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Ottawa needs to save money and it can start by fixing procurement

Author: Aaron Wudrick 2020/12/09

With the federal government’s deficit approaching $400 billion due to emergency pandemic spending, it goes without saying Ottawa will need to start looking for places to actually save money.

Some critics balk: don’t you know there’s a pandemic on right now? But even setting aside the pandemic spending itself — which should still be fair ball for criticism, considering the government managed to spend $54 billion to replace $21 billion in lost income for Canadians — there are plenty of places within the government’s $350-billion pre-COVID budget where it could start looking for some savings.

One often overlooked area is procurement, specifically the military variety. Big-ticket items such as guns, planes and ships can have price tags running into the tens of billions and time horizons that are often decades long. Unfortunately for taxpayers, they also have a sordid history of long delays, massive cost overruns, and final bills that end up being much bigger than originally estimated.

Incredible but true, the Canadian Forces are still using pistols from the Second World War after a plan to buy new ones was cancelled in 2011. And the infamously bungled process to replace the air force’s 40-year-old fleet of CF-18s has ballooned from a projected $9 billion in 2010 to at least $19 billion today.

The upside to such folly is a huge opportunity to save money. And a handy case study has been provided by a recent analysis by the Parliamentary Budget Officer regarding the Navy’s supply-ship procurement plans.

The PBO looked at two separate programs for purchasing naval supply-ships. The first involved the lease and conversion of a commercial vessel into a supply-ship known as the Asterix, which was completed by the Davie shipyard in 2018, together with an option for the conversion and lease of a second ship, the Obelix. The other program is the two-vessel Joint Support Ship program, which has yet to see any ships built, even though the first was supposed to have been operational in 2012. Yes, 2012.

The PBO concluded that if the government were to purchase both the currently leased Asterix and not-yet-built Obelix, the total price tag would be $1.4 billion. By contrast, the bill for the JSS for two ships would come to $4.4 billion.

The PBO acknowledged that comparing the specific capabilities of the ships was beyond the scope of its report. But they are clearly comparable at the most basic level — after all, the Asterix was commissioned only because the JSS program had not produced any ships yet. And there is one very obvious point of comparison: one shipyard is building ships on time and on budget, while the other is years behind schedule and will cost taxpayers far more.

Beyond that, the telling fact that the shipyard that produces the best ships for the Navy at the lowest price isn’t building all four ships underscores just how badly mangled the procurement process is. Rather than focusing on a simple objective — best product, lowest price — governments have long succumbed to a quintessentially Canadian pandering problem: spreading the work around geographically to ensure that if there’s work for a shipyard in Quebec City, there’s also work for shipyards in Vancouver and Halifax. While this preoccupation with interregional fairness may be well-intentioned, the end result is a much bigger bill for taxpayers.

Post-pandemic fiscal reality should make governments more focused on value for money. Luckily for the Trudeau government, there’s low-hanging fruit in areas like procurement. Going forward, the government needs to ensure procurement hits the main policy objective: getting the most bang for the taxpayer buck.


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Federal Director at
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Federation

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