Defence Capability Development, the Comprehensive Approach and Constraints of the Policy Environment in Canada

Robert Addinall, Al Dizboni

In this paper we briefly analyze two Canadian military procurements: the armoured vehicle acquisition process from the late 1990s through to the late 2000s, and the Next

Generation Fighter Plane program between 2010 and 2012. While these two processes took place in somewhat differing circumstances, both shared the characteristics that the original planning and procurement process, based on the ideal of efficient interaction between several different branches of the federal government, was completely altered by the constraints of the policy environment. Although beyond the scope of this paper, our research indicates that this same type of difficulty is shared by other defence procurement projects as well. We identify three major types of constraints in the policy environment, with each level of government organization having its own rationality. First, each government department involved in a procurement has an organizational culture and standard operating procedures which may not mesh well with those of other departments. Second, driving personalities in government departments may also alter the manner in which standard procurement process rules are applied.

These two types of constraint have been described as “bureaucratic politics” in a range of political science and history analysis since the 1960s, especially in studies of United States government programs.1 Third, the rationality of the elected government to win the next election may override the benefits it perceives in following idealized policy statements to the letter. This type of political rationality is often examined using public choice theory methodology.

1 For example, one of the best-known works on bureaucratic politics is: Graham Allison and Philip Zelikov, Essence of Decision: Explaining the Cuban Missile Crisis (New York: Longman, an imprint of Addison Wesley Longman Educational Publishers, 1999), as well as its earlier edition written by Allison and a different co-author and published in the late 1960s.

Methodological Framework: Problems and Variables

Our methodology here uses elements of both the bureaucratic politics and public choice approaches. To borrow a phrase from military history, each of the three constraints noted above introduces a form of friction to the policy environment. This means that the ideal functioning of the government as a single rational actor, as embodied in the whole-of-government or comprehensive approach, is not realized. Policies based on the assumption that each step in a complex procurement process can be implemented with little difficulty will fail. Instead policy should be founded on thorough analysis of the sources of friction and be designed to manage rather than to unrealistically eliminate constraints. Using a management-centric approach would prevent future programs from being badly derailed when perceptions of a sudden crisis arise.

In the case of armoured vehicles, the impetus to procure a replacement for Canada’s

Leopard 1 main battle tanks (MBTs) emerged in the late 1990s. The Leopard 1s, acquired in the late 1970s, were wearing out, while ideas of a Revolution in Military Affairs (RMA) then current in the United States suggested that the future lay with new, lighter weight armoured vehicle designs under 35 tons, rather than 45 to 70 ton MBTs. It was thought that lighter vehicles could be more rapidly deployable around the globe, increasing what NATO armies call operational mobility, while technological advances in networked command, control, communications, computing, intelligence, surveillance, reconnaissance (C4ISR) systems and new precision munitions would make lighter vehicles as or more effective in combat than heavier designs.2

2 RMA ideas made the transition from studies to official U.S. Army policy in October 1999, when then-Secretary of the U.S. Army Louis Caldera and then-Chief of Staff of the U.S. Army Eric K. Shinseki “unveiled a vision of a more strategically responsive U.S. Army.” It was stated that: “The Army intends to begin immediately to develop a force that is deployable, agile, versatile, lethal, survivable, sustainable and dominant at every point along the spectrum of operations… The vision statement establishes a goal to deploy a combat brigade anywhere in the world within 96 hours after liftoff, a warfighting division on the ground in 120 hours, and five divisions within thirty days.” See:

Also around this time a perception emerged within at least some elements of the Canadian Army bureaucracy that the elected Liberal government of the day would not be willing to fund the purchase of a new generation of tanks. As a result a plan came together to develop a new family of medium weight, wheeled armoured vehicles based on the same Light Armoured Vehicle III

(LAV-III) chassis as the LAV-III infantry carrier/infantry support vehicles that Canada acquired for the infantry branch of its army in the late 1990s and early 2000s. This family of vehicles was called the Direct Fire Unit (DFU), a phrase which essentially describes the combat role that it would have taken over from MBTs. Such vehicles engage opposing forces with powerful direct line of sight weapons or indirect fire weapons that can achieve the same effects. The Canadian

DFU was, at least in theory, intended to be interoperable with planned U.S. developments and less expensive than purchasing new MBTs. Based on extensive review of documents obtained under the Canadian access to information act, plans for it also appear to have skirted detailed analysis of Canadian Industrial Regional Benefit (IRB) requirements by being based on systems that were already produced in Canada. Key decisions were made in 2003 in the apparent absence of competitive evaluation of different direct fire armoured vehicle designs.

United States Army, Army Announces Vision for the Future, press release (Washington, D.C.: October 12, 1999). Archived by the Federation of American Scientists: http://www.fas.org/man/dod- 101/army/unit/docs/r19991015vision095.htm (accessed March 27, 2008). Shinseki stated that: “There are many ways to increase survivability while lowering the weight of your weapons platforms… including the survivability that you give to a platform because you are not expecting to take a direct hit.” See: Louis Caldera and Eric K. Shinseki, statements made during press conference, October 12, 1999. Transcript publication information: Association of the United States Army, Press Conference Secretary of the Army Louis Caldera and Chief of Staff of the Army General Eric K. Shinseki (Washington, D.C.: Association of the United States Army, 1999). Archived by the Federation of American Scientists: http://www.fas.org/man/dod-101/army/unit/docs/r19991014ausapress.htm (accessed March 27, 2008). In a follow-up press conference, representatives of the U.S. Army Training And Doctrine Command (TRADOC) stated that: “In today’s heavy force, we enjoy tremendous overmatch… That allows us to make a mistake… [light forces] may not recover from a mistake… They make up for it with the close fight using internetted combined arms.” See: Joseph Rodriguez and Michael Mahaffey, comments made during press conference, Washington D.C., December 16, 1999. Transcript publication information: U.S. Training and Doctrine Command, Transcript of the Training and Doctrine Command (TRADOC) Press Briefing, Status of Brigade Combat Team Development at Fort Lewis and Planned Performance Demonstration at Fort Knox (Washington, D.C.: TRADOC, 1999). Archived the Federation of American Scientists: http://www.fas.org/man/dod- 101/army/unit/docs/991216-briefing_tradoc_press.htm (accessed March 27, 2008).

Between 2003, when the DFU program was officially announced, and 2006, when it was cancelled, considerable resistance to the idea developed within four sub-branches inside the

Army. Inter-service rivalry between the army, air force and navy is a well-known challenge in many countries, and frequently entails bureaucratic politics aspect when the three services bargain against each other for limited government funds. What happened within the Canadian

Army might be termed intra-service rivalry; a form of inter-arm or inter-branch rivalry within a service. The DFU was perceived by some as an attempt by Army leadership to keep the

Armoured Corps branch of the Army in existence while removing capabilities form the Artillery and Infantry branches. This created resistance in the two latter organizations. However, some

Armoured Corps personnel also had doubts about the DFU, seeing it as a cost-cutting exercise and as inferior to purchase of new MBTs. Also in terms of internal resistance to the project, a significant amount of Canadian Army capability development analysis suggested that the DFU would not work as planned. This was primarily because the first part of the plan, procurement of the Mobile Gun System (MGS) variant of the DFU vehicle family, was announced in fall 2003 prior to thorough analysis, with a Statement of Operational Requirement (SOR) being completed afterwards, in early 2004. Finally, unexpected cost increases appeared, both because it became apparent that the MGS was more complex to develop than expected, and because features such as bilingual software for the vehicles (rather than English-only software) had not been included in early budgeting, although cost issues did not become widely politicized in the Canadian

Parliament and media in the case of the DFU project.

In 2006, two things changed. First, a Conservative minority government under Stephen

Harper was elected. This government was perceived as more friendly to the purchase of big ticket military items, including MBTs. Second, due to experiences in the Iraq and Afghanistan

4 campaigns, the United States Army started to reverse its views on the future of armoured vehicle design.3 Although it did create a number of Stryker brigades organized around a family of vehicles based on the LAV-III chassis, it eventually cancelled its Future Combat System (FCS) program.4 The successor to the FCS program underway by 2014 envisions heavy infantry carrier and support vehicles as well as heavy direct fire vehicles, generally likely to weigh over 40 tons and possibly over 80 tons. As a result a light/medium weight armoured vehicle family was no longer perceived as necessary for the Canadian Army to maintain interoperability with its

American counterpart. The changing views within the U.S. Army acted as an indirect influence on the otherwise primarily domestic variables of bureaucratic politics and public choice within

Canada, helping to deal a final blow to the dying DFU project. These two factors gave Army leadership the opportunity to quickly cancel the problematic DFU program and rapidly reallocate funds from that program to purchase of surplus Leopard-2 MBT from the Netherlands in 2007.

A postscript to the Leopard-2 acquisition was that a further plan to acquire a new, heavier

Close Combat Vehicle (CCV) to carry and support Canadian Army infantry was developed.

This was envisioned as most likely to be a tracked vehicle, with the Swedish BAE Systems

3 As an example of changing views by 2005 and 2006, an article appeared in the U.S. Joint Force Quarterly magazine entitled “Everybody Wanted Tanks.” The authors interviewed a range of U.S. military personnel, including the members of the U.S. 3rd Infantry Division. Those interviewed used phrases such as “tanks got respect.” The logistical demands of tanks turned out to be less problematic than advocates of light armoured vehicles had suggested in the late 1990s. The authors found that: “Until recently, the Army envisioned equipping all its forces with medium-weight combat systems. That concept now appears premature… Trying to prevail with one force type would be difficult and unwise.” They commented that experience in Iraq showed that situational awareness enabled by digitization did not work as perfectly as expected, especially in urban areas. New technology had not stopped American and other western forces from blundering into opponents. See: John Gordon IV and Bruce R. Pirnie, “Everybody Wanted Tanks,” Joint Force Quarterly 39 (October 2005), 84-90. Other good examples of changing views on armoured vehicle design at this time include: Kendall D. Gott, Breaking the Mold – Tanks in the Cities (Kansas: Combat Studies Institute Press, 2006), and Armor CXVII, no. 5 (September- October 2008) Special Counterinsurgency Selected Works issue. 4 Then-U.S. Secretary of Defense Robert Gates cancelled the FCS in April 2009, with the comment that it was an “exquisite” technology which was too expensive while being irrelevant to current needs. See: John T. Bennett, “Gates: Cutting FCS was tough,” Air Force Times, http://www.airforcetimes.com/news/2009/04/defense_gates_roundtable_040709/ (accessed April 9, 2009).

