I appreciate your invitation to speak before the standing committee today.
I invite you to join me in acknowledging that the land from which I offer these remarks is the traditional unceded territory of the Abenaki and Wabanaki Confederacy and the Wolastoqiyik.
As a scholar of international co-operation, my comments draw from ideas in the organizational management literature of public administration and political science, the economics research on collective behaviour and political science work on institutions as political actors, and the institutional design of legal contracts, including my own work from 2015 on modifications to the U.S. defence procurement system undertaken throughout the Obama administrations with respect to contract design.
In that work, I offered a set of recommendations to Canada for defence procurement. In fact, I was pleased to see that one of the recommendations from said research was partially adopted when the government accepted my recommendation that Canada work to diversify the sources of its contract partners concerning major defence procurement projects when it purchased F-18 Hornets from Australia.
That recommendation was offered during a presentation on an expert panel in 2014. It then appeared in 2015 in a policy paper and finally in a cost-benefit analysis I provided to MLI on the interim purchase itself. It was the final recommendation.
I appreciate that it took three distinct occasions over a number of years to make that recommendation see the light of day, and right now, of course, we have purchased those items, but it's still a few years until full delivery and full integration into the force, which is expected for 2025. I think it's important to note that this took a decade, and I think we can improve this, so I'm going to offer five recommendations in the next portion of these remarks.
By way of introduction, the bureaucratic steps and processes required to procure equipment and assets to equip CAF and functionally defend Canada’s territory could be described as an interlayered labyrinth of procedures and processes managed and implemented by various stakeholders across different agencies. These processes and procedures are sets of institutions and practices with the goal of ensuring transparency in the responsible use of funds and resources on behalf of the public through accountability to the electorate.
Institutions can also be interpreted as constraints to restrain actors, as well as obstacles to efficiency and speed. They may be unfavourable to the flexibility required by governments during crisis, which is needed to ensure CAF readiness. There is a trade-off between ensuring oversight versus speed in the face of a punctual crisis that may require defence force responses, and we saw this emergency procurement—in some senses—during the pandemic.
On procurement affecting CAF readiness, Canada has done a level of constraining itself, one might say, through the creation of institutions producing various trade-offs, delays and externalities; as an example, policies concerning defence industrial offsets complicate the production of defence goods it needs. This is market intervention meant to redistribute benefits. Other schemes are available to do this that are frankly more efficient. Canada is wasting time and resources and affecting readiness when it does that.
Its procurement process could be improved though modifying and even abandoning those industrial regional benefits, which I know would be very critical and not very popular. It is a distortion on the market and, frankly, it impacts the procurement process. There are effects and, essentially, it delays essential military and defence R and D products and projects. This speaks directly to readiness of forces.
When it comes to procurement from research and development particularly, a second example is Canada’s DND innovation funding authority. In fact, one of the problems is that it has severe limitations in terms of what we call “other transfer authority”. An OTA is essentially how we go about hiring these defence sector contractors and companies to produce the projects.
In the United States in 2016, there were various changes in an amendment called “OTA 815”, an authorization amendment. These modifications made the process in the United States much more nimble, flexible and capable of managing with delays. I'm going to talk about a couple of these things, which Canada could adopt itself without very much work.
Basically, these OTA 815 amendments affected three parts of the legislation: the dollar thresholds at which additional approvals are required for OTA; what it means to be a non-traditional defence contractor, where they changed what it means to be non-traditional contractors and how companies can become available again to become non-traditional contractors; and certain aspects about transitioning from prototype development into production. I see this as very important for Canada, because this is where right now we have huge delays in what's going on.
There are extra processes involved, and there are ways in which we can make procurement more nimble by doing various things.
Right now, for example, in the United States these changes mean that once a project has been approved for a certain amount, they can up those levels of approval into certain limits, as long as the initial contracting procedure was competitive. Those projects themselves—