CANSEC 2014

Speaking Notes for The Honourable Diane Finley, PC, MP
Minister of Public Works and Government Services

Ottawa, Ontario
May 29, 2014

Check against delivery

Good afternoon. It’s a pleasure to be here.

I’d like to thank CADSI for your kind invitation to speak to you today. Thank you also to KPMG for sponsoring the pre-lunch reception, as well as to luncheon sponsors L-3 Communications and Airbus Defence and Space.

Before I dig into the nuts and bolts of what I want to talk about today…let me start off with a little story.

I think it describes what a lot of us go through—in government, in business, and even at home.

It’s about how often we don’t speak the same language. Whether at home or in government, our assumptions sometimes drive how processes unfold.

I was once told a story about how the various factions of government interpreted a direction to “secure the building.”

Some posted guards on the perimeter. Another crew put the place on lock down and turned out the lights. Others evacuated the premises and set-up a headquarters.

The procurement folks said—ok, let’s take out a 5-year lease with an option to buy.

All joking aside, these perspectives and interpretations are important—but unless we’re all on the same page, it can lead to delays, confusion and miscommunication.

So today I want to discuss three main items—The Defence Procurement Strategy, Controlled Goods and CF-18 Replacement.

All of these initiatives have benefitted from close collaboration between government and industry.

I am pleased to say, that since announcing the new Defence Procurement Strategy on February 5th, we’ve seen more collaboration—and common understanding—than ever before in Canada’s defence procurement. This is not only true between government departments, but also true between government and industry.

Together with all of you, we wanted to meet three objectives through this strategy:

• To make sure that the government delivers the right equipment to the Canadian Armed Forces and the Canadian Coast Guard in a timely fashion;
• To achieve greater economic outcomes for Canada; and,
• To streamline the defence procurement process.

To achieve these objectives, we have been working on a comprehensive implementation plan.

Rest assured that as we continue to implement this Strategy, we will again be asking industry to work with us—because we know we will be able to succeed only if industry is engaged and participates fully in all the aspects where your input is key.

So I want to thank all of you who are here today for your tremendous response to what I believe is the most significant transformation in the area of defence procurement in the last 30 years.

From the feedback that we have received across the country, from big companies and small, at the many engagement sessions that I have attended personally and at others attended by my officials—it is clear that, within Canada’s great defence sector, we have changed the conversation around the outcomes to be achieved through our Defence Procurement Strategy.

But changing the conversation is not enough. Now we have to actually change the outcomes. This is a transformative process and, as we all know, transformation takes time.

But make no mistake—this transformation and focus on outcomes is real. It is grounded in sound policy decisions that are fundamental to the government of Canada. To those who think that this is a passing fad, let me be clear: we are laying the ground work for lasting change.

Every step that we take anchors the Defence Procurement Strategy in the day-to-day approach to all defence procurement.

Now, I’m happy to report that I’ve already been told by my officials that DPS is changing the way that OEMs are thinking about procurement and specifically about how to find creative ways to bring value to Canada when structuring your bids.

And that’s a good thing.

Because I’ve said it before and I’ll say it again; companies that demonstrate a willingness to invest in Canada through the transfer of intellectual property, the creation of skilled jobs, innovation-related activities and export and international business development, will have a competitive advantage when bids are evaluated.

If you are an OEM and you haven’t turned your mind to this, you are placing your company’s competitiveness at risk.

So let me talk for a few minutes about the importance of this transformation and what you can expect in the coming weeks and months as the Strategy is rolled out.

Our first and overriding goal will always be to deliver the right equipment to the Canadian Armed Forces, to our men and women in uniform, in a timely manner, and to better achieve this, we need to engage industry earlier in the procurement cycle.

This way, we can fully understand your views on the most appropriate solutions available to meet the capability needs of the Canadian Armed Forces. This engagement has to begin early and it has to be continuous.

We know that early engagement works—it allows the government to tell industry its capability gaps and needs, and it allows industry opportunities to inform and shape the requirements.

This effective two-way engagement makes for a smoother procurement process, and maximizes productive outcomes. It can also allow for course correction, as needed.

The most significant component of our efforts to engage you as early as possible in the capability discussion is the production of the Defence Acquisition Guide.

We committed to producing the first edition of the Guide in June and, as my colleague the Minister of National Defence has said, we will meet our commitment.

