unable to spend billions in equipment funds, pushing projects beyond next election

National Defence fell $2.3 billion short in its plan to re-equip the military in the past year — a failing that one defence analyst says guarantees many important decisions on warplanes, ships and vehicles will be pushed beyond next year's election.

Defence Minister Harjit Sajjan revealed the figure Wednesday as he launched the department's long-anticipated investment plan at a major defence industry trade show in Ottawa.

The plan is the Liberal government's spending roadmap for its defence policy, released a year ago, which pledged $6.2 billion in new capital spending in the first year.

New figures show $3.9 billion was spent.

Later in the day, the chair of the Liberal government's council of economic advisers underscored the importance of investment in the defence sector and how it will drive innovation in other sectors.

"If we want to grow — and we can in Canada, and we want to grow more significantly — the defence sector is going to play an essential part in doing that," Dominic Barton said.

Leading-edge military technology and the possibilities for its commercialization can transform the broader economy, he added.

However, the investment plan presented by the Liberals on Wednesday leans heavily on refurbishing existing technology and equipment — mostly aircraft — in the coming decade.

The Defence Capabilities Blue Print will see the air force's CF-18 fighter jets, C-140 Aurora surveillance planes, C-144 Challenger executive jets, C-150 Polaris refuellers and transports, CT-114 Tutor trainers and demonstration jets, C-149 search and rescue helicopters and CH-146 Griffons all given life extensions and upgrades.

New aircraft, including drones, won't be introduced until the mid-2020s — or later.

A defence analyst said that's no surprise since many major decisions will be pushed past the 2019 election. That means it will be up to the next government to make the tough decisions on how much to buy and how much to spend.

"Unless we see an extremely busy June with a lot of announcements on milestone projects, a lot of the work is going to be left until later," said Dave Perry, an expert in procurement at the Canadian Global Affairs Institute.

"They're not moving ahead as quickly as they suggested in the defence policy."

The government could leave even more money on the table this year. Figures compiled by Perry, using the federal government's own budget documents and records, suggest as much as $3 billion could go unspent on military equipment in the current fiscal period.

The former Conservative government was repeatedly criticized for promising the military big things in terms of equipment, but rarely delivering and allowing allocated funds to lapse.

That cash was eventually kicked back to the federal treasury and used for deficit reduction.

DND gets to keep money, spend it later

Sajjan said defence spending is now guaranteed in the fiscal framework, the government's long-term financial plan.

That means National Defence gets to keep the money and spend it later.

"We always know we might not need the extra funds, but they have to be there just in case," Sajjan said. "Rest assured, the unspent $2.3 billion dollars is protected. Those funds remain available when we need them."

He defended the spending "delta," saying that 30 per cent of it comes because projects came in under budget. Another 42 per cent was because of delays by defence contractors.

Approximately one-third, though, relates to the department's inability to make a decision — or develop specifications on time.

Sajjan took a shot at the government of former prime minister Stephen Harper, which used to regularly publish its defence spending plans, but never had specific funding attached to individual projects.

Conservative defence critic James Bezan said there is a disconnect between the government's defence policy and its spending plans as outlined in federal budget documents.

"Nothing seems to match," said Bezan, who treats the federal budget as the last word in spending.

There was no mention of National Defence in Finance Minister Bill Morneau's latest fiscal, presented in February. Defence officials insist that is because the department's spending is already accounted for in the fiscal framework.

The federal Treasury Board, however, must approve funding on a project-by-project basis — and Bezan said that hasn't been done.

"There's no money to do the things Sajjan is out there talking about," he said. "We are still dealing with the problems of getting procurement done in a timely manner and getting it done on budget."

The head of a defence industry group — Sajjan's audience as he made the announcement — said the government does deserve credit for consulting more about projects ahead of time, but there are obvious shortcomings.

"Any time funding moves to the right, it is a predictability problem for us. We want as as predictable and as stable funding as we can get," said Christyn Cianfarani, the president and CEO of the Canadian Association of Defence and Security Industries.

"I still think, systemically, there is a problem and if we don't turn it upside down and shake it — the whole procurement system — and do things differently ... many, many things differently, we'll still see sluggishness in the procurement system."

He said the Liberal investment plan is not "aspirational" and states clearly where the cash is coming from.

The Conservative guidebook in the end "did not deliver for the men and women in uniform," Sajjan told the audience of defence contractors.