Military procurement chief says shipbuilding process isn't 'broken'

The head of Canada's military procurement admits the Defence Department needs to reform the way it buys equipment and runs its major projects. But he says things are not as bad as they may seem.

'Until you actually pick the builder and sign a contract, the cost will go up and down'

HMCS Charlottetown heads out the harbour as the Halifax-class frigate is deployed to Libya, in Halifax in 2011. The government has a program to replace its frigates, but costs are rising. (Andrew Vaughan/Canadian Press)

Canada's head of military procurement admits National Defence needs to reform the way it buys equipment and runs its major projects. But, he says, things are not as bad as they may seem.

"I would not say defence procurement is broken, nor would I say it's perfect by a long shot," said retired rear admiral Patrick Finn, the Defence Department's assistant deputy minister (materiel).

"We have work to do for sure. We can be bureaucratic, we can be slow to change," Finn told CBC News in an interview. "But that's not to say we don't have our successes at the same time." 

Finn pushed back at the growing criticism of the federal government's shipbuilding program, explaining that reports of soaring costs were not evidence of mismanagement.

"Until you actually pick the builder and sign a contract, the cost will go up and down," Finn said.  

"We don't anticipate signing a contract for, 'here's a price, here's the number of ships, here's what we are going to do,' for another four to five years.

"And that is where people often will look at it and say things are broken because the estimates are changing."

An old hand at procurement

Finn's had a hand in procurement for years, and helped construct the multi-billion dollar National Shipbuilding Procurement Strategy.

Retired rear admiral Patrick Finn is now the assistant deputy minister (materiel) at National Defence and in charge of military procurement. (DND)

That strategy was designed in 2008 to help smooth the production of what was then considered to be $39-billion worth of large ships.

But the projected cost of the various ship projects in that strategy has grown considerably, for both the Canadian Coast Guard and the navy.

Most notably, the price to build 15 new warships for the navy has more than doubled, from $14 billion to more than $30 billion. The total cost for those ships, known as Canadian Surface Combatants, sits at $42 billion when other costs are factored in. In all, that's $16 billion more than the $26.2-billion approved by the government for the program.

Finn was once the manager of the CSC program. He suggested that inability to accurately grapple with costs was just a function of the necessarily complicated process of major military procurements.

Budgets are often set very early.- Defence procurement chief Patrick Finn

"There is variability in the budgets. Budgets are often set very early, using parametric processes, early processes. It's difficult," Finn said.

"Early in these processes, we establish rough order of magnitude budgets. We try to be judicious about it."

That stands in contrast to what Finn's former superior, the head of the Royal Canadian Navy, said about the program.

Vice-Admiral Mark Norman told CBC News this month Canadians had not been given accurate information about the growing price of the new warships.

Norman said the budget trouble flowed from a lack of professional capacity and maturity across the shipbuilding sector in Canada, including inside government and the military.

"We didn't have that mature relationship. We didn't have the mature industry and so there was a lot of guessing and speculation going on. And to be quite blunt, we got a lot of it wrong," Norman said.

Head of navy says warship costs could exceed $30B

Power and Politics

6 years ago
CBC's James Cudmore shares parts of his interview with Vice-Admiral Mark Norman about the skyrocketing cost of buying warships. 7:36

Controversial admission

That extraordinary admission was controversial, but it earned Norman kudos from defence and politics-watchers for being brave enough to tell it like it is.

As the head of the navy, Norman's interest is in getting as many suitably capable ships as he can, a position that could be threatened by either overstating the navy's needs or asking the government to spend more than it is willing to spend.

What was extraordinary was Norman's willingness to publicly admit there was a problem that needed to be discussed.

But Finn suggested there was nothing out of the ordinary going on.

"When we get into the major projects, they go on for years, they probably will all have an issue at some time in their life cycle as a project, whether it's a technical issue because of the sophistication of it, or whether it's cost issues related to the increased price of steel," Finn said.

"Some of those things we can't anticipate."

Finn said the government was getting better at managing procurement, in particular following the creation of new departmental chief financial officers, whose role includes a kind of independent oversight of costing and forecasting.

Government promises change

But the previous government was nevertheless so frustrated with the slow pace of procurement and the bungled nature of some of the projects that it chose to overhaul the system.

Workers look on from the bow of a ship during an address by then prime minister Stephen Harper at the Halifax Shipyard in 2012. A frustrated Conservative government overhauled the way the military handles procurement, but it's not clear to what extent the Liberals will stay that course. (Andrew Vaughan/Canadian Press)

It created a new Defence Procurement Strategy, including new policies and agencies to help provide oversight.

That project was very much the work of the Conservatives and it's not clear how much of it will continue, or for how long, under the Liberals.

Nevertheless, the current government has signalled its intention to come to grips with some of the problems that have plagued the shipbuilding strategy.

It's promising a new system to evaluate costs, launch quarterly public updates and provide annual reports to Parliament.

Public Services Minister Judy Foote is also hiring a shipbuilding expert to advise the government, filling a gap in expertise in her department, tasked with managing the ship program in conjunction with Finn's group at DND.


James Cudmore covered politics and military affairs for CBC News until Jan. 8, 2016.


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