As you’ve heard from Minister Nicholson, in identifying DND’s potential procurements well in advance, this new guide will help industry to plan ahead.

It will help you determine where to invest your R&D dollars, and with whom to form strategic partnerships. It will also help National Defence get input on industry’s views on the capability needs identified.

The first iteration of the guide may not be perfect, but we will not let ‘the perfect be the enemy of the good.’ This is a major step forward. In the spirit of continuing discussion, we will look forward to getting your views on how we can continually improve this important tool.

The second major objective of the DPS, as you know, is to leverage our purchases of defence equipment to create high-value jobs and economic growth here in Canada.

As a first step following the February announcement, we consulted with industry to apply Value Propositions on well-advanced procurements.

We developed an approach to motivate bidders to generate better economic outcomes for Canada—without slowing down the acquisition process.

We have applied this interim approach to Value Propositions on both the Canadian Coast Guard’s Medium-Lift Helicopters and National Defence’s Medium Range Radars.

Now, again, let me say, we know that these weren’t perfect. It continues to be our goal to implement DPS without slowing down procurements, so we’re making the best of it.

We will continue to develop an approach to applying value propositions that more fully reflects the spirit and intent of the Defence Procurement Strategy.

We’ll accomplish this by weighting and rating Value Propositions to ensure that what is proposed will contribute over the long term to building and growing our country’s defence sector.

We will continue to improve how we develop Value Propositions in two important ways.

First, as I said recently in Vancouver, within the identified thresholds, “any procurement that does not already have a final, published RFP is on the table for consideration of a value proposition.”

Industry will have the ability to contribute to the discussion about specific Value Propositions and how they will be rated and weighted on a case-by-case basis, as draft Value Propositions will form part of all industry engagements that we do on specific procurements. The same way that industry has input into all other aspects of an RFP.

Secondly, it has been clear that you would like some predictability and consistency in how Value Propositions are created. Together with Industry Canada, we will be calling on your representatives to assist us in developing a framework to do just that.

But I want to be clear that for government to get Value Propositions right over the long term, the work of a Defence Analytics Institute will be key.

As Minister Nicholson has said, “Only the private sector has the commercial know-how, the technological expertise and the innovative ability to rapidly deliver the kind of cutting-edge solutions needed to support the 21st century operational requirements of the Canadian Armed Forces.”

Industry representatives make up half of the interim board of the Institute. Industry advice will therefore be fundamental to the long term success of the strategy.

However, our success in this endeavour will be dependent on more than the advice of industry association representatives. The participation and engagement of OEMs will be fundamental to good decision-making.

It will require those of you in this business to share your data and analysis with the Institute so that it can measure global supply and demand conditions in defence-related industries …and contribute to how Canada identifies and develops Key Industrial Capabilities to which value propositions will apply.

Without your involvement, no one will benefit.

This brings me to the third objective of the Defence Procurement Strategy—to improve and streamline procurement processes. As we’ve said before, one way we’ll do this is through a better process for decision-making.

Until now, individual departments have each had their own processes for determining the right equipment or the desired economic benefits or, in the case of Public Works, the procurement process. Key decisions were therefore made sequentially, Minister by Minister.

With the establishment of the Defence Procurement Secretariat and a working group of Ministers, major decisions on procurement processes will be made in a joined-up way, so that the right outcomes can be achieved in a much more timely fashion.

We are absolutely convinced that, by working in concert with each other, Ministers will continue to exercise their individual accountabilities while speeding up procurement decisions and processes, which we know, cost you in the industry money.

So all to say folks, we’re making progress. Real progress, with real results, in a timely manner.

CADSI and AIAC and others have been instrumental in getting us to where we are today—and frankly, where we needed to be.

We will continue to rely on you and them as we move forward.

Now, speaking of collaboration with industry on introducing change, I’d like to turn for a minute to another area where we’ve been working to cut red tape and address regulatory overload.

Last fall, at the Canadian Aerospace Summit, I announced that Public Works was launching an initiative to reduce the size and scope of the list of items subject to domestic controls under the Controlled Goods Program.

Canadian industry urged us to take this step to preserve their competitive posture, reduce cost and administrative burden. It has been a key objective of mine to see this come about.

Of particular importance was ensuring that the Controlled Goods Schedule amendments were aligned with the U.S.’ Export Control Reform initiative, which is reducing the size and scope of their Munitions List under ITAR.