CV90 infantry fighting vehicle (IFV) design being considered a leading contender.5 Such a design was to be more resistant to improvised explosive devices (IEDs) and rocket propelled grenades (RPGs) in campaigns such as the Afghanistan conflict, and was also to have tactical mobility similar to the Leopard 2 MBTs on off-road terrain.6 The CCV procurement itself ran into trouble and by 2013 appeared to be indefinitely on hold, with upgrades to the existing LAV-

III fleet being described by the Army as sufficient.7 The armoured vehicle procurement section of this paper focuses on the MBT replacement program from the 1990s to 2007, rather than the later CCV program, but the basic point is that one aspect or another of Canadian armoured vehicle procurement has suffered uncertainty and various reversals of plans for almost two decades due to friction in the policy environment.

5 David Pugliese, “Canadian Forces Looks At CV90 For New Close Combat Vehicle,” Ottawa Citizen, November 17, 2008. 6 The official Department of National Defence statement of the CCV in 2010 was that: “The experience of the CF and that of other nations in operations in Afghanistan, Iraq, Lebanon and other operational theatre (sic.) demonstrates the requirement for a new highly survivable medium-weight… armoured CCV. The threats of mines, Improvised Explosive Devices (IEDs), Explosively Formed Projectiles (EFPs) and anti-armour weapons have proliferated and are likely to be faced in most medium to high-threat missions. A more robust vehicle with both passive and active protection appropriate to the mission will likely be required frequently in the future.” Department of National Defence, Canadian Forces, “Close Combat Vehicle (CCV) Project,” http://www.forces.gc.ca/aete/closecombatvehicleccvproject-projetdesvehiculesdecombatrapprochevcr-eng.asp (accessed September 28, 2010). 7 For example, on December 23, 2013, Ottawa Citizen defence columnist David Pugliese wrote: “Just how important was CCV to the Army? Well, for the last four years it was a key project. Troops going into battle needed the CCV for protection, the army stated. The Close Combat Vehicle was announced with great fanfare by the Conservatives in the summer of 2009. The government said at the time it would purchase 108 of the armoured carriers. The army originally argued that the vehicles, which would accompany its Leopard tanks into battle, were a priority for future missions… Now senior army officers say the upgraded LAV-III provides what was expected from the CCV. ‘The army suggested that its LAV III Upgrade vehicles provide the CCV capability’ said Patrick Lier, Senior Vice President of Nexter Systems, one of the firms bidding on the CCV project. ‘As a company with decades of experience in producing armoured vehicles, we at Nexter are astonished by this assertion. The LAV UP simply does not provide the same level of protection or mobility.’ Defence Watch readers also question the CCV cancellation decision in relation to the area of firepower. The LAV-III’s 25mm gun can’t [sic.] compare to the 30mm cannon that was to be outfitted on the CCV, they point out.” David Pugliese, “Just How Important Was Close Combat Vehicle To The Army?” Defence Watch blog, Ottawa Citizen, December 23, 2013, http://blogs.ottawacitizen.com/2013/12/23/just-how-important-was-close-combat-vehicle-to-the-army/ (accessed May 8, 2014).

The Next Generation Fighter Plane program, under which the Conservative government announced the purchase of 65 F-35 strike fighter aircraft in 2010, shares many features with the

DFU program. As in the case of MBTs in the early 2000s, Canada’s CF-18 strike fighters, in service for approaching three decades, were wearing out, and a replacement would be needed soon. The perceived importance of interoperability between Canadian and U.S. military forces reappeared as a driving factor, as the Royal Canadian Air Force (RCAF)8 expected that its U.S. counterpart would acquire a large number of F-35s. Once again, while the Statement of

Operational Requirement (SOR) for the project was still essentially under development the specific vehicle design to be acquired was announced, with no competitive evaluation of competing aircraft designs undertaken. As with the MGS variant of the DFU, the F-35 was still under development, and cost increases were likely.

In the case of the F-35, these factors became enmeshed with a politicized debate driven by different approaches to life cycle accounting. The life cycle accounting problem arose first because the Canadian Department of National Defence (DND) was still using a traditional twenty year life cycle cost. Industry Canada (IC) and Public Works and Government Services

Canada (PWGSC) were more interested in the Industrial Regional Benefits (IRBs) for Canadian industry arising from a F-35 procurement, rather than in reviewing DND’s life cycle accounting process. However, the Parliamentary Budget Officer (PBO), followed by the Auditor General

(AG), found what they considered to be significant problems with the accounting process for the

F-35, as a result of which life cycle costs were put under scrutiny in the Public Accounts

8 The air force in Canada was simply the Air Command of the Canadian Forces, often referred to as the Canadian Air Force, between 1968 and 2011, when its name was changed back to the historic Royal Canadian Air Force. Similarly, the Army was technically the “Land Force” between 1968 and 2011, while the Canadian military as a whole was called the “Canadian Forces” (CF) but is now called the “Canadian Armed Forces” (CAF). For simplicity the names current in 2014 are used here. Additional name changes have taken place in sub-organizations within each service; where relevant, such changes are noted in footnotes below.

Committee of Parliament and in the Canadian media. Differences in approaches to life cycle accounting and in understanding and agreeing on how to apply it created the appearance that the cost of acquiring F-35 had increased fivefold over a short period of time. The perception of a rapid cost overrun crisis and concerns about “sole-sourcing” created a political problem for the

Conservative government, which proceeded to “reset” the procurement with the creation of a

National Fighter Plane Secretariat that would oversee an evaluation of a number of different aircraft designs in a competitive process.

Both the DFU and F-35 programs failed to follow accepted Canadian procurement practices in terms of not developing a very clear and well-supported SOR and then completing a competitive evaluation process before the vehicle to be purchased was announced. Failing to take this step exposes DND, IC, PWGSC and the elected government to accusations of sole- sourcing, as happened in the case of the F-35.9 Alternatively, it can also lead to steadily worsening internal bureaucratic politics, as happened in the case of the DFU. The following sections of this paper are broken into three parts. The first examines the ideal model for

Canadian military procurements in place since the 1970s and how it fits into a whole-of- government or comprehensive approach, with subsections on the concept, defence and security application, and procurement application of the Whole of Government Approach (WoG). The second describes the creation of the DFU program and its derailment in greater detail, and the

9 While in the case of some procurements only one manufacturer builds a vehicle that fits requirements a competitive process makes the benefits and drawbacks of a preferred design clear, and sometimes makes clear that a design will not function as anticipated. In the case of the DFU, a lack of a competitive evaluation of different armoured vehicle designs at the outset meant that the Army expended time and money for three years on a project that was gradually found to have more and more flaws. Former Assistant Deputy Minister Materiel Alan Williams and others find “sole sourcing” (selecting a procurement from one contractor or group of contractors without a competitive process) to be acceptable in some circumstances. If necessity can be demonstrated, this approach is legally possible and has precedents and existing regulations by Treasury Board Office (TBO) to guide it. However, such necessity does not appear to have been clearly demonstrable in the cases of the DFU and the F-35. See: Alan Williams, Canada, Democracy and the F-35, part of the Claxton Papers series (Kingston: Defence Management Studies Program, School of Policy Studies, Queen’s University, 2012).

8 third examines the development of the F-35 aspect of the Next Generation Fighter program and its derailment in greater detail. In the concluding section we briefly comment on some proposed solutions to problems in Canadian defence procurement, and emphasize that understanding the sources of friction in the policy environment and putting in place guidelines to manage it is an approach more likely to meet with success than attempting sweeping departmental reorganizations to eliminate it.

Part 1 Canadian Military Procurement and the Whole of Government Approach: Concept

The Comprehensive Approach (CA) or WoG Approach is often described as a new vision in public administration in the early 21st century, although it has much earlier historical precedents.10 It focuses on reducing the organizational and administrative barriers between individual organizations with the objective of enabling them to coordinate their resources. This, in turn, is supposed to eliminate redundancies, achieve economy in utilizing resources, and allow multiple agencies to optimize their collective output. It is also intended to achieve greater strategic effects in terms of effective governance in the context of constraints and insecurities.

The WoG is not a fixed deductional design that can be mechanically applied to different administrative contexts, but is rather intended to be flexible, and to take different shapes depending on given circumstances. In many respects its strength depends on the will of actors

10 For example, DND Defence Scientist Peter Gizewski has written that the concept of grand strategy employed by the “great powers” in the nineteenth century referred to the purposeful use of strategic resources to achieve national objectives. Also of note is that during the “total war” period of 1914-1945, the key objective of geostrategy came to be the mobilization of not only the whole of government but the entire nation for the purpose of war, while in the post-war world U.S. led reconstruction efforts in Japan and, in the form of the Marshall Plan, in Europe were packages of comprehensive development involving various U.S. agencies working together with local institutions. Peter Gizewski, “ The Comprehensive Approach: an Idea who time has arrived” in Tom Rippon and Graham Kemp, eds., Governance and Security as a Unitary Concept, (Victoria: Agio Publication House 2012), 358-61; see also note 14.

9 involved – both key individuals within organizations and the organizations themselves – and on the nature of the operational theatre in which it is applied. For example, Figure 1 is a Treasury

Board of Canada overview of the Whole-of-Government Approach from the perspective of achieving strategic efficiencies in federal government spending.

Figure 1: Treasury Board of Canada Secretariat Whole-Of-Government Framework11

11 Treasury Board of Canada Secretariat, “Whole-of-government framework,” http://www.tbs-sct.gc.ca/ppg- cpr/frame-cadre-eng.aspx (Accessed May 9, 2014).

WoG: Defence and Security Application

In the context of defence policy-making processes the CA is intended to move the strategic planning activities of government departments out of “silos,” or away from

“stovepiped” processes, towards coherent and integrated communication and policy-making.

Moving from the WoG to the CA, from the public sector to public-private partnerships, and from the domestic to the international, the Maximalist view of CA in the defence context refers to situations where security operations require collaboration between actors in different fields of both private and public spheres, at both national and international levels in the areas of military operations, economics and diplomacy. In Canada it includes the 3D vision, with the three Ds emphasizing interconnectivity between defence, development and diplomacy activities in security policy and international missions. By its nature, 3D requires common strategies and integrated operations across a number of federal government departments including DND, the

Canadian International Development Agency (CIDA), the Department of Foreign Affairs and

International Trade (DFAIT), and other participants. It also requires operational cooperation between such Canadian departments and their equivalent organizations in other nations.

