National Defence Committee on Oct. 24th, 2023

[Dr. Alexis Ross, President, Apex Defense Strategies, LLC, As an Individual]

Thank you, Mr. Chairman.

Good afternoon, committee members. Thank you for the opportunity to appear before you to inform the committee’s deliberations by offering comparative insights from the U.S.'s experience with procurement.

My name is Alexis Lasselle Ross. While I currently own a consulting business that advises companies as they navigate the defence market, I've spent 20 years in government working on national security policy. During my time in Congress and at the U.S. Department of Defense, I spent several years instituting reform in government programs, most recently in defence acquisition.

As a congressional staffer, I wrote legislation to change the focus and outcomes in weapons procurement. I continued this work in the Army, as the presidentially appointed deputy assistant secretary to the Army for strategy and acquisition reform, where I worked to change the policies, processes and responsibilities in the Army’s acquisition enterprise. Through these experiences, I have gained an understanding of the necessity, obstacles and benefits of acquisition reform.

It is my honour to appear today before the committee to offer my observations on the procurement process. While I cannot speak with regard to the Canadian procurement system or its impact on the Canadian Armed Forces, I can explain the American experience in weapons acquisition and our attempts to reform our own defence acquisition system to yield better outcomes for our military forces.

There are several well-cited pitfalls of the U.S. defence acquisition system. For example, it can take 10 or more years to field a major weapon system, and the DOD’s procurement processes typically do not adapt quickly to emerging threats or evolving technologies. Consequently, there have been dozens of initiatives to reform acquisition policies, processes and organizational structure over the last 50 years.

Every several years, a surge of interest and activity emerges that leads to notable changes. As in every kind of public policy debate, there is a proverbial pendulum that swings between what is important or which side of the debate triumphs. In acquisition reform, the pendulum usually swings between optimizing cost, schedule or performance when procuring weapon systems.

Currently, the American defence system is in an era that promotes speed and innovation. Starting in roughly 2015, we have undertaken structural changes, such as the realignment of decision-making authority to accelerate the pace of programs' advancement through the process. We have made procedural changes, including creating new pathways in the process that eliminated some of the procedural requirements for programs and sped up their progress. We have expanded the use of the more flexible and, therefore, more rapid contracting methods.

With regard to innovation, we have taken steps to attract non-traditional vendors into the defence market, such as the technology companies from the Silicon Valley tech hub here in California. This has consisted of the creation of organizations designed to perform outreach to and guide these non-traditional vendors as they enter the defence market. We have also created special authorities to incentivize the acquisition workforce to utilize these new, non-traditional entrants.

In closing, there are three considerations that I would offer to anyone undertaking acquisition reform.

First, any major reform effort must be bolstered by a sound implementation plan. Reform is really just a good idea until it has been implemented. The majority of the work occurs when the changes are executed and the system adapts to the new paradigm. Really, it entails changes in the organization’s culture, which take, of course, a lot of time, so it's definitely worth being prepared for a long endeavour.

Next, the extent of the success of acquisition reform is inherently limited by the faults of adjacent systems that impact acquisition outcomes. For the U.S., these are the requirements system, which determines what to buy, and the budgeting system, which resources the procurement. After a few years of designing and then implementing acquisition reform in both Congress and at the U.S. Department of Defense, I came to the conclusion that acquisition could not go any faster without changes to the budgeting process, which is another rigid, slow and overly prescribed process.

Finally, one must anticipate a change in focus in the near future. Just when you feel that the previous changes are taking hold, something will inevitably happen, such as a sudden involvement in military operations that shifts priorities or a change in the political party in power. Again, with these, the focus shifts to a new priority. As I said before, in acquisition it usually means shifting the priority between optimizing cost, schedule or performance.

I applaud the committee for its interest in improving the Canadian procurement system, and I hope that my testimony proves useful to that endeavour.

I look forward to your questions.

[The Chair, Liberal, John McKay]

Thank you, Dr. Ross.

Professor Taylor, you have five minutes, please.

[Prof. Trevor Taylor, Director, Defence, Industries and Society Programme, Royal United Services Institute, As an Individual]

Thank you.