We didn’t want to see Canadian industry left behind their important U.S. trading partners, but we also had to make sure that the reduced list fully met Canada’s obligation—critical to the exemptions that we enjoy under the ITAR—to continue to protect U.S. controlled goods and technology.

As part of the regulatory change process, my department has actively consulted and engaged with industry, as well as other Canadians.

I am very pleased to tell you today that the Government of Canada has just approved the amended and reduced Schedule.

As a result, over one half of the entries on the Schedule have been removed, with the remainder being goods and technologies that have national security implications. These amendments will come into effect on June 4 [2014].

You have been asking for these changes—and we have delivered. In fact, we fast-tracked delivery for you to get it done, while ensuring diligence in all matters of national security.

And—even better—going forward, we have put a mechanism in place to ensure that Canada’s list of controlled goods will always match and align with the ITAR—now and in the future.

This industry and government collaboration is great news for Canada’s defence sector as it will help level the playing field for the Canadian aerospace, defence, and security industries vis-a-vis global competition, without compromising national security.

Before concluding, I want to talk for a minute about where we are on CF-18 replacement.

I know that many of you in this room are anxiously awaiting this decision. I truly want to thank all of industry who engaged with us in this process.

When our Government established the Seven Point Plan for CF-18 replacement, it set a very high bar for independent and transparent review.

An independent panel, comprised of experts, external to Government, ensured that the evaluation of options being conducted by the RCAF was both rigorous and impartial.

Now let me tell you, as a testament to how seriously we have taken this exercise, we were very careful to choose the right people for this job.

We ensured that we chose people who had the technical know-how, strong financial backgrounds, detailed knowledge of Canada’s military and procurement systems and we even brought in someone who was a very public critic of the program.

We wanted to absolutely ensure that the challenge function that they would play on the analysis of options was very rigorous.

I can also tell you that I met with the panel a few times during the course of their work. Keith Coulter, Rod Monette, Philippe Lagassé and Jim Mitchell have really kept the RCAF’s feet to the fire in this evaluation. They have taken their job very seriously and they have done a great service to Canada.

So—where are we in the process?

I am proud to say that this has been a very transparent process. DND, Industry Canada and the Fighter Secretariat have produced several reports and we have kept our commitment to make those reports public over the course of the last year and a half. You can find them all on the Secretariat’s website.

So we will do our due diligence in reviewing the remaining reports and we will keep our promise to our industry partners to protect their commercially sensitive information.

But we will keep the commitment we made last December to make the public report on the evaluation of options available soon.

In the end, there is something much bigger and much more important than politics that we must keep in mind.

That is, first and foremost, in our consideration of the work that has been done by the RCAF, the Panel, Industry Canada, and the Secretariat, we will ensure that the Canadian Armed Forces have the equipment they need to do the work that we ask of them.

As a Government, we ask the Canadian Armed Forces to protect Canada’s sovereignty and its people. We ask the Forces to defend Canada’s values at home and abroad. We ask them to provide relief to those affected by natural disasters within our borders and around the world.

This is not a small request. It requires great and unimaginable sacrifice, and, in return, we owe them no less than to ensure that we get them the right equipment to do the job that we ask of them.

I know my time is nearly up today, so I want to circle back for a moment. At the beginning of this speech, I told a story about how if we don’t communicate early, our outcomes will be misaligned. And that is bad for government and bad for industry.

Whether it’s the Defence Procurement Strategy, the Controlled Goods program or a specific procurement, we know we will get faster and better outcomes when we work together.

By engaging with industry earlier and more continuously, we avoid the pitfalls and the unnecessary delays that happen all too often at the back-end.

These conversations between industry and government go a long way toward preventing problems that we’ve experienced with past procurements involving misunderstandings about both what is needed and how those needs can be met.

Early and continuous industry engagement is not a gimmick and it’s not a slogan. We want and we need your participation.

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 best value, through a process that will create thousands of highly skilled, high paying jobs here in Canada.

That’s good for Canadian workers, businesses and taxpayers.

This strategy not only makes good economic sense, but it also helps strengthen Canada’s sovereignty and national security. This strategy really is a win/win/win.

Again, thank you for taking part in what has so far been a constructive conversation—one that has set a positive tone for everything that lies ahead.

All to say, I think I’ve taken enough of your time today.

So thanks very much, folks—and enjoy the rest of your event.