Much of what has been written relating to the Canadian Armed Forces and the CA has focused on operations. For instance, in 2008 then Canadian Army Lieutenant-General Andrew

Leslie, Canadian Army Lieutenant-Colonel Michael Rostek, and DND Defence Scientist Peter

Gizewski wrote in the Canadian Army Journal that:

In today’s security environment, successful military operations are unlikely to be achieved through the use of military power alone. In a world where conflict often involves myriad ethnic, religious, ideological, and material drivers, an ability to bring to bear all instruments of national and coalition power and influence upon a problem in a timely, coordinated fashion (i.e., diplomatic, economic, military and informational) is increasingly essential to achieving effective results. So also is an ability to address, and, if possible, to constructively engage the views and reactions of the public – both domestic

and international – as well as the media – as operations unfold. Canadian Forces (CF) acknowledgment of the need to practise a more coordinated and holistic approach to operations is ever more evident – and also pressing. Accordingly, DND leadership – both civilian and military – is increasingly calling for the adoption of a force that takes a “comprehensive approach” to operations.12

In terms specific to military operations other commentators again point out the historical continuities in the CA concept. Ottawa Citizen defence columnist David Pugliese commented in

February 2014 that: “the ‘whole of government’ approach has become a familiar mantra among

Canadian military officers and government bureaucrats when they describe the… way this country embarks on overseas missions,” but, emphasizing that the basic idea was not new, titled his article “‘Whole of government’ is old wine in a new bottle.”13 In addition, obstacles to the implementation of the CA have been recognized by defence analysts. Elsewhere Gizewski has written that the bureaucratic community does not have enough incentive to fully get on board with the Whole-of-Government Approach, that government resources that aid in the realization of the approach are scarce, and that the political will to implement it is weak.14

The aspect of the CA which emphasizes cooperation between Canadian government agencies and their counterparts in Canada’s allies is certainly of long standing. In recent decades it has usually been termed interoperability and, as seen above, was an important aspect of the

Canadian Army’s and RCAF’s plans to procure the DFU and the F-35. Interoperability has been described by Queen’s University defence analyst Douglas Bland as being “as Canadian as a

12 Andrew Leslie, Peter Gizewksi, and Michael Rostek, “Developing A Comprehensive Approach to Canadian Forces Operations,” Canadian Army Journal 9, no. 1 (2008): 11-20. 13 David Pugliese, “‘Whole of government’ is old wine in a new bottle,” Ottawa Citizen February 20, 2014, http://www.ottawacitizen.com/news/Whole+government+wine+bottle/9532284/story.html (accessed May 9, 2014). 14 Peter Gizewski, “ Discovering the Comprehensive Approach” in Michael Rostek and Peter Gizewski, eds., Security Operations in the 21st Century: Canadian Perspectives on the Comprehensive Approach (Montreal & Kingston: McGill&Queen’s University Press, 2011), 21.

12 beaver.”15 Pressures for British Imperial standardization of military equipment both created opportunities and caused difficulties for the Canadian military and Canadian industry before the

Second World War.16 In the mid-twentieth century U.S. influence became the primary driver on

Canadian thinking about military interoperability and has remained so to the present. In addition, the concept of “jointness” between the three armed services (army, air force and navy) grew in importance first in the U.S., and then in other NATO countries, during the 1980s and

1990s.17 In Canada the three services have been administratively “unified” since the late 1960s, although the extent to which they are operationally unified has varied over time.

WoG: Procurement Application

Effectively a form of what would today be called the CA has also been in place, at least on paper, in terms of Canadian military procurement since the 1970s. In the idealized form of the procurement process, once a branch of the military develops an acquisition requirement, civilian authorities within DND and Public Works and Government Services Canada (PWGSC) must undertake a series of steps resulting in a Request For Proposal (RFP) to industry. During evaluation of responses to the RFP from industry, Industry Canada (IC) is responsible for identifying Industrial-Regional Benefits (IRBs) arising from the project to industry across the different regions of Canada, and ensuring that the procurement includes economic benefits for

15 Douglas L. Bland, “Military Interoperability: As Canadian as a Beaver,” in: Ann L. Griffiths, ed., The Canadian Forces & Interoperability: Panacea Or Perdition (Halifax: Centre for Foreign Policy Studies, Dalhousie University, 2002), 49-63. 16 See, for example: Aaron Plamondon, “Casting Off The Imperial Yoke: The Transition of Canadian Defence Procurement Within The North Atlantic Triangle, 1907-1953” (master’s thesis, Royal Military College of Canada, 2001), 54. 17 “Jointness” was first given significant emphasis in the Goldwater-Nichols Department of Defense Reorganization Act of the 99th Congress in the United States in 1986.

Canadian industry. The legislative and regulatory framework for management of Canadian military procurements has been summarized into a reasonably intuitive graphic by former

Canadian Assistant Deputy Minister (Materiel), typically shortened to ADM(mat), Alan

Williams, and is presented here as figure 2. Figure 3, provided by the Canadian Army Land

Warfare Centre, shows the Canadian Army’s capability development process, which as can be seen is supposed to fit into the overall process presented in Williams’ graphic.18 The RCAF, which has included the Canadian Forces Aerospace Warfare Centre since that organization was created in 2005, should have a similar internal process.19

Figures 2 and 3, then, show an idealized process: this is what should happen when a branch of the Canadian Armed Forces initiates a procurement. The following two sections of this paper examine in greater detail the forms of friction that arise and cause the process to be implemented in a less than ideal fashion, and which can precipitate genuine problems as well as the appearance of crises in political debate and the media.

18 In the graphic DLSC stands for Directorate of Land Strategic Concepts, which was the predecessor to the Canadian Army Land Warfare Centre between 1996 and 2004. DAD stands for Directorate of Army Doctrine. Additional iterations of the organization were called the Directorate of Land Concepts and Doctrine (during a period when DLSC and DAD were merged into one organization), and Directorate of Land Concepts and Designs. 19 The Canadian Forces Aerospace Warfare Centre (CFAWC) website states that the CFAWC: “will become the centre of excellence for aerospace power development, including Concept Development and Experimentation (CD&E) and lessons learned. “ http://www.rcaf-arc.forces.gc.ca/en/cf-aerospace-warfare-centre/index.page (accessed May 9, 2014). As can be seen, this role is similar to the stages outlined in the Army’s Land Force Capability Development Continuum.

Figure 2: Military Procurement Legislative and Regulatory Framework20

20 Alan S. Williams, Reinventing Canadian Defence Procurement (Montreal and Kingston: Breakout Educational Network in association with McGill-Queen’s University Press, 2006), 3.

Figure 3: Land Force Capability Development Continuum21

21 Department of National Defence, Land Force Capability Development Continuum (2006). Provided by Army Land Warfare Centre (then Directorate of Land Concepts and Designs) staff, April 2011.

Part 2 Derailment in Detail: The Direct Fire Unit (DFU) Armoured Vehicle Program, 2003-2006

In examining the sources of friction in defence procurements, whether arising from factors usually analyzed through bureaucratic politics or through public choice methodologies, it is useful to define the actors involved. As described above, although the government as a whole may not act as a rational actor, each sub-component within a government acts relatively rationally within its own specific interests. In the case of the DFU program there were seven major historical actors which influenced Canadian armoured vehicle procurement. In terms of determining allocation of military funding, three organizations were involved: the Canadian

Army senior leadership and, up to early 2006, the Canadian Liberal government with Jean

Chretien and then Paul Martin as Prime Minister, and subsequently a Conservative government under the leadership of Stephen Harper. Within the Army there were four organizations in addition to the senior leadership: the capability development system, the Armoured Corps, the

Infantry, and the Artillery.

Work on what would become the DFU was initiated by the Army’s capability development system, much of which is located in Kingston, Ontario, in the late 1990s.

Capability development was at this point simply fulfilling its organizational purpose: to study the nature of the future security environment, recent campaign experience of both the Canadian and other NATO armies, and to evaluate likely developments in military doctrine, organization and technology.

In 1998 the Directorate of Land Strategic Concepts, the predecessor to the Canadian

Army Land Warfare Centre, produced an Armour Vehicle Concept Paper. The author(s) of the paper proposed that a new “phase one” Armoured Combat Vehicle (ACV) be procured in the

17 period 2002-2005, while a “phase two” vehicle would replace the Leopard-1 MBTs “sometime after 2010.” The phase 1 vehicle was to have “accurate firepower, capable of destroying main battle tanks and lesser targets,” and it was to “trade off” armour protection for “high strategic and operational mobility, high sustainability and low operating costs.” The phase two project was intended to “leverage the experience gained during [phase] 1… and take advantage of the emerging technologies that will be available post-2010.” It was stated that ACVs should be light enough to operate on “third world country” infrastructure, and be capable of travelling at the same speed as the then-new LAV-III armoured infantry vehicles. The paper’s author(s) discussed the possibility that in order to compensate for its lighter amour the ACV should use an indirect fire guided missile, either along with – or in place of – a direct fire cannon for use against MBTs and other threats. Consideration was given to incorporating an air defence capability into the vehicle, possibly using the same guided missile system.22

Despite the recommendations in the ACV paper, capability development and war games were balanced in assessing the benefits and drawbacks of light armoured vehicle concepts.

Army war games held during 1997-1998, such as the exercise QUARRÉ DE FER, found that a

20 to 30 ton Armoured Combat Vehicle was too lightly armoured and, if equipped with wheels rather than tracks, lacked the tactical mobility to manoeuvre openly when in sight of the enemy.

The QUARRÉ DE FER war game analysis concluded that “the ACV could not be used boldly and aggressively in warfighting situations… The study recommends the MBT not be replaced by the ACV in the armoured regiment for warfighting.”23

22 Department of National Defence, Armour Combat Vehicle Concept Paper (Kingston, Ontario: Directorate of Land Strategic Concepts, 1998). 23 The QUARRÉ DE FER analysis was included in annex D to the Armour Combat Vehicle Concept Paper.

Additional studies and conferences within the Army during 1999 to 2001 further examined then-current Revolution in Military Affairs ideas about armoured vehicle design.24

Then, in May 2002, the seminar war game Future Army Experiment: Operations in the Urban

Battlespace was held. In this exercise the term “Multi-Mission Effects Vehicle” (MMEV) was first applied to conceptual wheeled light armoured vehicles which incorporated precision missile weapons. The performance of three different types of future Army brigade were studied, two of which included new lighter vehicle designs, while one retained existing systems such as MBTs.

