In view of increasing military operations and threats globally, the Canadian Armed Forces (CAF) were finding it difficult to remain competitive and up-to-date in order to defend the country against external threats.
CAF's personnel numbers declined from approximately 89,000 regular force personnel after the Cold War to below 60,000 in the 1990s. The military’s operational tempo significantly increased over the same period, placing extreme stress on personnel. Operational fatigue, combined with an ageing workforce, resulted over time in a “hollow force”. Faced with new demands and the need to respond to new and unforeseen crises, the CAF required more recruits of higher quality with the necessary knowledge and skills.
Significant cuts to defence funding in the 1990s resulted in an overall degradation of the forces’ equipment, affecting all three services. For example:
- The Navy had to dispose of one of its three replenishment ships and one of its four destroyers;
- The Air Force eliminated almost half its aircraft, which were urgently needed for use in Afghanistan
- The Army also lost a lot of its fighting and utility vehicles.
- Looking ahead, several major equipment fleets would reach the end of their operational lives within 10 to 20 years and would need to be replaced.
The military had also been forced to save the resources needed to maintain equipment, conduct training, and prepare units for operations. The resources allocated to the National Procurement budget covered only 70 percent of demand, significantly impeding the forces’ ability to train and maintain high readiness levels.
More than half of the defence infrastructure was over 50 years old, and much of its portfolio was not designed for modern operational requirements. It was also ageing and in poor repair and needed to be refurbished or replaced.
The Canadian government issued the Canada First Defence Strategy (CFDS) in 2008, with the purpose of improving the overall effectiveness of the Canadian forces, based on four pillars: personnel, equipment, readiness and infrastructure.
The CFDS defined six core missions that CAF had to be prepared to undertake in Canada or abroad:
- “Conduct daily domestic and continental operations, including in the Arctic
- “Support a major international event in Canada, such as the Olympic Games
- “Respond to a major terrorist attack
- “Support civilian authorities during a crisis in Canada, such as a natural disaster
- “Lead and/or conduct a major international operation for an extended period
- “Deploy forces in response to crises elsewhere in the world for shorter periods.”
The funding plan for the CFDS was based on a 20-year funding formula that would increase by 2 percent per year from 2008 to 2028. In real terms, the budget of the Department of National Defence (DND) would increase from CAD18 billion in 2008 to CAD30 billion in 2028, totalling CAD490 billion over those two decades, with CAD45-50 billion allocated for major acquisitions.
The public impact
This policy achieved limited public impact given its many limitations and broad scope of objectives. However, its outcomes and budgeting impact include the following:
- In the early days of the CFDS, during CAF's deployment in Afghanistan, it immediately showed positive results, with the Strategic Lift Aircraft replacement programme. This enabled CAF to launch expeditionary military or disaster relief teams anywhere in the world independently.
- The budget allocation was a critical component of this project, but a failure to comply with this left the military strategy with a funding gap. “The plan was predicated on continuous, real growth in the defence budget, but budget cuts and freezes and procurement delays have left the DFD with less purchasing power than it had before the CFDS... Closing the gap between the force structure outlined in 2008 when the planned budget for 2013/2014 was CAD21 billion and the structure affordable within an actual budget of around CAD17.4 billion is the key challenge facing the department.”
- In 2011, the CFDS was declared unaffordable at the same time that the defence minister announced new procurement plans for air superiority fighters, armoured vehicles, and new maritime patrol planes. Because of the resources invested in procurement programmes and refurbishments, CAF were forced to make cuts to basic maintenance and training.
Public Confidence Good
While there is no information available on the public's view of the CFDS, there is information indicating a historically strong support for the Canadian military and its operations as a whole, although tempered by a concern about the military's standard of care for staff returning from deployment abroad.
A DND poll in 2014 showed a positive opinion of the military. “The overall impression of members of the military was strongly positive (60 percent of respondents in the 2014 data). That has been constant at around the same number since 2006. That isn’t expected to change with the latest data. Not surprisingly, the number of people with the opinion that the Canadian Forces does not properly care for its soldiers returning from overseas missions has increased from 20 per cent in 2010 to 38 per cent in 2014.”
Stakeholder Engagement N/A
For two years before the CFDS was launched, there was rigorous planning and evaluation of the requirements in order to design the programme. However, there are no details on specific consultations between the Canadian government and the DND, who were the main stakeholders involved in its development.
The foundations for an initiative to improve the existing state of the military started in 2006. Over the following two years until the programme was officially launched, the government was engaged in planning the CFDS. It took into account Canada's defence and security challenges, recent operational experience, and current and future demands on the military, including scenarios of possible missions that CAF might participate in. “This allowed the Government to generate a detailed level of ambition for the Forces and determine the military capabilities needed to carry out essential missions. This exercise, in turn, helped identify where investments were most needed in order to fill gaps across the four pillars upon which military capabilities are built – personnel, equipment,
readiness and infrastructure.”