It's an interesting challenge to be asked to talk to you this evening. It's evening for me; obviously, it's afternoon for you.

What I would like to say, first of all, is that I observe that Canada, like Australia, the United States and certainly the United Kingdom, has a kind of constant effort to improve its acquisition systems. This is to be applauded, but it does say something about how difficult it is, actually, to get everything right.

One conclusion that I reached quite a while ago—and it relates to something with your last speaker—is that different things have to be bought or procured in different ways and need different acquisition strategies to deal with them. It's quite a complex challenge to specify, but you don't buy office desks in the way that you buy combat aircraft. It builds on that.

Well done, Canada, for trying to make things better, but you're in a club where defence acquisition is a soap opera rather than a novel with an ending.

I'm not going to talk too much about the British acquisition system. I'm happy to take questions on it. I did put some written paper to you and I'll just underline the headlines from that.

One is that there's a role, I think, for expectation management. People have extraordinary expectations that defence equipment can be delivered in 10 years' time with a particular performance for a particular amount of money. On the way here, I just tested my views with a cab driver. I asked him if he'd had any work done on his house. He'd had various jobs done, including a new bathroom. I asked him if it was on time. He said it wasn't and that it took 10 days, not five. I asked him if he wrote to his minister and he said hadn't. When our equipment is a year or so late on a 10-year program, we have to appreciate how difficult these things are. I think there's a role for expectation management.

I think there's a fundamental challenge now to defence acquisition at the high level. I will put it in these terms. We are accustomed to defence acquisition processes being very deliberate and careful. There's a kind of formal way through where you specify a requirement, you think of an acquisition strategy and then you implement it. Eventually, you sign a contract and all that. It takes a long time, as everybody in this business knows.

The reality of the world in which we are living now is that technology is moving very quickly in many important areas. Also, world politics are moving very quickly in important areas. Therefore, the idea that you can write a really useful requirement now against which you'll sign a contract in four years' time seems absolutely ludicrous.

The way in which it's moving—reluctantly, I must say, in some parts of the U.K., at least—is that there's a need for a closer dialogue between industry, which knows more about the technology, and the government, which knows more about needs. They talk together and the relationship between them becomes more important than the contract that may exist. It's a big and radical way of moving, but when you think of the speed at which.... It's the sort of way in which we operate with urgent operational requirements, but it's not the sort of way in which we usually work with major platforms.

There's a real challenge for defence acquisition in ambitious countries that ask how they can make their acquisition system move at the same rate as technology and politics are moving. Now, I know that Canada is trying to go more quickly with acquisition processes, so there's awareness of this. However, I think one particular point is that if you go for fixed requirements, then those requirements are going to become unsatisfactory to your military users before you've had a chance to deliver the system. That means contract changes and all that.

The next point I want to make is that Canada does not—nor does the United Kingdom—buy military equipment to achieve a single objective of military capability. It's going for prosperity and for improving wealth distribution within the country. In the U.K.'s case, it's trying to keep the union together and help cement the union. We place work in Scotland to help to do that because it binds the Scots closer together.

We have procurement for multiple objectives. We have debates now about what is meant by “value” and what the dimensions of value are. It's much more than whether a general in a division thinks it's a very good piece of kit. That's an important consideration, but it's not the only consideration. Foreign policy considerations can also feed in.

[The Chair, Liberal, John McKay]

Professor Taylor, you've gone a fair bit past your time. I'm wondering whether you could work the rest of your comments into responses to members' questions.

[Prof. Trevor Taylor]

Okay. That's fine with me.

[The Chair, Liberal, John McKay]

Thank you.

[Prof. Trevor Taylor]

That makes my life easier.

[Voices]

Oh, oh!

[The Chair, Liberal, John McKay]

We're all about trying to make your life easier. There we are.

Mr. Bezan, you have six minutes.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Thank you, Mr. Chair.

I want to thank our witnesses for taking time out of their schedules to join us virtually in Canada as we look at ways to improve defence procurement here.

Professor Taylor, at RUSI, have you guys, or have your colleagues, ever done any studies on the Canadian Armed Forces?