The MMEV studied in this exercise was a complex high-end system, with both a 105mm tank cannon similar to that of a Leopard-1, and a low level air defence missile system that could be used for both anti-tank and short-range air defence. Some of the results were favourable to new, lighter vehicles packed with advanced sensors and computing and communications equipment.

Nonetheless, once analysis of the exercise was concluded the game designers still found that it was difficult to make “one size fits all” force structures, and suggested that creating a future army optimized to operate in complex terrain such as urban areas, but also adaptable to open terrain, would be overly complicated.25

24 In June 1999 a Future Army planning team including academics and representatives from military allies held a conference in Kingston, Ontario. Its result were published by DLSC in a study titled Transforming an Army: Land Warfare Capabilities for the Future Army. In one discussion, Don. L. Smith, then Director of Science and Technology Land (DSTL) at the National Defence Headquarters (NDHQ) Defence Research and Development Branch, made comments which reflected views in the U.S. at the time: “We are… going… to move into the notion of protect, sustain, act and sense. The protection of the Army is going to be a stealth issue… We are talking about… an Army with topgsight [sic], one that sees and knows all. The Future Army will have an instantaneous vision of what is going on with the enemy… When you know your own situation and the enemy’s, you can have small units working in tightly orchestrated fashion.” See: Department of National Defence, Directorate of Land Strategic Concepts, Transforming An Army: Land Warfare Capabilities For The Future Army, edited by Shaye K. Friesen (July 1999). In addition, a 2001 DLSC study stated that increased operational mobility was required in the present and near-term, indicating that the large quantities of fuel, ammunition, and equipment maintenance needed by heavier vehicles would have to be reduced. See: Department of National Defence, Directorate of Land Strategic Concepts, Future Army Capabilities: Sustain, Sense, Command, Act, Shield (January 2001). 25 Department of National Defence, Directorate of Land Strategic Concepts and Fort Frontenac, Future Army Experiment: Operations in the Urban Battlespace (May 2002).

While capability development organizations in Kingston conducted studies of MMEVs and related vehicles, the office of the Director General Land Staff (DGLS) at NDHQ undertook its own analysis, examining three alternatives for a wheeled armoured vehicle with a 105mm tank gun in November 1999. It found that the immediate advantages of a light armoured vehicle acquisition would be improved operational mobility, a lower in-theatre logistical burden, and near-term interoperability with U.S. Stryker brigades. However, it also found that a light armoured vehicle in the direct fire role would provide no significant improvement in tactical capability over the Leopard-1, and that such a design would have little “growth potential.” Such a design was also considered to have potential long-term interoperability problems with U.S. forces, since it was anticipated that the U.S. might replace its LAV-III based Strykers with a new design such as the FCS by the 2010s. The DGLS study recommended that a new direct fire armoured vehicle procurement be delayed until the 2015 to 2020 timeframe, in order to reduce near-term costs, take advantage of future technology developments and analysis of the security environment, and to do additional conceptual testing. This was seen as a way of spending limited funds on “high payoff” equipment.26

However, during 2002 then-Chief of Land Staff (CLS) Lieutenant General Jeffery, together with then-Assistant Chief of Land Staff (ACLS) Major General Hillier (promoted to

Lieutenant General in December 2002), developed the idea of incorporating three different types of light armoured vehicles into a DFU. One of these was a MMEV which was based on simply adapting the Oerlikon Air Defence Anti-Tank System (ADATS) missile launcher which the

Army had acquired in the late 1980s to sit in place of a turret on a LAV-III chassis. The second vehicle was the Mobile Gun System (MGS), sometimes also referred to as the Main Gun System,

26 The DGLS study is detailed in: Directorate of Army Doctrine (DAD) comments on the second draft of the Mobile Gun System Statement of Operational Requirements (MGS SOR), fall 2003. Accessed through the Canadian Access to Information and Privacy Act, file number A0109893.

20 which placed a 105mm tank gun in what was essentially a robotic turret on the LAV-III chassis.27 The third system was a TOW-Under-Armour anti-armoured vehicle missile system, also to be mounted on the LAV-III in place of a turret and called the LAV-TUA.28 These three vehicles were intended to use overlapping ranges of fire, combined with greater information processing and precision targeting capabilities, to engage opponents at long distance and avoid the need for the protection of heavy armour plating.

The DFU plan was detailed in an Army senior leadership briefing on April 30, 2003, a month before Hillier took over from Jeffery as CLS.29 Hillier at this time was a strong proponent of the DFU, writing on April 28, 2003 to other senior Army officers that:

Thus we really could replace the Leopard in the direct fire role with veh [sic., abbreviation for vehicle] that is wheeled, can be carried in a Herc [sic., abbreviation for Hercules cargo aircraft] and that can deliver at least the same capability but, most importantly, deliver it in a theatre of operations where we cannot or don’t want to get the Leo [sic., abbreviation for Leopard-1].30

A “high profile” “communications approach” was developed to tout the benefits of the

DFU plan within the Army as well as to the public.31 During the April 30 briefing it was noted that announcement of the project by the Minister of National Defence (MND) should be made at a large media event, and should be sustained through more speeches, interviews, contact announcements and other unspecified “opportunities.”32 The procurement of the MGS, MMEV and LAV-TUA was to be linked to an Army “Transformation” plan. It was also noted at the outset that vehicles such as the MGS were the only “Canadian built non-tank option for

27 The turret was a “remote weapons station;” the crew sat inside the vehicle hull, rather than some of the crew having their upper bodies inside the turret, as in a conventional MBT. 28 TOW is itself an acronym standing for Tube launched, Optically tracked, Wire data link auto-guided missile. 29 See: CLS briefing: Department of National Defence, Chief of Land Staff, Implementing Army Transformation (Opportunities, Limitations & Risks) (Ottawa: April 30, 2003). Accessed through the Canadian Access to Information and Privacy Act, file number A0042354 30 Rick Hillier, e-mail to Mike Jeffery, P.J. Holt, M.D. Kampman and others, Monday April 28, 2003. Accessed through the Canadian Access to Information and Privacy Act, file number A0032670. 31 Department of National Defence, Implementing Army Transformation, 35. 32 Ibid., 35.

21 replacement for the Leopard for the foreseeable future.”33 This referred to the fact that LAV-III based vehicles are produced at the General Dynamics Land Systems-Canada factory in London,

Ontario.34

During summer 2003, draft background documents and position papers advocating the procurement of the MGS were developed. One internal position paper addressed “possible points of contention,” suggesting that: “Any opposition to this purchase would come from those who still believe the Army should deploy tanks.”35 At the same time, it expressed the opinion that it would be “not reasonable” to expect the Canadian government to approve a “very expensive” purchase of new MBTs.36 It is also notable that one of the concerns articulated in terms of Transformation plan described during the April 30, 2003 CLS briefing was to ensure that, despite limitations in the size of the defence budget, the Army would not lose any personnel.

The point made in these documents about retaining personnel and preserving existing organizational structures is significant in terms both of public choice and bureaucratic politics, since the armed forces had seen some of the greatest cutbacks during the effort to eliminate the federal government fiscal deficit under then-Finance Minister Paul Martin in the mid-to-late

1990s. Although Canadian defence budgets started to increase significantly after the September

11, 2001 terrorist attacks on the United States, the greatest increases in spending later in the first

33 Ibid., 21. 34 The original vehicle design was by the Swiss company MOWAG, which signed a license agreement with Diesel Division General Motors (DDGM) Defence Operations in August 1976 to allow GM to produce LAVs. In 1998 MOWAG was formally acquired by DDGM Canada and then partnered with General Dynamics to produce the Stryker variants of the LAV-III for the U.S. Army. General Motors Defense division was, in turn, acquired by General Dynamics in 2002, with the Canadian branch becoming General Dynamics Land Systems-Canada. 35 Department of National Defence, Land Force, Army Transformation and the Mobile Gun System (MGS), 1. The document is undated, but the historical context suggests that it was produced in early fall 2003 in preparation for announcement of the MGS, or else slightly after as an additional justification for the project. Accessed through the Canadian Access to Information and Privacy Act, file number A0109897. 36 Ibid., 2.

22 decade of the 21st century had not yet taken place, and were apparently not anticipated. The

Army’s concern was still with avoiding further reductions, not with asking for what were perceived as highly expensive procurements. The Army senior leadership’s decision to pursue the DFU and promote it through a communications strategy appears to have been a bureaucratic reaction to what it perceived as the political choice of the elected Liberal government to constrain military funding over a long period of time. It sought to “sell” the Army’s internal organizations, as well as the politicians and the public, on a family of vehicles that it thought the elected government would find politically acceptable to buy.

The Army senior leadership’s intuition in this case may not have been far off the mark.

In his autobiography Hillier notes that, during the mid-2000s the cabinet of Paul Martin, who was the Liberal Prime Minister of Canada from late 2003 to early 2006, vacillated on defence procurement in part because of concerns about public perception. According to Hillier, by 2005 the Liberal government had allocated money for a number of new purchases both to replace aging equipment and to support military operations in Afghanistan. These included replacement of the C-130 Hercules transport aircraft fleet, heavy lift helicopters, a new fleet of transport trucks, and new naval replenishment ships. Nonetheless, he describes being highly frustrated as a result of a meeting in 2006 in which he laid out plans to proceed with the purchases. Concerns were raised about the appearance of spending large sums of money on defence and appearing to be sole-sourcing contracts. In total $13 billion had been allocated to defence, but not yet spent.