Political Commitment Good
One of the main priorities of the federal government was to have a strong military, which was capable of defending Canadian citizens and was well-positioned to represent the country abroad. Therefore, there was a strong commitment to support this initiative and provide it with the resources it required.
Canada’s then prime minister, Stephen Joseph Harper, stated in the CFDS document that: “This government took office with a firm commitment to stand up for Canada. Fulfilling this obligation means keeping our citizens safe and secure, defending our sovereignty, and ensuring that Canada can return to the international stage as a credible and influential country, ready to do its part. Rebuilding the Canadian Forces into a first-class, modern military is a fundamental requirement if we are to deliver on these goals.”
The defence minister, Peter MacKay, also referred to the plan, in the following terms: “The CFDS represents a major milestone. It fulfils the government's commitment to provide enhanced security for Canadians and gives the military the long-term support it so critically needs and deserves, now and in the future.”
The CFDS was supported by a significant increase in baseline funding from to 2006 by CAD5.3 billion over five years, and the government committed through Budget 2008 to raise the annual increase in defence funding to 2 percent from 1.5 percent, starting in fiscal year 2011-12.
However, a later evaluation of the initiative in 2011 observed that the distribution of these resources had not taken place as expected. “The [DND] has not taken the actions or provided the central resources and oversight required to support the implementation of its new contracting approaches successfully. The lack of concerted action and follow-through on the new contracting approach for existing military equipment has resulted in slower and more limited implementation than planned.”
Clear Objectives Good
The main objective of the policy was very broad and long-term, and while it set some specific targets, they were mainly capacity-driven and there was no clarity on how they contributed to the overall goal.
The objective of the CFDS was to deliver a detailed roadmap of actions for the modernisation of the Canadian Forces, to produce a first-class, modern military – well-trained, well-equipped and ready to take on future challenges.
Some of the specific goals announced for the capacity of CAF across the four pillars of personnel, equipment, readiness and infrastructure were:
- “Increase the number of military personnel to 70,000 Regular Forces and 30,000 Reserve Forces;
- “Replace the Forces' core equipment fleets, including 15 ships to replace existing destroyers and frigates, 10 to 12 maritime patrol aircraft, 17 fixed-wing search and rescue aircraft, 65 next-generation fighter aircraft, and a fleet of land combat vehicles and systems;
- “Strengthen the overall state of the Forces' readiness to deploy, and their ability to sustain operations once deployed; and
- “Improve and modernise defence infrastructure.”
The DND had been struggling with reforms to their maintenance activities and budget for years, and had already implemented a couple of related projects that were unsuccessful. These initiatives had provided some insights into the weaknesses of the institution’s financial management.
The unsuccessful initiatives included:
- The Optimized Weapon System Management (OWSM) programme for existing military equipment (2002)
- The In-Service Support Contracting Framework (ISSCF) for new equipment acquisitions (2008).
However, a lack of capacity within the Aerospace Equipment Program Management Division and a reduced activity of the OWSM Board of Directors had led to an abandonment of planned OWSM contracts. Some of the challenges that the DND had identified as contributing to delays in the OWSM programme implementation included:
- Resistance to change in the roles and responsibilities of officials
- Lack of capacity in specialised skills for contract management approval processes and in negotiations with private sector firms.
The National Procurement Oversight Committee had previously acknowledged a lack of good financial information for decision-making. In 2001, the Auditor General concluded that the DND needed to improve its management information systems, and the quality of data they contained.
The CFDS was launched with a generous increase in defence funding and a budget plan. However, spending over the years was higher than estimated, and ongoing shortages of skilled personnel became a limiting factor for the execution of the initiative.
Funding for the initiative was stated at the outset, with scheduled increases in spending over the following two decades in order to safeguard the availability of resources. “The CFDS was supported by an investment plan based on a commitment to provide predictable funding increases over a 20-year period. Building on Budget 2006, which increased defence baseline funding by CAD5.3 billion over 5 years, the government has committed through Budget 2008 to raise the annual increase in defence funding to 2 percent from the current 1.5 percent starting in fiscal year 2011-12. Over the next 20 years, these increases will expand DND's annual budget from approximately CAD18 billion in 2008-09, to over CAD30 billion in 2027-28. In total, the government planned to invest close to CAD490 billion in defence over this period.”