[Prof. Trevor Taylor]

Not to my knowledge. We have a separate group who do the operational side of the military, if you like, or the military sciences part. I'm sort of aware, because I deal with procurement, of things like your new ship, the Type 26 variant, but I don't know of any studies.

We've been in existence since 1831, so when you ask me if we've ever done that, I can't give you a clear answer.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

I know you've been at RUSI for quite a while, from reading your bio.

I want to drill down on an issue that you kind of touched on, Professor Taylor. I know that Dr. Ross is incredibly experienced on this from her time at the Pentagon and on Capitol Hill.

What's the importance, from a national defence perspective, of having the indigenous capabilities of domestic production of your own equipment versus having to rely on international partners? This is especially when you look at the great power struggles that we're seeing today—the war in Ukraine, the war in Israel with the terrorist attack by Hamas, and the ongoing conflict raging in the South China Sea between China and the Philippines, never mind over the Strait of Taiwan with the independent island of Taiwan and the PRC.

I'm just wondering about the importance of having those defence industry capabilities domestically.

[Prof. Trevor Taylor]

I think the quick answer is that it's very important but not absolutely important.

The U.K. wants to present itself as an operationally independent major international power. They recognize this means that you cannot depend entirely or excessively on a foreign supplier. I think Ukraine has brought out the importance of supply chains in the defence capability. There's a variety of reasons for this, in part to do with prosperity and these other things.

There is government documentation, particularly the defence and security industrial strategy announced in 2021, explaining why the government concluded that this was important and what they were going to try to maintain. Then we have quite a series of sector strategies. I think it's very much down to this. A document in 2012 said that the ability to use your armed forces as you see fit is the essence of sovereignty. Now, that raises all kinds of questions about what sovereignty means, but it says that it's something quite important—

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Dr. Ross, perhaps you could jump in here.

You kind of alluded to this when you talked about trying to bring some of the non-traditional players into the defence industry and defence procurement in the United States, specifically on cyber and new digital technologies. In the United States, you guys are by far the most capable in defence production in the western world, so I just wanted to get your comments on that.

As well, you do have experience on Capitol Hill. We saw U.S. media comment that Canada has become a laggard in meeting the NATO 2% mark. At committee, we also had Senator Dan Sullivan, who talked about Canada not pulling its weight, and was quite critical of our Prime Minister.

I'm wondering if you'd be able to comment on that.

[Dr. Alexis Ross]

I'll take the first question first.

It's a very good question, Mr. Bezan. I think there is a great importance that we place, especially currently, on domestic manufacturing.

Starting in the nineties, we made some choices. These were choices that were made by the defence department and others that essentially amounted to exporting quite a lot of our production. Our domestic manufacturing facilities and capabilities—and therefore workforce—dramatically dwindled in the ensuing decades.

Here today, we find ourselves in a situation where, for much of what we need for things, such as the materiel we're supplying to Ukraine, we've found that we did not have a strong industrial base here in the U.S. To ramp up production on something that has been turned off or turned down is a very big challenge. As you know, industry cannot turn on a dime. Starting up a production capability, starting up a facility, can take 18 months to two years. We're finding that we're now having to take steps to try to reverse those trends.

In some cases, it may not be entirely practical to do everything on U.S. soil, so of course we have to rely on nearshoring or friendshoring, these other concepts of working with allies and partners, which also have additional benefits of working together with a common goal and ultimately having greater interoperability of our systems and other things. There's a great opportunity for that.

To your point about my opening comments, on trying to seek innovation domestically where it exists, I think we—and I would presume Canada, the U.K. and others—are finding that one of our greatest strengths in the western world is that we have incredible innovation in engineering and a lot of scientists and tech talent that we need to leverage. We're attempting to do that now. When we look at near-peer adversaries, we're seeing that they don't have quite that talent, so we need to make sure we leverage this while we can, before those other forces do catch up.

We're also seeing—

[The Chair, Liberal, John McKay]

Unfortunately, Dr. Ross, we're going to have to leave it there, because Mr. Bezan's time is well past.

With that, Ms. Lambropoulos, you have six minutes, please.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you, Chair.

I'd like to thank both of our witnesses for being here to answer some of our questions.