Hillier states that: “The Conservatives [when they were elected in 2006] were presented with this plum, organized themselves to spend it and branded themselves as the party to support the CF.”37

Returning to 2003, procurement of the MGS was announced on October 29 of that year by then-MND John McCallum, who stated that: “The acquisition of a mobile gun system is an

37 Rick Hillier, A Soldier First (Toronto: HarperCollins Publishers, 2009), 348-350

23 important project that will take Canada’s Army further down the path of transformation… It is part of our commitment to modernize the Canadian Forces by re-investing in capital projects that provide the capabilities Canada needs in the emerging international security environment.”38

Hillier also made a statement amplifying the importance of the procurement during the announcement.39 Nonetheless, development of a SOR for the MGS was far from complete, with the final version approved only in the spring of 2004.40

At this point the irregular process for acquiring created resistance within the capability development system. During the winter of 2003-2004 the draft SOR had to go through a review process by personnel of the various capability development organizations, with the reviews being recorded in combat development records. Some of these reviews were positive, but many were negative, some greatly so. One reviewer from the Directorate of Army Doctrine (DAD) wrote that the MGS project “comes across” as “situating the estimate,” meaning that it was trying to make reality fit a predetermined plan.41 This DAD review suggested that there was a need to be

“honest about the relative merits and pitfalls of both eliminating the Leopard C2 from service and introducing the MGS.”42

Following such negative combat development reviews, resistance to the MGS project also appeared amongst some Armoured Corps personnel and was expressed in a debate in the

38 Department of National Defence, “Minister of National Defence Announces Acquisition of a Mobile Gun System,” Department of National Defence news release, October 29, 2003 http://www.mdn.ca/site/newsroom/view_news_e.asp?id=1238 (accessed March 21, 2008). 39 See: ibid. 40 Department of National Defence, Land Force, Statement of Operational Requirement Mobile Gun System (Ottawa: 2004). The SOR was signed as approved by the Project Director, Major J.A. Atkins, and the Project Manager, Lieutenant Colonel P. Ohrt, on January 19, 2004. It was signed by the SRB Chair, Acting CLS, and Group Principal Major General JHPM Caron, on January 29, 2004. It was signed as approved by DGSP Development Review by Major General DL Dempster on February 2, 2004. It was signed by the Chair of the Joint Capability Review Board and VCDS, Lieutenant General GEC Macdonald, on April 16, 2004. Accessed through the Canadian Access to Information and Privacy Act, file numbers A0104130, A0104131, and A0104132. 41 Department of National Defence, Director General Land Combat Development, Combat Development Record Comments 2nd Draft MGS SOR Version 3.1, unidentified Directorate of Army Doctrine reviewer’s comments, 9. 42 Ibid.

Canadian Army Journal.43 In the journal’s fall-winter edition an article was published entitled

“The Medium Gun System is Coming!....Now What?” by D.J. Senft, then a Major stationed at

CFB Wainwright in Alberta, an important armoured vehicle training area for the Army. Senft stated that “political and strategic considerations” were driving the procurement of the MGS, rather than a practical need.44 In the following issue the MGS Project Director, Major J.A.

Atkins, responded that a tank such as the Leopard was unsuited to future Army operations, and that the DFU family of vehicles would supercede MBTs with an expanded set of capabilities, rather than directly replace them.45

Although some armoured corps personnel were themselves not impressed by the DFU project, it also caused negative reactions in the Artillery and Infantry branches. An initial

Artillery branch white paper on MMEVs produced around 2003 was enthusiastic about the concept, under the assumption that the artillery would control the vehicles. This is apparent simply from the paper’s title: Air Defence Anti-Tank System (ADATS) In The Line of Sight

Precision Guided Missile Role – Like A Hot Knife Through Butter, And More.46 However, during 2003-2004 it became apparent that the Army senior leadership’s plan was for Artillery personnel operating MMEVs to be transferred to the Lord Strathcona Horse regiment in Alberta, the traditional Armoured Corps unit of the Canadian Army. This was seen within the Artillery as a de facto transfer of the Air Defence Anti-Tank capability to the Armoured Corps, a situation that members of the Artillery believed would be unworkable. In a particularly poignant

43 Like many other military institutions, the Canadian Army Journal changed its name during the period discussed in this paper. Up until 2003 it was the Army Doctrine and Training Bulletin, but then became the Canadian Army Journal. As in other cases, the current name is used here for simplicity. 44 D.J. Senft, “The Medium Gun System is Coming!....Now What?” The Army Doctrine and Training Bulletin, fall- winter 2003, 26-32. 45 J.A. Atkins, “The Leopard C2 Is Not A Tank,” Canadian Army Journal, spring 2004, 111-112. 46 Department of National Defence, (Land Force, presumably Artillery Brach, given statements in the paper) Air Defence Anti-Tank System (ADATS) In The Line Of Sight Precision Guided Missile Role – Like A Hot Knife Through Butter, And More... (Ottawa), 1-2. Undated, but from historical context appears to be written in 2002 or 2003. Accessed through the Canadian Access to Information and Privacy Act, file number A0109843.

25 comment, Major R. Lavoie of the Canadian Training Centre (CTC) Artillery School at Gagetown stated that after an Artillery Advisory Board discussion: “…for some reason, we believe we are absolutely not being listened to, although we have the experience with the kit and we are the only

Combat Arms [sic.] with concerns and appreciations of the complexity of the third dimension of the battlefield.”47

The Infantry branch of the Army also reacted negatively to the DFU program. This was because, up until 2003, the Infantry controlled the TOW anti-armour missile system that was to become part of the LAV-TUA vehicle, as well as the personnel attached to it. As in the case of

MMEV/ADATS personnel, the personnel operating the LAV-TUA were technically to have remained part of the infantry, but the transfer to Alberta had the appearance of a de facto transfer of a capability from the infantry to the Armoured Corps. An example of concern over this can be seen in the February 2004 comments of Colonel David Barr, then Director of Infantry. He agreed that the infantry could see the logic behind “co-locating” the MGS, MMEV and LAV-

TUA systems in 1 Canadian Mechanized Brigade Group, but stated that the loss of “yet another” support platoon, and its ramifications on senior Non Commissioned Officer career development and opportunities for “varied employment” in infantry battalions would constitute a “serious professional and morale issue.” He added to this that there was still “considerable resentment”

47 Major R. Lavoie at the CTC Artillery School in Gagetown, Lieutenant Colonel S.J. Bowes at CTC Armoured School Gagetown, Lieutenant Colonel M.J. Pearson at CTC Infantry School Gagetown, Lieutenant Colonel I.R. Creighton at CTC headquarters, Gagetown, Colonel C.J.R. Davis at CTC headquarters Gagetown, and Major L.J. Hammond at CTC Artillery School Gagetown, e-mail correspondence. Subject line: MMEV Force Generation – Position Of The Royal Regiment Of Artillery. Accessed through the Canadian Access to Information and Privacy Act, file number A0109924.

26 over elimination of Pioneer and mortar platoons in the infantry over the several years preceding

2004.48

The TOW-Under Armour missile system was relatively easy to integrate onto the LAV-

III chassis, and some vehicles were built. However, both the MGS and MMEV were ultimately developmental systems. In the case of the MGS, the Canadian Army found itself relying on the

U.S. Army to perfect a system that turned out to be more complex and more expensive to build than anticipated.49 Furthermore, the Canadian Army itself found that it had not budgeted for certain features that would be required on the Canadianized version of the MGS, and it was anticipated that the cost of the project might rise from $693 million to $1.2 billion.50 Bilingual software alone was estimated to cost as much as $50 million, due to engineering personnel costs of $200 per hour.51 In the case of the MMEV, the ADATS system was to be integrated onto a

LAV chassis at Oerlikon-Contraves Canada in Saint-Jean-Sur Richelieu.52 Nonetheless, the

48 Colonel Barr, Major General J.H.P.M. Caron, Major General A.B. Leslie, and others, e-mail correspondence, February 18-20, 2004. Accessed through the Canadian Access to Information and Privacy Act, file number A0109908. 49 MGS development was ultimately completed by the U.S. Army, and the MGS was deployed within Stryker brigades. However, in 2004 the design had missed its targets for low rate initial production, and some correspondence indicated that rumours were circulating within the U.S. and Canadian Armies that the program was in trouble and might fail. Problems with the vehicle’s main gun and questions regarding whether it would actually be transportable in C-130 aircraft were also raised. In one case, an e-mail containing a U.S. Inside The Army article detailing these problems was circulated. Reportedly, the main gun was expected to fire ninety rounds without a system failure, but instead fired fewer than twenty rounds between failures. It had been decided that a clean slate design would be needed. Also, modelling, simulation and infantry school war games had demonstrated that the vehicle had significant drawbacks as designed. Discussion of these problems occurred in: correspondence between Major L.P. Binette at Directorate of Land Strategic Plans in Ottawa, Major Vince Fagnan with the Canadian MGS project, and other Majors and Colonels in emails dated to October 20 and 21, 2004. Accessed through the Canadian Access to Information and Privacy Act, file number A0110728, and also in an email from A. Bolster at the Assistant Deputy Minister (Materiel) Office in Ottawa-Hull to Colonel M.D. Kampman. Accessed through the Canadian Access to Information and Privacy Act, file number A0110812. 50 Major L.J. Hammond to a number of other land force officers, undated (from the context it is obviously late 2004 or 2005). Accessed through the Canadian Access to Information and Privacy Act, file number A0283192. 51 Ibid. 52 As with the selection of the LAV-III chassis for the DFU vehicle family, the decision to use the ADATS and Oerlikon-Contraves was sole-sourced. The MMEV procurement was officially announced on September 22, 2005, less than a year before it would be effectively cancelled. The press release stated that: “The Canadian Forces are acquiring new, technologically advanced Multi-Mission Effects Vehicles… that will combine anti-tank and air-

Canadian program also faced unexpected obstacles, especially in terms of how the vehicle would integrate into allied air defence networks during coalition operations.53

As noted above, the change from a Liberal to a Conservative government created the political opportunity for the Army’s senior leadership to quietly cancel the DFU program. When the Conservative party of Canada took advantage of the opportunity to reallocate $13 billion in defence spending to brand itself, in Hillier’s words, “as the party to support the CF,” the reallocation of money from the DFU to purchase of Leopard-2 MBTs was an easy component of this transition.54 Hillier, who was appointed to the position of Chief of Defence Staff in January

2005, explained the change in his position on armoured vehicles in the following manner:

We had thought that the MGS could deliver an effect nearly identical to a tank if the technology of mounting the cannon on a relatively light vehicle could be made to work. It turned out that it couldn’t: we would have had a lightly armoured, wheeled (as opposed to tracked) vehicle with limited mobility, limited armour protection and limited accuracy with its gun.55 Army capability development commented in 2006 that “analysis of the MGS and MMEV occurred outside of a regular capability development planning process,” and recommended cancellation of both projects.56 In June 2006 then-Major-General Andrew Leslie was promoted

defence capabilities on one platform. Firing with its non line-of-sight weapons system, the MMEV will be able to engage targets that are hidden behind surrounding landscape features such as hills and buildings.” The press release explains that the military worked with Defence R&D Canada and Canadian industry on parts of the MMEV project, and that Oerlikon Contraves Canada was selected because it owns the intellectual property rights to the ADATS. Consequently: “There is no other missile system integrator in Canada, or abroad, with the requisite expertise.” Department of National Defence, “Multi-Mission Effects Vehicle,” Canadian Forces News, September 22, 2005. http://www.forces.gc.ca/site/news-nouvelles/news-nouvelles-eng.asp?cat=03&id=1767 (accessed September 10, 2010) 53 Department of National Defence, Director General Land Combat Development, May 3-7 Seminar War Game report/slide show briefing, 3. 54 Rick Hillier, A Soldier First, 350. 55 Ibid., 408. 56 Department of National Defence, Director General Land Combat Development, Recommendations to Cancel MGS and MMEV by Jim Simms (Kingston, Ontario: undated but from the context must have been produced during the spring of 2006), 4. Accessed through the Canadian Access to Information and Privacy Act, file number A0283169.

