Canada's Defence Procurement Strategy: The Defence Analytics Institute
Speaking Notes for The Honourable Diane Finley, PC, MP
Minister of Public Works and Government Services
Canada's Defence Procurement Strategy:
The Defence Analytics Institute
February 19, 2014
Check against delivery
Thank you for that kind introduction. And hello everyone. I'm very pleased to be here today for this Symposium. I want to express my sincere appreciation to the University of Calgary's School of Public Policy for hosting us today.
February 5th was a landmark day for our Government and our country when my colleague the Minister of National Defence and I announced Canada's new Defence Procurement Strategy.
And I would be remiss if I didn't take this opportunity to thank Tom Jenkins for the work he and his panel did in preparing the Canada First: Leveraging Defence Procurement Through Key Industrial Capabilities report, which significantly informed the new Defence Procurement Strategy.
Tom, we really wished you could have been there when we announced this two weeks ago, so I'm pleased I can publicly thank you in person today. And Tom, I want to remind you that in your report you asked that we report back to you within one year on how much progress we've made on your recommendations. Well, I'm here to give you my report. We got it done!
It wasn't always easy, but with help and dedication from you, your panel, industry and officials, we actually managed to deliver it about a week under the one-year deadline.
I don't need to remind this audience that we are the government that decided, under the Canada First Defence Strategy, to make an unprecedented investment in the Canadian Armed Forces.
We are also the government that has put in place a strategy to ensure that Canada and the Canadian defence industry is positioned to capitalize on what Tom described as a “once in a century”
opportunity to leverage our defence purchases to create and support jobs, economic growth and long term prosperity here in Canada.
As outlined last week in our Government's Economic Action Plan 2014, the Defence Procurement Strategy is based on the report by Tom and his panel and reflects significant collaboration with Canada's defence, security and aerospace industries.
Of course, it is no secret that changes to how we procure military equipment were sorely needed. Suffice to say, we have had our challenges.
Through Canada's Defence Procurement Strategy, our Government will:
- Deliver the right equipment to the men and women of the Canadian Armed Forces and Canadian Coast Guard in a timely and cost effective manner;
- Leverage our purchases of this equipment to create jobs here in Canada and maximize export opportunities; and
- Streamline our procurement processes.
To be crystal clear: our main goal remains and always will be to provide our men and women in uniform with the equipment they need, on time and on budget.
One important way that we will do this is by early and continuous engagement with industry. We will establish a two-way conversation between industry and government as soon as an equipment requirement is identified. And in so doing, we will mitigate the risk of problems emerging later on in the process of acquiring the equipment.
We will also be more clear and transparent in our information-sharing with industry by publishing a new, annual Defence Acquisitions Guide outlining DND's major procurement priorities. Watch for the first issue of this guide to be released this June.
One of the most significant changes under the new Strategy is that, through the use of a Value Proposition, proposed benefit to Canada investments will also be rated and weighted in the bid evaluation process, alongside the technical requirements and price.
As a result, companies whose bid proposals demonstrate a willingness to invest in Canada, in a meaningful manner, through the transfer of intellectual property, the creation of high paying jobs, innovation-related activities, and export development and growth may have a competitive advantage in bid evaluations.
It is expected that Value Propositions, when applied, will account for (or be weighted at) approximately 10 per cent. The actual percentage will be determined on a procurement-by-procurement basis.
As I've already stated, providing the capability requirements of our men and women in uniform will remain paramount for our defence procurements – but when there are multiple suppliers who can meet a need, we will not hesitate to ensure that the successful supplier provides meaningful economic benefits for Canada.
And we want to ensure that benefits to Canada are not just promised, but realized. So, in another break from the past, we will make companies publicly accountable for what they propose so we have transparency in regard to investments that are actually being made.
As of 2011, Canada had $23 billion in IRB obligations, a quarter of which remain to be fulfilled by companies. The new public reporting requirement will help ensure that benefits are actually delivered as promised.
We'll also continue to rely on KICs—those Key Industrial Capabilities that we've come to know so well. We've refined these KICs into more precise market segments. But let me tell you, we are fully committed to working with industry to continue to refine the KICs as we move forward, to ensure the maximum effectiveness of Value Propositions.
And here is where the Defence Analytics Institute comes in. In his report, Tom laid out a strong rationale for why we need to identify Key Industrial Capabilities. You all know the reasons, so I won't belabour this.
But key to Tom's analysis was that if we were going to better leverage the dollars we'll spend on the military to benefit Canadian industry, we would have to find a balance – a carefully focused strategy to ensure that we do not increase costs or risk compromising performance.
