Red tape, lack of experience slowing $60B warship project: Former DND official

OTTAWA — A former Defence Department official has pulled back the curtains on what he says are some serious problems with Canada's $60-billion effort to buy new warships for the navy, including red tape and a lack of experience among those running the project.

The revelations are in a new paper by retired rear admiral Ian Mack for the Canadian Global Affairs Institute, in which Mack says Canada has a lot to learn from Australia when it comes to naval shipbuilding.

Mack spent a decade helping manage Ottawa's efforts to build a new fleet of warships to replace the navy's existing frigates and destroyers. He retired in 2017 and Australia asked him to advise it on the purchase of a new fleet of frigates of its own.

Australia has moved lightning quick on its plan compared to Canada, with Canberra going from initial government approval for the project to the selection of a design in three years. Canada took six.

Australia and Canada are both planning to build variants of the British-designed Type 26 frigate. Canada is expected to build 15 of the new ships at Irving Shipbuilding in Halifax, with the vessels serving as the backbone of the Royal Canadian Navy for the better part of the next decade.

Delays in the project have already cost Canadian taxpayers hundreds of millions of dollars. The government has scrambled to prevent layoffs at Irving by promising to buy three smaller ships from it and paying to slow production at the Halifax yard until work on the new warships can begin.

Mack's assessment suggests Ottawa has been missing the forest for the trees, with the government more focused on mitigating risk and avoiding litigation than efficiently delivering state-of-the-art vessels to the navy.

Canada's approach "seemed much more complex and thus work-intensive for all concerned when compared to ... Australia's future frigate program. This reflects an expensive way of doing business for Canada and for bidders that consumes immeasurable person-years of efforts."

Canadian officials bent over backwards to fit the multibillion-dollar warship project into the government's standard procurement rules and procedures, Mack wrote, rather than adapting to reflect the once-in-a-generation nature of the project.

That included an extremely prescriptive approach in which officials defined "hundreds of mandatory technical requirements" for the new ships. When bidders had trouble meeting those requirements, the government was forced back to the drawing board, wasting time and energy.

In contrast, Australia laid out "only a few mandatory requirements of any kind" and let warship designers fill in the blanks, which Mack believed was much more pragmatic and effective.

Also underlying much of the work in Canada leading up to the selection of a design was a "preoccupation" with the threat of lawsuits from losing bidders, Mack added, which resulted in officials jumping through hoops to prove the process was completely and without question fair.

Australia, on the other hand, approached the competition with the recognition that the competition was "more about assessing apples, oranges and bananas," Mack wrote.

The retired rear admiral also criticized what he saw as "little or no applicable experience or knowledge" among the military personnel and public servants working directly on the Canadian warship project, whereas Australia bolstered its own ranks with experienced contractors.

That dearth of Canadian experience extended to how the project, which will be the country's single-largest military purchase, was budgeted.

"The approach to costing was largely developed from a blank sheet of paper as the (project) evolved," Mack wrote. "In Australia, a specialist addressed this matter in a much more comprehensive manner based on years of experience and mastery of the financial aspects."

Canada planned to spend $26.2 billion on the 15 new warships when the project was first devised in 2008, but that number was increased to $60 billion in 2017 following a budget review and before industry was to submit proposed designs.

Perhaps reflecting that lack of experience, Mack said officials running the project were required to provide "regular reporting to layers of senior government" as they drew up Canada's requirements for the new warships and the process that ultimately selected the Type 26.

Yet despite those "onerous reporting demands" to senior government officials, Mack wrote that "only a few key decisions were rendered and rarely in a timely manner. The opposite was the case in Australia."

While he acknowledged Australia's approach has its own problems, and that some elements would not translate to the Canadian context, Mack suggested federal officials would benefit from taking a closer look at how other countries are managing major military purchases.

"Our government traditionally has worn blinders when it comes to executing complex projects involving procurement."

This article by The Canadian Press was first published on Nov. 15, 2019.

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