28 to the rank of Lieutenant-General and became Chief of Land Staff. In an e-mail sent to Hillier and a number of other senior officers on August 22, 2006, he recommended deploying the

Leopard-1 to a combat role in Afghanistan.57 On March 30, 2007 a Leopard 2 procurement scoping meeting took place,58 and in May of that year a Tank Replacement Project Management

Office was set up.59 Subsequently, twenty Leopard-2 MBTs and two armoured recovery vehicles were loaned from Germany,60 and on April 12, 2007, the Canadian government announced the purchase of 100 surplus Leopard 2 tanks from the Netherlands.61

The above description of events concerning the DFU program and the ultimate purchase of Leopard-2 tanks is, perhaps surprisingly, a fairly brief account of what took place. Additional detail can be found in related publications by one of us.62 However, from the detail provided here two key core points can be drawn. First, a perception within the military that the elected government in Parliament will attempt to avoid the appearance of extremely large expenditures on military procurement can lead the senior leadership of a military service, such as the Army, to attempt to bypass many elements of the standard and, in terms of the CA, ideal procurement

57 Andrew Leslie, e-mail to a number of other Land Force senior officers, August 22, 2006. Accessed through the Canadian Access to Information and Privacy Act, file number A0199396. 58 Major Feuerherm, e-mail to a number of other land force officers, March 30, 2007. Accessed through the Canadian Access to Information and Privacy Act, file number A0213134. 59 Letter from the Vice Chief of the Defence Staff, Lieutenant-General W.J. Natynczyk, to the Assistant Deputy Minister (Materiel), also distributed to the Chief of Land Staff, May 1, 2007, Department of National Defence. Accessed through the Canadian Access to Information and Privacy Act, file number A0283181. 60 Letter from The Honourable Gordon O’Connor, Canadian Minister of National Defence, to Dr. Franz Josef Jung, German Federal Minister of Defence, April 3, 2007, Department of National Defence. Accessed through the Canadian Access to Information and Privacy Act, file number A0213219. 61 Department of National Defence, Canadian Forces, “Renewing the Canadian Forces’ Tank Capability,” http://www.forces.gc.ca/site/news-nouvelles/news-nouvelles-eng.asp?cat=00&id=2252 (accessed September 28, 2010). See also: Department of National Defence, Canadian Forces, “Protection the top priority with tank acquisition, posted April 12, 2007. http://www.admpa.forces.gc.ca/site/news-nouvelles/news-nouvelles- eng.asp?cat=00&id=2251 (accessed September 28, 2010). 62 See: Robert Addinall, “The Long Engagement: The Case of the Canadian Army’s Multi-Mission Effects Vehicles,” Canadian Army Journal, summer-fall 2013, 15-35, and Robert Addinall, “To Transform An Army: The Canadian Interpretation of The RMA and The Transformation of Armoured Vehicle Design, 1992-2008: The Case of the LAV- III” (PhD dissertation, Royal Military College of Canada, 2011).

29 process. Second, such an attempt can lead to a series of bureaucratic politics problems. As such, factors identified within both the public choice and bureaucratic politics methodologies must be considered as sources of friction when considering problems with current Canadian military procurement. In the following section we briefly analyze a related set of events in the case of F-

35 procurement.

Part 3 Derailment in Detail: Intra-governmental Relations, the Next Generation Fighter Program and the F-35

As in the case of the DFU program, several actors were involved during the period from

2010 to 2012 during which the stated intent of the intent of the federal government was to procure the F-35. These included DND, IC, PWGSC, the Parliamentary Budget Officer (PBO), the Auditor General (AG), the elected Conservative government under Stephen Harper, and, with varying degrees on influence, the Liberal and NDP opposition parties in Parliament. As in the case of the MGS component of the DFU program, a U.S. program office and the U.S. military were indirect influences, attempting to manage F-35 development which was experiencing cost increases and falling behind schedule. In the case of the F-35, Canadian media coverage was a much greater indirect influence than in the case of the DFU. While the creation and cancellation of the DFU program appears to have been in part a bureaucratic reaction by the Army’s senior leadership to what it believed the elected government would be willing to spend, parliamentary debate and media coverage more clearly contributed to the Conservative government’s decision to “reset” the fighter program. The focus here is on the bureaucratic mismatches in terms of deciding how to evaluate life cycle costs that led up this political choice.

In terms of context it should be noted that the difficulties with life cycle costing experienced in the F-35 procurement are not necessarily evidence of extreme bureaucratic incompetence within any one department, but rather evidence of a lack of communication between branches of the federal government. A 2009 International Institute for Sustainable

Development white paper on life cycle costing sponsored by NORAD notes that:

Though many procurers are using life cycle costing (LCC) as a decision-making tool, its use is still far from being systematic and the calculation methodologies are sometimes far from robust. Moreover, procurers are not using LCC to inform strategically advantageous decisions. It is therefore clear that the current sustainable public procurement model is not delivering the best value for tax payers’ money. In other words, established methodologies for life cycle costing have been in flux, and some older methods, such as DND’s traditional 20-year life cycle cost, are no longer considered adequate. Questions developing an appropriate methodology for costing a project could likely be settled early in program development if managers from the main federal government actors met and defined what the project was to accomplish. If the ideal procurement process shown in Alan

Williams’ graphic in Figure 2 is followed, such meetings could have taken place. Because the F-

35 procurement was irregular, it appears that they did not.

Both Williams in his book Canada, Democracy and the F-35, and the Canadian

Broadcasting Corporation’s (CBC’s) Fifth Estate documentary program, have provided thorough timelines of Canada’s involvement in the F-35 program, which was initially known as the Joint

Strike Fighter (JSF) program. In short, the JSF program was initiated in the U.S. in late 1993 as the Joint Advanced Strike Technology (JAST) program, and a separate project led by the U.S.

Defense Advanced Research Projects Agency (DARPA) to develop a short take-off and vertical landing (ASTOVL) aircraft was merged with it in 2005. At that time the program was renamed to JSF, and three competing designs were developed by Lockheed Martin, Boeing and

McDonnell Douglas during a 1994-96 concept development phase.63 Also during the 1990s, the

U.S. government chose to pursue international involvement in JSF development in order to spread out costs and share risk with allied nations. It developed three tiers for international participation. Level one partners were to contribute approximately ten percent to aircraft development costs and would have stuff fully integrated into the JSF program office, and would also be represented through a national deputy director. Level two partners were to contribute approximately U.S. $1 billion, and level three partners were allowed to make contributions in the range of U.S. $125 to U.S. $175 million. The U.K. and the U.S. signed a Memorandum of

Understanding (MOU) on December 20, 1995, in which the U.K. became the only level one partner.64

On November 16, 1996, the U.S. Department of Defense (DOD) chose the Lockheed-

Martin and Boeing designs to continue into a concept demonstration phase. During the late

1990s Italy and the Netherlands became level two partners, and Australia, Denmark, Norway and

Turkey became level three partners. In 1997, Canada joined the U.S., U.K. and these six other allies as a level three partner in the research and development effort to create what was now described as a fifth generation fighter plane. According to Williams’ recollections, the primary motivation for Canadian involvement at this time was to gain access to potential industrial benefits; only industries in partner nations would be allowed to submit bids as sub-contractors to design and produce elements of the final aircraft.65 Referring to his own experience as well as to comments made by Canadian JSF program manager Michael Slack in December 2006, Williams finds that DND was generally considering the 2012 timeframe for a replacement of the CF-18

63 Alan Williams, Canada, Democracy and the F-35, part of the Claxton Papers series, 1. 64 Ibid., 6. 65 Ibid., 1 and 5-6.

(Canadianized version of the F-18), and in the early 2000s upgraded the CF-18 fleet to last until

2017 or 2018 if necessary.66 This meant that in 1997 there still appeared to be plenty of time to evaluate ongoing development of the JSF and identify whether or not the program would meet its objectives and become an appropriate F-18 replacement.

On October 26, 2001, the U.S. and U.K. selected the Lockheed-Martin design, which subsequently became known as the F-35 and was also given the name “Lightning II” after the original Second World War United States Army Air Force (USAAF) Lockheed P-38L Lighting fighter-bomber. This marked the initiation of the System Development and Demonstration

(SDD) phase of the program. Canada chose to continue its involvement with the program, and on February 7, 2002, Williams, as ADM(mat), signed a MOU committing Canada to involvement in the SDD phase. On December 11, 2006, Ward Elcock, as the Deputy Minister of

DND, signed the next MOU, committing Canada to the Production, Sustainment and Follow-on

Development (PSFD) phase.67 Aside from access to industrial benefits, Canadian involvement in development of the F-35 between 2002 and 2012 allows Canada to purchase the aircraft from the

U.S. government, rather than directly from Lockheed-Martin, at a discounted cost. This is because development costs are not included in the final purchase price for partner nations which have already contributed funds to the design of the F-35.68 Over this period, then, the additional benefit available to Canada was that if the F-35 program met its objectives, final purchase of the aircraft as an F-18 replacement would be more cost-effective.

As seen in the section on the DFU, the Conservative government elected in 2006 had an opportunity to spend significant unallocated defence funds and brand itself as the greatest

66 Ibid., 30. 67 Ibid., foreword and 8-9. 68 See: ibid., 18.

33 supporter of the Canadian military of any of the federal political parties. It also had the opportunity to extoll the industrial benefits to Canada accruing from involvement in the F-35 program. Peter MacKay, the Conservative MND between 2007 and 2013, declared that involvement: “will produce high-tech jobs and sustained economic benefits to regions across

Canada… Canadian companies will have opportunities to compete for contracts to participate in the production of the global fleet of some 3000 aircraft.” Many others made similar statements, including Gary Goodyear, Tony Clement, John Baird, and Denis Lebel.69 The Conservative government ambitiously claimed that Canada’s early involvement engendered $12 billion worth of industrial benefits.70 Through the 2000s DND was happy to go along with the industrial benefits focus of the elected governments, with DND’s Director of Air Requirements noting that only “a relatively modest operational analysis” of Canada’s capability needs had been done at the time of the earlier developmental commitments, with most attention given to “industrial issue and [technology] transfer issues.”71 IC also estimated that through its Industrial Participation

Plan with Lockheed Martin Canadian business received about $350 million in F-35 contracts well ahead of any firm decision on the aircraft purchase, and estimated that it expected Canada to gain $12 billion in opportunities related to parts and engine manufacturing.