Professor Taylor, I've done some quick reading on some of what you've already written and sent in to the defence committee at the U.K. Parliament. It seems that your views on competition may not be so clear-cut. I'm wondering if you can explain the pros and cons and go into how we can perhaps promote healthy competition within our own industry but at the same time cut back on some of the cons.

[Prof. Trevor Taylor]

If you have a word limit.... That's a really big question, by the way, and a difficult question, but I think the quick observation I would make is that if you have a small number of suppliers and a customer who makes only very occasional orders, those suppliers are desperate to win an order. When you come to a competition, they quite frequently make offers that are highly optimistic, let's say, and then it's not surprising that they come in late and over budget. It's not surprising that if the government wants to change a contract and maybe change a requirement, the companies that have the contract seem to charge excessively for it, because they know they're in difficulty with their contract in the first place, so I think you have to think about the effects of competition on the offers that companies make.

Now, if you're in a market where there are multiple suppliers and multiple customers, competition works much better, but if you're in a competition where losing that competition could mean you leave the sector, then you are not going to give.... You're going to be drawn to extremely optimistic answers. I think we can see this in the way that lots of competitions have run. If I use Dr. Ross's country, the competition between Airbus and Boeing for the U.S. tanker has left Boeing with losses in the billions because of the price they committed to. You have to think about using competition when the market structures are right.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you for that.

I also recognize that you have experience with the procurement process in the U.K. You've also compared it to that of the U.S. You mentioned Australia. You have some experience in the European system as well. Can you draw on some of the strengths and what you've seen as best practices that you think Canada can benefit from?

Once you're done, I'll pass the baton to Dr. Ross as well, so she can give us her input there.

[Prof. Trevor Taylor]

One hesitates to make a recommendation to another country in different circumstances.

I'd go back to my comment in the very beginning on thinking about buying different things in different ways. We practise that very heavily in the United Kingdom, without doing it explicitly.

For our next combat aircraft, under GCAP, which we're doing with Japan and Italy, the companies are chosen, the partner countries are chosen and they're working as one team to develop what they know must be a competitive product. The competition comes not from within the top companies, but from having to compete in the future with China, which is in the export market, whatever the U.S. has to offer, and so on. That's a once-in-30-years contract, where there are a very small number of companies that are going to do it.

In other areas, like if you're buying rifles, a traditional open competition will work perfectly effectively. There are lots of people who sell them to you. You don't have, through life, big update costs, obsolescence management costs and so on.

You have to think through whether you have the right acquisition process for the particular thing you're buying. This is a hard thing for commercial officers within defence to get a grip on. What is suitable in one area may not be suitable elsewhere.

It's a very limited answer, but I did my best in the period allowed.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you.

I don't know if there's much time left, but Dr. Ross, would you like to chime in as well?

[The Chair, Liberal, John McKay]

You have about a minute.

[Dr. Alexis Ross]

I'll be very brief and offer just one thought.

Without knowing the other country systems, I don't know if, by comparison, there are things that work well here that should be in place there. What I can do, though, is suggest something that doesn't work well in our system and that I would suggest you try to avoid.

Our system is very statutory-based. It's highly technical. Many of the rules are based in procurement law. Every time something goes wrong, Congress writes a new law. You could think of it as barnacles on a ship. They keep getting added and are never taken away. If you look at our United States code, it's like a graveyard of past acquisition mistakes.

The only problem with that is that it's a lot to keep up with. It makes it very technical and hard for the workforce to adapt to and keep up with. We have to have a very professional acquisition corps, which requires a lot of training and makes it very hard for them to be creative, dynamic and agile.

Our greatest success in recent reforms has been finding pathways to try to streamline this [Technical difficulty—Editor].

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

I think we might have lost Dr. Ross.

[The Chair, Liberal, John McKay]

Dr. Ross is frozen.

She was pretty well at the end, in any event.

Dr. Ross, you froze for a second there. It was pretty well at the end of the six minutes, regardless. We were just contemplating barnacles here.

I'm going to turn to Madame Normandin. She'll ask her questions in French, so I hope you're on your English translation.

With that, Madame Normandin, you have six minutes.