Purchasing Power Explaining Variation in the Canadian Armed Forces’ use of Contracted Services by David Perry A thesis submitted to the Faculty of Graduate and Postdoctoral Affairs in partial fulfillment of the requirements for the degree of Doctor of Philosophy In Political Science Carleton University Ottawa, Ontario © 2015 David Perry Abstract This dissertation examines why the Canadian military’s use of privatized defence services has varied over time. In answering this question, the hypothesis tested is that variation in the use of Private Military and Security Companies by the Canadian military has been driven by changes to the size and internal allocation of the defence budget. Drawing on the concept of constrained optimization, this hypothesis asserts that defence officials have attempted to optimize the allocation of the defence budget between its constituent spending categories of Personnel, Operations and Maintenance and Capital. Variation in the extent of service contracting has been influenced by changes to the size of the defence budget and constraints on its allocation. The dissertation reviews the history of changes to the size and allocation of the defence budget and the historical use of service contracts by the Department of National Defence (DND). It then examines four case studies that provide focused examinations of significant shifts in DND’s use of service contracts. Three of these cases examine increases to the use of service contracting: the Alternate Service Delivery program; In-Service Support contracting; and Operational Support Contracts. The fourth case study, the 2012 Service Contracting Cut, examines a decrease in the use of service contracts. This research found that constraints on DND’s ability to spend money on Personnel have been the most consistent cause of variation in the use of service contracts, but this variation was most significant when Personnel constraints were combined with budget cuts. Whether the combination of constraints on Personnel and budget cuts led to an increase or decrease in the use of service contracts has depended on the constraints on the other two major categories of defence spending (Capital or Operations and Maintenance). ii Acknowledgements Many people provided invaluable support to this research project. I would like to thank the members of my committee and Elinor Sloan first and foremost for their guidance. Beyond them, this project also benefitted from the knowledge and inspiration imparted by professors at Carleton, Dalhousie and Mount Allison universities and the members of the Centre for Foreign Policy Studies, Centre for Security and Defence Studies, Conference of Defence Associations Institute and the Canadian Global Affairs Institute. Many experts too numerous to thank individually contributed to this research project immensely by giving me their time through both formal and informal interviews. These were invaluable, and I thank you all. I would also like to thank Carleton University, the Social Sciences and Humanities Research Council, the Ontario Graduate Scholarship Program, the Security and Defence Forum and the Defence Engagement Program for their financial support. Finally, many friends and family provided invaluable support and encouragement. To all of you, but Joanna especially, thanks for helping me finish. iii List of Acronyms Used Alternate Service Delivery (ASD) Canadian Armed Forces (CAF) Canadian Contractor Augmentation Program (CANCAP) Contractor Support Project (CSP) Department of National Defence (DND) Fleet Maintenance Facilities (FMF) In-Service Support (ISS) In-Service Support Contracting Framework (ISSCF) North American Air Defence Command (NORAD) North Atlantic Treaty Organization (NATO) Optimized Weapons System Management (OWSM) Original Equipment Manufacturers (OEMs) Person Years (PYs) Private Military and Security Companies (PMSCs) Public Works and Government Services Canada (PWGSC) Royal Canadian Air Force (RCAF) Royal Canadian Navy (RCN) United Nations (UN) World War Two (WWII) iv Contents Abstract ........................................................................................................................................... ii Acknowledgements ........................................................................................................................ iii List of Acronyms Used .................................................................................................................. iv List of Figures ................................................................................................................................ ix List of Tables .................................................................................................................................. x Chapter 1: Introduction ................................................................................................................... 1 Core Argument........................................................................................................................ 5 Literature Review.................................................................................................................... 8 Literature Gap ....................................................................................................................... 17 Theoretical Framework ......................................................................................................... 24 Argument .............................................................................................................................. 27 Research Question ................................................................................................................ 30 Hypothesis............................................................................................................................. 30 Variables ............................................................................................................................... 31 Operationalization of Variables ............................................................................................ 31 Methodology ......................................................................................................................... 32 Case Selection ....................................................................................................................... 36 Chapter 2: Theoretical Framework ............................................................................................... 42 The Pressure of an Activist Canadian Foreign Policy .......................................................... 42 Internationalism .................................................................................................................... 44 Atlanticism ............................................................................................................................ 54 Continentalism ...................................................................................................................... 62 Canadian Federal and Defence Budgeting ............................................................................ 69 Keynesianism ........................................................................................................................ 70 Neoliberalism ........................................................................................................................ 72 The Impact of Neoliberalism in Canada ............................................................................... 77 Mulroney ............................................................................................................................... 78 The Confluence of Foreign Policy and Neoliberal Budgeting.............................................. 87 DND’s Organizational Preferences ....................................................................................... 87 Constrained Optimization ..................................................................................................... 94 Conclusion .......................................................................................................................... 104 Chapter 3: Canadian Defence Resource Overview ..................................................................... 105 Expenditures in the Government of Canada and DND ....................................................... 105 v Contracting Accountabilities for Service Contracts ........................................................... 112 The Unique Characteristics of Defence Spending .............................................................. 114 Public Service Management ............................................................................................... 116 The Decade of Darkness ..................................................................................................... 118 Budget Allocation Constraints during the Decade of Darkness ......................................... 119 The Capital Budget ............................................................................................................. 121 Force Reductions ................................................................................................................ 124 Resource Recovery ............................................................................................................. 127 Force Expansion.................................................................................................................. 130