Canadian involvement in the initial phases of the JSF/F-35 program did not oblige the country to buy the final aircraft. However, On July 16, 2010, MND Peter MacKay, Industry

Minister Tony Clement, and Public Works Minister Rona Ambrose held a large press event announcing the purchase of sixty-five F-35s.72 At this point Version 1.0 of the Next Generation

69 Justin Massie, “Bandwagoning for status: Canada’s need of the F-35,” (2011) 17:3 Canadian Foreign Policy Journal, 251-264. 70 Ibid. Massie also mentions DND documents from 2010 and papers by Goodyear in 2010 and Meyer in 2011. 71 Ibid. See also: Alan Williams, Canada, Democracy and the F-35. 72 This is described in Alan Williams, Canada, Democracy and the F-35, and in the CBC Fifth Estate timeline.

Fighter Capability (NGFC) SOR had only been completed by the RCAF’s Directorate of Air

Requirements on June 1, 2010,73 and would most likely have required additional time to go through review and revision before it could be considered reasonably finalized.74 The procurement cost for sixty-five F-35s stated by the government and DND at this time was $9 billion. Over the following two years other statements indicated a total cost of $16-18 billion, since there would be a lifetime sustainment cost of around $7 to $9 billion for sixty-five planes.

What followed on March 10, 2011, was the first critical report on the procurement from the PBO, and then additional reports on March 23, 2011 and May 3, 2011. A further extremely critical report was produced by the AG on April 3, 2012, and then a series of hearings on the F-

35 procurement took place in the Standing Committee on Public Accounts (SCPA) of Parliament on April 5 and 26 and then May 1, 3 and 15, 2012. Conservative, Liberal and NDP MPs questioned representatives from DND, IC, PWGSC, and the AG and other members of the AG’s office during the PACP hearings.

The initial PBO report focused only on costing method. The PBO was struck by what he considered to be the unrealistic cost estimates provided by DND and the government and concluded that appropriate costing methods were not properly followed. Amongst the key conclusions in the PBO report:

In the case of the F-35 proposal, no competition was held. The SOR has not been made publicly available, the capabilities of the aircraft remain uncertain given its current state of development, the IRBs remain unclear, and the acquisition and long-term sustainment costs have not been determined… The PBO has estimated the total program cost –

73 The Fifth Estate was able to secure release of a heavily redacted copy of the SOR through the Freedom of Access to Information system for their fall 2012 documentary on the topic. Directorate of Air Requirements, Statement of Operational Requirement (SOR): Next Generation Fighter Capability (NGFC), (Ottawa: Directorate of Air Requirements, June 1 2010). 74 Consider the review process and at times severe criticism that the MGS SOR underwent in late 2003 and early 2004 described in the DFU section of this paper above.

including acquisition and ongoing sustainment – to be US $29.3 billion. Divided over 65 aircraft, this results in a cost of approximately US $450 million per aircraft in FY 2009 dollars.75

The methodology of the PBO report was to focus on the increasing weight of fighter jets with each generation and evaluate the cost-per-pound of aircraft production. Based on these historic trends the PBO arrived at an $11.4 billion initial procurement cost.76 In addition, the

PBO chose to use a thirty year life cycle cost, rather than DND’s traditional twenty year life cycle cost, arriving at a cost of $17.9 billion for sustainment and future upgrades to the design.

These two numbers added together produced the PBO’s $29.3 billion estimate.

The AG report addressed irregularities in the procurement process as well as introducing another life cycle cost methodology, evaluating expenditures over a 36 year, rather than 20 or 30 year period. While acknowledging that “early efforts to promote industrial participations were successful,” the AG wrote of the F-35 procurement that:

Key decisions were made without required approvals or supporting documentation. PWGSC did not fully carry out its role as the government’s procurement authority. Although it was not engaged by National Defence until late in the decision-making process, PWGSC endorsed the key decision to sole source the acquisition of the F-35 in the absence of required documentation and completed analyses. By that time, practically speaking, Canada was too involved with the aircraft and the JSF program to run a fair competition… National Defence did not provide complete information in a timely manner… National Defence likely underestimated the full life-cycle costs of the F-35. The budgets for the F-35 acquisition ($9 billion) and sustainment ($16 billion) were initially established in 2008 without the aid of complete cost and other information. Some of that information will not be available years from now.77

75 Parliamentary Budget Officer, An Estimate of the Fiscal Impact of Canada’s Proposed Acquisition of the F-35 Lightning II Joint Strike Fighter, (Ottawa: Office of the Parliamentary Budget Officer, March 23, 2011), 7-10. 76 See the PBO report, as well as commentary on it in: Michael Byers, The Plane That Ate the Canadian Military (Ottawa: Canadian Centre for Policy Alternatives, Rideau Institute, 2014), 7; and in: George Petrolekas and David Perry, CDA Institute Analysis of the KPMG Audit of the F-35 Costing Data (Ottawa: Conference of Defence Associations Institute, 2012). 77 Auditor General of Canada, Report of the Auditor General of Canada to the House of Commons, “Chapter 2: Replacing Canada’s Fighter Jets,” (Ottawa: Office of the Auditor General of Canada, 2012).

The recordings of the SCPA hearings that followed the AG’s report indicate that, despite having been previously asked to move away from a traditional twenty year life cycle costing by the AG, DND had not yet done so in the case of the F-35. The overall impression given from the testimony is that no other department had questioned the traditional twenty-year life cycle until the PBO and AG offices became involved, since IC and PWGSC seem to have been more interested in the industrial benefits of Canadian involvement with the F-35 than in reviewing or evaluating DND’s cost estimates. In other words, the hearings seem to corroborate the AG’s criticism. In addition, when the PBO and AG were preparing their reports there does not appear to have been much communication between DND on the one hand and the PBO and AG offices on the other, leading to wildly differing cost estimates. During the hearings many of the bureaucrats and politicians seem to be struggling to understand the differences between cost estimate methodologies.78

Later in 2012 the KPMG accounting firm was retained by the Treasury Board of Canada

Secretariat to prepare another life cycle cost framework relating to the F-35. This framework was to be based on: “a review of Canadian government policies, departmental guidance and international leading practices.”79 The KPMG estimate was for a 42 year life cycle, based on seven years to procure and phase in a fleet of sixty-five F-35s, thirty years of full service, and five years for phase out and disposal.80 The KPMG report arrived at a final total life cycle cost

78 See: Standing Committee on Public Accounts, Number 040, 1st Session, 41st Parliament; Standing Committee on Public Accounts, Number 041, 1st Session, 41st Parliament; Standing Committee on Public Accounts, Number 042, 1st Session, 41st Parliament; Standing Committee on Public Accounts, Number 045, 1st Session, 41st Parliament. 79 KPMG, Next Generation Fighter Capability: Independent Review of Life Cycle Cost, (KPMG, November 27, 2012); and KPMG, Next Generation Fighter Capability: Life Cycle Cost Framework (KPMG, November 27, 2012), 1. 80 George Petrolekas and David Perry, CDA Institute Analysis of the KPMG Audit of the F-35 Costing Data, 4.

37 of $45.802 billion,81 and KPMG’s cost framework was subsequently used for DND’s December

2012 Next Generation Fighter Capability Annual Update.82

In any of the models sustainment costs were in themselves a problem. At least initially

DND seems to have assumed that the base costs of operating a fleet of jet aircraft – aerodromes, runways, ground support crews, and so on – would exist regardless of the aircraft purchased.

Such base costs are normally called operating costs, while the category of sustainment cost should refer to repair and upgrade contracts with the supplier specific to the vehicle in question – contracts with Lockheed-Martin in the case of the F-35. Initial DND costs of $16 to $18 billion considered only purchase and sustainment costs.

A thorough analysis of all the F-35 life cycle cost estimates was prepared by George

Petrolekas and David Perry for the Canadian Defence Associations (CDA) Institute in late 2012.

It extrapolates the initial DND cost estimate, the PBO cost estimate, and the AG cost estimate over a 42 year life cycle in order to directly compare these with the KPMG and December 2012

DND estimate. The CDA analysis incudes two total costs: a total acquisition cost, and a total cost of ownership. It uses three sub-items in the total acquisition cost: development cost, capital acquisition costs, and additional acquisition costs. For total cost of ownership there are four sub- items: personnel, operating and maintenance costs; aircraft disposal, full program life cycle cost, and attrition.83

The CDA analysis finds that the initial DND estimate did not take into account development costs, most likely due to the fact that these costs were contributed in 1997, 2002 and 2006, and were considered sunk costs. It made a capital acquisition estimate of $6 billion,

81 KPMG, Next Generation Fighter Capability: Independent Review of Life Cycle Cost, 4. 82 George Petrolekas and David Perry, CDA Institute Analysis of the KPMG Audit of the F-35 Costing Data, 6. 83 Ibid., 5-6.

38 and included $3 billion for additional capital acquisition costs, presumably for items such as

Canadian-specific modifications (including communications devices), spares, munitions, and other contingency items. DND therefore initially reported a total acquisition cost of $9 billion.

When DND’s initial predictions for sustainment and operating costs are included and pro-rated to a 42, rather than 20 year, lifespan, a full life cycle cost of $21 billion is reached.84

According to the CDA, the PBO also ignored development costs, but reached a figure of

$9.7 billion for capital acquisition costs. CDA notes that PRBO’s figures are presented in 2009

U.S. dollars, and were calculated using a “top-down” cost estimating relationship model based on basic mass empty weight of the vehicle.85 The PBO also allocated initial logistical requirements for the F-35 to capital acquisition, and therefore derived a smaller estimate of $1.7 billion for additional acquisition costs, and a total acquisition cost of $11.4 billion. Its estimate for personnel, operating and maintenance costs was $25.45 billion, disposal and attrition costs were ignored, and a full program life cycle cost of $36.75 billion is arrived at when the PBO’s

$29.3 billion is adjusted to a 42 year life cycle.86

The CDA review of the AGO analysis indicates that, as with the others, the AGO ignored development costs, presented a figure of $5.58 billion for capital acquisition costs, and included

$3.4 billion for additional acquisition costs, reaching a total procurement cost of $8.98 billion.

