Speeding up military procurement will take careful rewiring of Defence Investment Agency | Opinion

Canada will soon have a new and uniquely designed Crown corporation to conduct military procurement.

Earlier this month, the federal government announced it will be introducing legislation to transform the Defence Investment Agency (DIA) into a Crown corporation to pick up its pace.

It’s a bold and in some ways unprecedented move to put one of Canada’s most strategic sectors on more independent and commercial footing — and with hundreds of billions of dollars in government spending up for grabs, to say nothing of our national security, the stakes are very high. But for all its independence, the success of this new model will depend as much on the soft wiring of internal government coordination as the hard wiring of the DIA’s corporate design.

The government will encounter some formidable challenges in this strategy, and it remains to be seen whether the relative agility of a Crown corporation can be used to break Canadian military procurement free from the grips of bureaucratic process.

Under Bill C-40, The Strengthening Canada’s Defence Sector Act, the DIA, established just one year ago, will now be reborn in corporate form, giving it exceptional powers to conduct Canada’s military procurement with an eye to industrial development. What adds to the unprecedented quality of this move is that the government went back to the drawing board in mid-transition, dropping plans under earlier legislation, Bill C-31, to create a department-like agency under direct ministerial control in favour of a corporation headed by a board of directors and a highly empowered CEO.

The CEO, Doug Guzman, a major player in Canadian investment banking, was reportedly unhappy with the C-31 model, which left him in a position akin to that of a deputy minister with a minister in direct control over the agency. If the new model was indeed designed with Guzman in mind, it runs counter to the principle that you don’t build government machinery around individuals, but so be it.

To be clear, the now-jettisoned DIA structure in C-31 was already unusual and designed to meet conflicting needs. It’s no secret that the government’s industrial development focus, born in the context of a stunning turn in Canada-US relations, runs counter to the emphasis that the Department of National Defence (DND) places on getting exactly the kind of equipment it wants.

In the slow and painful multi-departmental process that has marked Canada’s military procurement, DND represents the powerful voice of military capacity preferences, while economic development considerations and procedural purity have fallen respectively to the departments of Innovation, Science and Economic Development and Public Service and Procurement Canada.

No single government organization can resolve this internal tension, and while Crown corporations can have a fair bit of operational autonomy to discharge a precise mandate, they’re usually far removed from policy discussions.

That’s presumably why the government originally planned to create an agency headed by a minister but with a broad range of operational authorities departments don’t usually have in areas like financing, staffing, contracting and above all procurement. This included sweeping authority to set aside the normal requirements for competitive bidding.

But for this model to work, the responsible minister would have needed to devolve much day-to-day responsibility to the CEO while focusing on managing the interdepartmental labyrinth at the political level. It was a tall, though not insurmountable order that would demand a lot of support from the centre of government, both political and in terms of process.

That model will never be tested. Instead, under the new legislation the government has now opted for what is in some ways a more obvious model of a commercially focused corporation within the DND portfolio, albeit with a newly created position of associate minister of national defence for procurement.

In practice, ministers do not head Crown corporations but retain a range of authorities over them as well as accountability to Parliament. Traditionally, associate ministers of defence were subordinate to the defence minister because they did not have direct personal responsibility for the department.

So, on its face this new arrangement might suggest that the government decided to reconcile the tension between DND’s military capacity preferences and broader economic objectives in favour of DND.

But there’s good reason to think that this isn’t quite the case. For one thing, Prime Minister Mark Carney wasn’t likely to undercut his deep ambitions for industrial development. The new associate minister will be directly responsible to the prime minister and to Parliament for the DIA. Also, there’s the fact that the DIA will be an unusually empowered Crown corporation, likely headquartered in Toronto, under a CEO in whom the prime minister obviously has a considerable confidence.

If anything, critics have raised concerns that the DIA will operate with too little day-to-day accountability to the government and to Parliament. But Bill C-40 comes with some important guardrails, including the DIA minister’s uncommonly immediate capacity to give binding direction to the corporation.

The DIA board will also include at least one and possibly up to three deputy ministers or equivalents. And while C-40 will give the DIA more corporate independence than it had under C-31, it will take away the sweeping policy authority it would have had as a ministerial department.

Responsibility for the Defence Procurement Act, core legislation for coordinating and regulating Canada’s military industry, will now remain with the procurement minister.

All of this brings us back to the inescapable need for effective whole-of-government coordination at the political level if procurement is to be expedited and harnessed to industrial growth. It’s hard to wire that into legislation, but so far this government has shown no shortage of political will.

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