The Ottawa Citizen
Monday, October 29, 2007
By David Pugliese
Source: The Ottawa Citizen
Twelve military equipment projects totalling $7.3 billion are considered “high risk,” have gone over budget and are at least two years behind schedule, according to a Defence Department review.
Taxpayers, however, will remain in the dark on exactly which programs have run into difficulty. The department has declined to release details. So far, $600 million has been spent on the programs in question.
Other equipment projects could also face cost overruns, but the department would not provide further details.
The analysis of capital equipment projects was done to identify higher-risk programs that warrant an audit, according to the study by the department’s chief of review services. It was produced in April and released recently.
“For the 12 higher-risk projects, project cost (or forecast) increased by 9 per cent on average and was behind schedule by 2.2 years,” the analysis said.
It added that those projects had not changed in terms of numbers, or type of equipment or capability to eventually be delivered .
The report also determined that non-competitive contracts could cost taxpayers extra, but it did not get into details about how much. “Sole-source acquisition can result in higher costs to the Crown, especially with amendments to the contract,” it pointed out. “Projects with competitively tendered contracts were considered lower risk,” the analysis said.
The analysis recommended the chief of review services conduct audits into five higher-risk projects. Because the department has limited auditing services available, it recommended that assistant deputy ministers conduct examinations into another six equipment programs.
The report says 64 per cent of 25 higher-risk projects have fallen behind schedule. That includes the 12 already identified to be in the most difficulty.
Such slippage is a strong indicator of the potential for delayed acquisition of the equipment or a capability as well as an increase in project management costs, according to the review.
The department recently put the document up on its website, but censored details about which projects have run into trouble as well as specifics about costs.
Defence officials declined to be interviewed about the review.
But in an e-mail to the Citizen, the department cited a provision under the access to information law that allows it to censor the report. It claims that the names of the equipment programs and other related details constitute advice to the department or to the defence minister, and thus cannot be seen by the public.
In its e-mailed response, the department said criteria for identifying projects for review could include the presence of high-risk transactions, cost or schedule changes, the initial risk assessment of the project, the overall value and a project’s history of meeting its set timetables.
The projects examined were those already under way in May 2006. The review examined 162 capital equipment projects totalling a little more than $51 billion.
The review did not look at the $24 billion in new equipment projects announced by the Conservative government between June 2006 and July of this year. Those new projects include the purchase of heavy-lift helicopters, the acquisition of C-17 and C-130J transport planes and new fleets of tanks, army trucks and supply ships. The Harper government also announced the construction of Arctic patrol ships, the establishment of a new training centre in the North and the modernization of the navy’s frigates.
Deliveries of C-17 aircraft have started, but most of the other programs are still in early stages, with the equipment to be delivered over the next decade.
Alan Williams, the department’s former assistant deputy minister for materiel, said the projects examined by the review could include equipment purchases, upgrades to existing equipment or in-service support contracts for various systems.
Mr. Williams said he found it significant that the review raised the question about sole-sourcing of military contracts. “In contrast to what the government has been saying, they’re acknowledging that you spend more money on sole-source contracts,” said Mr. Williams, author of Reinventing Canadian Defence Procurement. “Without competition, you can waste taxpayers’ dollars.”
The Harper government has come under fire in the last year in the Commons for what critics say are a series of non-competitive contracts awarded to defence firms. MPs with the NDP, Liberals and Bloc Québécois have all warned that directing contracts to particular firms without competition costs taxpayers money and limits the involvement of domestic firms.
The government has responded numerous times that the procurement process is fair, open and transparent. The equipment is needed quickly by the military, it contends.
The chief of review services’ analysis recommends strengthening the management of capital equipment programs by conducting audits early in the acquisition process. It also pointed out that more management control should be directed to programs based on their level of risk.
Story Type: Business
Length: 781 words