The AGO’s estimated, when adjusted to a 42 year life cycle, comes to a total life cycle cost of

$42.87 billion.87

84 Ibid., 5-6. 85 Which, as seen above, is then used to estimate the cost of the vehicle by comparing it to similar vehicles of similar weight. 86 Ibid., 5-6. 87 Ibid., 5-6.

In examining the KPMG report and the 2012 DND update on F-35 fighter costs, the CDA

Institute noted that this last estimate was the only one to include development costs. KPMG and

DND estimated these at $0.565 billion. In 2012 DND estimated capital acquisition cost of the F-

35 at $5.98 billion, with additional capital acquisition costs of $3.01 billion, for a total procurement cost of $8.99 billion. The 2012 DND update estimated personnel, operating and maintenance costs of $35.2 billion and disposal costs of $0.65 billion which, together with the total acquisition cost, came to $44.82 billion. In addition, an attrition cost of $0.982 billion was included based on an estimate of loss of seven to eleven aircraft over the lifetime of the fleet, and the resulting requirement to buy replacement planes. This extra $0.982 gives the total of $45.802 billion seen above.88

Based on this review, Petrolekas and Perry comment that: “there is little variance in the life cycle cost estimates between studies if a standard life-cycle is used, and the same cost elements are included.” In fact, even though it includes fewer elements, the extrapolation of the initial DND cost estimates to $21 billion over 42 years are somewhat of an outlier, with the

KPMG results being twice as much. Nonetheless, comparing Petrolekas’ and Perry’s analysis with the testimonies presented at the SCPA, it appears that any of the cost estimates circulated between 2010 and 2012 would, when averaged out over 42 years, have given a cost of operating a fleet of sixty-five F-35s of between $0.5 to $1 billion per year.89 Furthermore, three out of four

88 Ibid., 5. 89 Illustrating the problems that arise from planning to procure a vehicle that is still in development by a program based in another country, additional costs may arise. For example, Byers notes that the KPMG review and DND Update all assume that the operating cost of F-35s will be the same as the operating cost for CF-18s. However, he argues that: “The use of the CF-18 operating cost is fanciful. Although the F-35 was originally expected to have lower sustainment and operating costs than legacy aircraft like the CF-18, the costs based on evidence to date have become significantly higher than those of legacy aircraft, including the CF-18.” To back up his position he cites sources such as the U.S. Government Accounting Office (GAO), which wrote in 2011: “Current JSF life-cycle cost estimates are considerably higher than the legacy aircraft it will replace; this has major implications for future demands on military operating and support budgets and plans for recapitalizing fighter forces.” He finds increased

40 of the estimates agree that the initial procurement of the F-35 fleet would have been around $9 billion, with only the PBO estimate an outlier at $11.4 billion.

However, because of different bureaucratic procedures in terms of what costs to include, widely differing cost estimates emerged, and the impression that the program had undergone a cost overrun from the range of $9 billion dollars to the range of $45 billion dollars could easily be gained from Canadian media coverage.90 Like its Liberal government predecessor, the

Conservative government was likely concerned about the reaction of the Canadian public if it was seen to be overspending on defence, despite having portrayed itself as the greatest supporter of the military in federal politics. It therefore had a reason to focus on the smallest, most immediate number in terms of F-35 procurement: $9 billion. Also likely is that, like the Army senior leadership in 2003, some members of the RCAF bureaucracy were probably worried about the reaction of politicians and public if the cost of ownership of a new vehicle appeared too high, and would also have had an incentive to focus on the smallest available number in press releases.

To be clear, it should be understood that this figure was not a lie. $9 billion corresponds to a cost of around $138 million per plane for sixty-five new planes. Initial cost estimates were around

$75 million per plane,91 and while problems in the U.S. led developmental program drove this figure up, in 2012 $138 million or less per aircraft was still possible. Technically speaking this

operating costs could increase total life cycle cost for the F-35 fleet to $55.619 billion. Michael Byers, The Plane That Ate the Canadian Military, 5 and 9-10. 90 No criticism of journalists involved in covering the F-35 procurement is intended, but articles carried headlines such as: “F-35s officially costed at $45,802,000,000 in new report.” Any reader who had not taken a significant amount of time to research the different costing methods used would easily be confused as to how one government report could claim a cost of $9 billion for acquisition of the F-35, or $15 to $20 billion over its entire life cycle, while another released within a couple of years would state a cost of $45 billion. The impression is of a massive overrun. For the example, see: John Ivison, “F-35s officially costed at $45,802,000,000 in new report,” National Post, July 12, 2012. 91 Alan Williams, Canada, Democracy and the F-35, 24.

41 would be the cost of buying the new vehicles; it simply omits the cost of sustaining, operating and disposing of them, and ignores development costs as already having been spent.

Establishing solid costs for the rest of the life cycle at the outset of the program is what should have been done if the procurement process had been followed in its ideal form, but the public choice rationality of the Conservative party and the bureaucratic politics rationality of the

RCAF led to those additional costs being opportunistically ignored in 2010. During 2011-2012 the organizational logic of the PBO and AG offices caused them to develop their own cost estimates, both of which at first glance were starkly different than the numbers DND and the government had given. The resulting opportunity for the opposition parties to criticize the government in parliament, and for adverse media coverage of government support for the F-35 program, meant that the most rational course of action for the Conservative government changed.

It became more important to back away from a procurement which now looked problematic at least until after the next election cycle than to emphasize being the party to support the military at all costs. The result was the Next Generation Fighter Plan Program “reset.”

Conclusion

The pause and reset of the Next Generation Fighter Program by the Conservative government included a seven point plan. The plan included the creation of a National Fighter

Secretariat (NFS) within PWGSC to coordinate the procurement process from the stage of a new

SOR through to product delivery. The government had previously also created a National

Shipbuilding Procurement Strategy Secretariat to manage a large shipbuilding program. More

42 recently, it has been announced that a permanent Defence Procurement Secretariat will be established within PWGSC, and that this Secretariat will report to a Deputy Ministers

Governance Committee.92 Such moves reflected, in part, the preferences of a number of defence analysts. Alan Williams, for example, recommends that Canada follow key allies such as the

U.K. and Australia which have single national defence procurement agencies. The KPMG report also recommended the establishment of a centralized institution for the coordination of accounting methods. The creation of a single agency seems to strengthen the CA in large procurement projects where stakeholders have separate departmental organizational cultures and procedures which can not only be at odds with one another, but also with the most rational political strategy for the elected government. Key stakeholders would have to work through such a defence procurement agency to have their requirements processed.

However, creation of such an agency does not necessarily preclude forms of friction including diverging bureaucratic interests and departmental fences. Nor does it ensure that elected governments will not participate in “gaming” the procurement system due to their own party interest in being re-elected. As political analysts Philippe Lagasse and Desrosiers argue, bureaucracies tend to keep their tribal departmental essence.93 Craig Stone echoes these concerns.94 In his analysis on the NFS he writes that a single agency for procurement has definite advantages, such as cutting the length of the procurement process. However, he remains concerned that the separate interests and administrative priorities of each individual department would not vanish and, notably, that such challenges to using the CA in procurement have been

92 Public Works and Government Services Canada, “Streamlined and Coordinated Decision-Making,” http://www.tpsgc-pwgsc.gc.ca/app-acq/stamgp-lamsmp/streamlined-eng.html (accessed May 10, 2014). 93 Lagasse and Desrosiers, “Canada and the Bureaucratic Politics of Fragile States,” Diplomacy & Statecraft 20:4 (2009), 659-678. 94 Craig Stone (2013)

43 encountered in countries like Australia and the U.K. that use a single agency. Indeed there was a

Department of Defence Production in the Canadian federal government during the 1950s which was eventually split between the Department of Industry and the Department of Supply, which now correspond to IC and PWGSC. This split indicates that an earlier generation of Canadian bureaucrats and politicians were not convinced that a single department for defence procurement represented any particularly great efficiency.95

We have argued here that a range of laws and conventions already existed which, taken together, provided a basis for applying the CA to military procurements in Canada, as illustrated in Figures 2 and 3. If the will to employ the CA effectively is not found within each individual government department and within the elected government in Parliament, the creation of a new organization may have no beneficial effect. In both the case of the DFU and the case of the F-

35, under different Liberal and Conservative elected governments, the requirement to prepare a

SOR and evaluating different options before selecting and announcing a sole-sourced vehicle was simply ignored. If this requirement, among others, could be ignored under the procurement system in operation between the 1970s and 2012, it could simply be ignored in the case of future procurements by a new department of defence procurement as well.

A potentially more effective method of ensuring that appropriate processes are followed is to put in place procedures that ensure senior managers in key government departments carry out their roles and double-check the actions of their counterparts. Some recent actions by the government suggest that at least some elements of such a management-centric approach are

95 Unless it is under direct PCO or PMO authority, the present Defence Procurement Secretariat may well also end up a tribal organization with severe bureaucratic politics barriers between it and other federal government departments, since it is entirely within the organizational fences of PWGSC. The same problem happened with the Afghan Action Groups within DFAIT which had to be replaced by a PCO controlled group following the Manley Report in 2006.

44 being put in place. Under the heading of “streamlined and coordinated decision-making”

PWGSC has stated that a new Defence Procurement Strategy (DPS) will:

…include the establishment of a permanent Working Group of Ministers chaired by the Minister of Public Works and Government Services, and will include the ministers of National Defence, Industry, International Trade, and Fisheries and Oceans (when required for Canadian Coast Guard procurement projects) to ensure shared accountability in defence procurements to enable these to proceed faster and in a more efficient and coordinated manner. The Working Group will act as a forum for discussion, advice and to resolve issues in the implementation of major procurement projects. The Working Group of Ministers will be supported by a permanent Deputy Ministers Governance Committee (DMGC), which is the key decision-making body for the implementation of the… DPS and chaired by… PWGSC.96 There is, of course, no ultimate guarantee that these working groups will not subvert proper procedures either. However, it is likely to be more difficult to convince a group of senior representatives from different departments to ignore established procedures than to do so within the bureaucracy of a single defence procurement department. The most effective path to implementing the CA in terms of procurement projects may be to strengthen the procedures that compel departments to communicate with one another, rather than to engage in sweeping departmental reorganizations.

96 Public Works and Government Services Canada, “Streamlined and Coordinated Decision-Making.”