Defence sole-sourcing

There's been a bit of hullabahoo about this in the media, created by the Ottawa Citizen's David Pugliese:

Nearly half of military contracts had no competition, report finds

Leading to this editorial today in the Montreal Gazette:

No-bid defence deals need revision

It is worth noting that the "report" from the Canadian Centre for Policy Alternatives was written by the notorious Steve Staples, always out to get the Canadian Forces. Mr Pugliese has the grace to write this of the Centre:

The study by the left-leaning Canadian Centre for Policy Alternatives...

While the Gazette really spins things:

The findings were made public by the Canadian Centre for Policy Alternatives, an organization with a liberal and big-government approach to many issues but one is capable of fair-minded analysis...

Fair-minded analysis from Cousin Steve? What planet...

As for the "analysis" itself, it's largely a simple-minded attack on the C-17 purchase, and the announced plans to buy C-130Js and CH-47s, plus a (maybe slightly justified) jab at the fixed-wing SAR situation. These things have been gone over repeatedly at The Torch so I'll make just this observation. Cousin Steve never assesses the military capabilities that the aircraft need to meet, nor does he note the almost certainty that the A400M will not meet its production schedule. He is dealing in a process-fixated fairy world of comparing new cars with used cars with cars that do not even exist.

The piece also gives great detail about MND O'Connor's previous lobbying associations. But Cousin Steve never bothers to explain the fact that one of the companies he implies is getting the shaft with the current procurements, Airbus Military, was one of Mr O'Connor's clients. Some conflict of interest or whatever.

I despair of our media. Again.

Babbler's Addendum: After re-reading Mark's post above, I figured it would be more productive to build on it rather than start fresh covering many of the same points with similar responses. So here goes.

In his introduction, Staples states that "a sampling of recent media reports reveals a military procurement process steeped in departmental secrecy and charges that multi-billion-dollar contracts are being steered toward pre-selected contractors." You know which media reports he "sampled?" Three from Mike Blanchfield of the Ottawa Citizen, five from Daniel Leblanc of the Globe & Mail, and eight from David Pugliese of the Ottawa Citizen. Quite the broad consensus there - three reporters from two newspapers and all with a rap sheet as long as your arm at this blog for poor reporting.

Oh, and incidentally, five of the six media reports Staples brings up have been thoroughly fisked here. Check the archives - the search function in the toolbar at the top of the page is your friend.

The attack on O'Connor's days in the employ of Hill & Knowlton is really, REALLY getting old. *YAWN* C'mon back when he awards a nice big and juicy contract through an ACAN to Airbus, okay? Make you a bet they'd like to see O'Connor get hit by a bus given their sales to DND since he was given the portfolio.

Speaking of the Advance Contract Award Notices process, Staples cites Auditor-General Sheila Fraser as saying "Although it definitely ensures greater transparency, one can see, simply by looking at the title, that it constitutes a notice that is given prior to awarding a contract. It means greater transparency, but it is not a competitive process." Of course, she's right, but not in the way that Staples interprets her remarks.

The ACAN isn't a competitive process, it's what's used to determine if a competitive process is appropriate for a contract. If firms other than the pre-identified contractor respond to the ACAN within the parameters required, the department has to proceed to a full tendering process. The reason it doesn't happen much is that in order to put together an ACAN, your departmental staff work has to have already determined with a good deal of certainty that only one supplier will be able to meet the requirements.

In trying to discredit the ACAN process, Staples falls all over himself pushing forward the highly questionable assertion that the Airbus A400M - a plane that has yet to be build and flown - should have received serious consideration for the Tactical Airlift project. The irony is that in so doing, Staples effectively lobbies for Airbus far better than O'Connor ever did! (Perhaps he's bucking for O'Connor's old desk at Hill & Knowlton - I'd guess the pay would be better than at an oxymoronic lefty "think-tank.")

As evidence that the military procurement system is broken, Staples brings up the following information:

Treasury Board rules allow limited tendering for 13 reasons, and according to the database the most common reason cited is "Exclusive Rights" (44%) or "Low Dollar value" (40%).

Does the database allow inputs of multiple reasons for a single contract? Because if not, then the data doesn't show that "Extreme Urgency" isn't a motivating factor as Staples suggests, but rather that it's not the only one.

Moreover, both Exclusive Rights and Low Dollar Value are compelling reasons to use an ACAN. For the former, purchasing the intellectual property rights for anything that involves high-technology - which is pretty much everything the CF uses - is prohibitively expensive, and without doing that, a competitive process is next-to-impossible. For the latter, the costs of running a competition would in many instances outweigh the savings gained through that same competition.

That is to say, sometimes sole-sourcing is the cheapest, and most reasonable way to buy.

Staples implies that we should all be shocked and concerned that "non-competitive" contracts for DND have doubled over the past two years. Let's put aside for the moment that taking three data points on a graph and declaring a trend is preposterously shaky methodology, and assume he's correct - a leap of faith, to be sure.

So what? With the increasingly complex equipment being purchased, it's no wonder that the number of procurements that bump up against Exclusive Rights is going to be on the rise. Should we hamstring our soldiers by only buying equipment that can be fixed with gun tape and baling wire out in the field? If we purchase a piece of kit built with proprietary technology, we need to understand that we really only have one option going forward in most cases, unless we're willing to completely break with that technology...at which point we're in the same boat all over again with a new contractor.

Staples goes on to cite a couple of former procurement bureaucrats - one from Canada who has been thrashed in these pages previously, and one from the U.S. - who believe competition on military contracts is a good thing. I'd agree with that sentiment on a general level, but the CF is in a bit of a different situation after years of underfunded neglect. But one point made by the former chief weapons tester for the Pentagon is twisted by Staples into a real mindbender: "generally, when the U.S. Congress maintains closer oversight and review, U.S. soldiers get better, more effective equipment, sooner and cheaper." In a Canadian context, with the same "generally" caveat, I'd agree with all of that except the "sooner" part.

In Canada, "the purchase of complex military hardware takes up to 15 years" already. Add yet another layer of oversight and a competition that includes a number of firms that cannot meet the contract requirements on the face of things, and I find it completely counterintuitive that the process would somehow be truncated.

At the end of the day, I find it telling that this contrived media-stunt of a report was really only pounced upon by Pugliese, the journo cited so fawningly in the report itself. Welcome to the spin-cycle, folks.

Update: More detailed refutation of Cousin Steve's spinning report is here.

Upperdate: These two stories are interesting in the context of the fixed-wing SAR aircraft issue:

1) C-27J tapped for [US] Joint Cargo Aircraft (more here)

2) Australian government gives nod to Alenia over C-27J Spartan selection

As for 2), the Australian government is saying that in fact no decision in favour of the C-27J has yet been made. The story at this link, about the RAAF's airlifter replacement programs, is well worth reading--lots of parallels with the Canadian Air Force's situation.

A comment on the US decision at Milnet.ca is here.