So, he recommended that we focus on a limited number of areas that would offer the greatest return on investment in terms of fostering sustained capabilities to fulfill particular defence requirements, while promoting innovation and competitiveness.
But when he set out to identify the strengths, weaknesses and opportunities for growth within the Canadian defence industrial base, he found that robust data to support that analysis was a bit hard to come by. Which is why he recommended that the government establish an arm's length institute to develop a plan for data-gathering and analysis in respect of global demand and supply conditions in defence-related industries. And folks, Tom and his panel were not the only ones to suggest that this gap needed to be filled.
In fact, CADSI laid out a similar case in their 2012 paper. In it, CADSI stated that such an institute would be required to provide the evidence and analytical baseline on the defence and security sector that was needed to underpin a key industrial capabilities strategy. They also found that the data generated by such an institute would also be of use to industry in better understanding and exploiting market opportunities internationally.
The tremendous potential of these international opportunities for our defence companies was dramatically illustrated last week when we announced one of the largest export deals in Canadian history with Saudi Arabia.
CADSI even suggested that such an arms-length organization – comprised of a partnership between government, industry and academics – would not only promote better policy, but would also improve procurement decision-making and practices. So, they laid out their case well, and we agree.
That is why last week – as part of the announcement of the Defence Procurement Strategy – Minister Nicholson and I stated our government's intention to launch an arm's-length Defence Analytics Institute.
And today I am pleased to announce further details about this new arm's-length research body.
First, our vision is for this body to provide:
- Expert analysis to inform various aspects of the military procurement process, including the development and sustainment of KICs;
- Research and insight into the strengths, weaknesses, and opportunities for growth within the Canadian defence industrial base; and
- Information on export opportunities and technological trends in global defence, as well as insight into Canadian industry's capacity to develop new technologies in those areas.
It will leverage industry and academic expertise to supplement the government's own internal analysis.
Further, the Defence Procurement Strategy will be reviewed every five years, and we envision that the Defence Analytics Institute will play an important role in this process – helping to answer questions like:
What impact on the participation of Canadian firms in procurements has the Strategy had? How has it contributed to the growth and development of key industrial capabilities? Has it improved export opportunities for Canadian industry? These will be important questions that the Institute can help the government answer, with a view to ensuring that our objectives for the Strategy are met.
As for the structure of the Institute, I can tell you that it is going to be established and maintained through a joint effort. Starting immediately, the Minister of Industry, with the support of the Minister of National Defence and myself, will set up an interim Institute. This will of course happen with help from industry, selected academics and other government departments.
The interim Institute will carry out the important work of determining the mandate and scope of activities of the permanent DAI, which the government will put on a permanent footing by next year [2015].
Finally, the success of the Institute will be heavily dependent on those who are directly involved in its operation. To underscore this important aspect, I am very pleased today to announce the names of the interim board members of the Defence Analytics Institute. They are:
Tim Page, President of CADSI, the Canadian Association Defence and Security Industries;
Christyn Cianfarani, Director of Government Programs, Research and Development, and Intellectual Property at CAE Inc.;
Iain Christie, Executive Vice-President of the Aerospace Industries Association of Canada;
Peter Gartenburg, Vice-President of Ottawa Operations at L-3 Communications;
Dr. Janice Stein, Director of the Munk School of Global Affairs at the University of Toronto;
Dr. Louis Bélanger, Director of the Institute for Advanced International Studies at Laval University;
Dr. Craig Stone, Director of Academics and Associate Dean of Arts at the Canadian Forces College;
And Dr. David Bercuson, Director of the University of Calgary's Centre for Military and Strategic Studies.
And I am delighted that Tom Jenkins has graciously agreed to be the Chair. Tom, as you all know, is the Chairman of the Board for OpenText.
I thank all of you for agreeing to come in on the ground floor of this exciting initiative.
Folks, the new Defence Procurement Strategy marks an important shift. Because in the context of government spending millions–sometimes even billions–of taxpayer dollars for defence equipment, Canadians have every right to know that we are getting what our troops need, at the best value, through a process that's good for Canadian workers, businesses and taxpayers.
We have committed to manage our defence procurement practices differently, and more effectively. At the heart of this commitment lie strengthened decision-making and accountability. And the Defence Analytics Institute will make an important contribution to improved decision-making and accountability.
It may seem all too obvious – but we can't make good decisions if we don't have good information to base them on. At the end of the day, the effectiveness of this Strategy will depend to a significant extent on the Institute's work, as will the evaluation of the Strategy.
I am very excited that only two weeks after unveiling the Strategy, we are already taking the concrete steps to get this new research capability in place. And I am looking forward to listening to today's discussion. It is through engagement like this that we will build a stronger tomorrow.
Thanks very much, everyone.
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