However, budget increases over time became too high and controversial. With the recession in 2008, Budget 2012 projected that one-fifth of all federal spending reductions would come from defence. "Budget 2014 defence cuts went even deeper, accounting for a quarter of all spending reductions. These measures effectively made the CFDS unsustainable, its 20-year budget reduced from CAD490 billion to CAD453 billion... These reductions, in combination with CFDS budget caps put in place in 2008, meant that many projects were left underfunded.”
A 2011 audit indicated that the DND had ongoing personnel constraints. “For many years, the [DND] has faced shortages of skilled employees in some maintenance and repair trades. In addition, cuts made in the 1990s to DND human resources have resulted in fewer employees who are responsible for planning, managing, and contracting maintenance and repair activities... There are longstanding deficiencies in information management systems used to support decision-making for maintenance and repair activities, first raised by us in a 2001 audit.”
Later, in 2016, another audit reported that DND made initial planning assumptions that “overestimated equipment use, underestimated support costs, and under-resourced personnel requirements. Consequently, higher-than-estimated support costs and the lack of personnel contributed to reduced availability and use of the selected equipment we examined… There was also a shortage of personnel at DND to negotiate, monitor, and challenge contractor performance.”
The governance structure of the DND includes the minister, the deputy minister, the chief of the defence staff, and the vice chief of the defence staff as senior decision-makers regarding the use of resources in the department, supported in financial management by the Defence Management Committee (DMC) and the Program Management Board (PMB).
The first review of this structure in 2009 concluded that neither the DMC nor the PMB focused on strategic resource allocations. “Most agenda items that appear before the DMC provide situational updates, and the majority of items tabled at the PMB focus on project approvals and the in-year management status. We found no evidence of a formal process to provide senior management with regular reports on the corporate and specific directives identified in the business planning approval letters to ensure that the Department is achieving its objectives and using allocated funds to obtain expected results.” Later audits found improvements in this regard, but the auditor maintained as a recommendation that DND should take action to streamline governance processes and better integrate resource planning for equipment support.
There was no alignment between the internal institutions working towards the strategy, which failed in such basic responsibilities as planning the National Procurement budget. “Each year, planning for personnel and operating budgets (such as fuel) for equipment support was carried out separately by the three environments of the military and the assistant deputy minister (Materiel), who were responsible for equipment support. In addition, the Military Personnel Command planned for the number of personnel, their recruitment, and the training of operating and maintenance members. While these plans included a three-year view of financial and personnel risks, they did not include a longer-term view on how [DND] will meet its objectives.”
Auditor reports evaluating the initiatives revealed weak measurement systems, and a lack of visibility over the impact and cost-effectiveness of procurement activities.
The programme audit in 2011 concluded that DND had limited capability to assess the long-term impacts of its annual procurement allocation, as it lacked information for the decision-making. “[DND] lacks complete, reliable, and integrated information on the total actual costs of maintenance and repair, because some of the costs — salaries and infrastructure, for example — are not captured in its asset management information systems. The absence of this information impedes its ability to make informed decisions about the life-cycle management of its fleets or to determine whether it is putting enough funds each year into maintenance and repair... Although the Department has recognised the need to systematically measure the efficiency and effectiveness of its own equipment management activities, it does not currently do so... [DND] has limited capacity to assess the impact of its annual National Procurement allocation decisions. Together with the lack of total cost information, this means that the Department does not have a firm basis for determining whether the same result could be achieved at less cost or if the same expenditure could achieve better results.”
Although there was good alignment between the incentives of the military and those of the associated Canadian private sector and government, there was limited alignment within the forces themselves in order to make the joint strategy operate efficiently.
The CFDS stated from the beginning the intention of integrating with local industry in order to help its development along with that of the defence sector. “The infusion of long-term stable funding it provides will enable industry to reach for global excellence and to be better positioned to compete for defence contracts at home and abroad, thus enabling a proactive investment in research and development and opportunities for domestic and international spin-offs as well as potential commercial applications.”
The prime minister defended this joint effort to support both the industry and the country’s safety through the CFDS, saying that: “the Strategy not only delivers increased security for Canadians, but also significant economic benefits for citizens across the country. By unveiling a detailed plan for the future replacement of key equipment fleets, we are providing Canadian industry the opportunity to more effectively meet defence procurement requirements, and to position themselves for global excellence.”
The defence minister highlighted the benefits of the CFDS for the military as well as citizens: “[The CFDS] fulfils the Government's commitment to provide enhanced security for Canadians and gives the military the long-term support it so critically needs and deserves, now and in the future.”
However, audits found that DND needed better internal alignment. “[DND] should better define and integrate resource requirements in the initial decision-making process for equipment approval and support. [DND] needs to monitor and manage equipment support risks in a comprehensive and integrated manner to ensure sufficient personnel and funds are aligned with operations and training requirements.”