2019 Minister’s Transition Book 2: Core responsibility 1—Purchase of goods and services
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Procurement Branch overview
The department acts as the common service provider for over 100 government departments and agencies in procuring a full range of goods and services. Over the past 3 years, the department has managed on average $16 billion in procurement annually on behalf of its client departments.
The Government of Canada procurement environment involves a number of key players:
- Treasury Board of Canada Secretariat—Establishes procurement regulatory and policy environment
- Public Services and Procurement Canada—Provides common procurement services and tools to federal departments
- Shared Services Canada—Provides common procurement services related to the delivery of email, data centre, network and workplace technology devices
- Client departments—Buy goods and services based on their own authorities or those delegated by Public Services and Procurement Canada or Shared Services Canada
- Suppliers—Support delivery of federal programs through goods and services
Procurements are generally categorized as:
- military: goods and services used for the military and coast guard (for example, aircraft, engineering services)
- complex: all other non-military goods and services over $10 million (for example, large information technology and infrastructure projects, Canada Student Loans Program)
- simple goods and services: all goods and services under $10 million (for example, office supplies, fuel, consulting services)
The federal procurement process is guided by the following core principles stemming from the Financial Administration Act, the Government Contracts Regulations and Treasury Board Contracting Policy:
- fair, open, and transparent
- value for money
- acquiring the right goods/services
Authorities, trade agreements, and federal regulations
The Department of Public Works and Government Services Act gives the minister exclusive responsibility for the procurement of goods. In accordance with the act and in order to maximize efficiencies, the minister has delegated to other departments the authority to acquire goods under $25,000, such that they are not required to come to the department for approval. The minister has the authority to procure goods up to the applicable Treasury Board contracting limits (currently $75 million for competitive processes).
The Defence Production Act outlines the minister’s specific responsibility for military procurement, as outlined in the legal authorities section of this briefing package.
The Government Contracts Regulations under Treasury Board authority require that procurements are conducted competitively and provide some exceptions to this rule (such as, emergencies in the public interest, expenditures below certain thresholds, nature of the work is such that it would not be in the public interest to solicit bids, only one person is capable of performing the contract).
Canada is party to several trade agreements which include government procurement obligations, as outlined in the trade obligations section of this briefing package.
The branch has 2 sides comprised of 1) procurement and 2) defence and marine procurement and provides federal departments and agencies access to a workforce of procurement professionals who are able to help them navigate the complex web of legislative, regulatory and policy requirements.
Procurement Branch plays a critical role in ensuring that procurement outcomes go beyond simply acquiring goods and services; the organization is committed to strategic procurement as a means to:
- ensure that procurement is more efficient and accessible to clients and suppliers
- develop simpler and less burdensome processes, policies and tools
- leverage procurement to advance policy goals
- deliver results in an open, transparent and effective manner to maintain public trust
- ensure that accessibility is an initial consideration in the procurement of all goods and services, in accordance with the Accessible Canada Act and the Treasury Board Contracting Policy
Where suppliers wish to seek dispute resolution services, they may file a case with the Canadian International Trade Tribunal or approach the Office of the Procurement Ombudsman. Provincial courts and the Federal Court are also venues where suppliers may have their cases heard. The Office of the Procurement Ombudsman reports to the Minister of Public Services and Procurement.
As a key enabling activity for advancing government objectives and delivering essential services, reforming procurement remains imperative. Work is underway at the department to leverage opportunities to make federal procurement work better, including:
The department is working on introducing the electronic procurement system (E-procurement) to shift from administratively burdensome, paper-based processes to a digital marketplace. This system aims to cover the end-to-end procurement process from the time a need is identified to when an order is placed. E-procurement further aims to reduce the cost and complexity for suppliers competing for government contracts and providing buyers with agile access to the commercial marketplace and promote value.
An initial pilot for e-procurement will “go-live” in March 2020, as part of Phase One of implementation, that would align government procurement processes with internationally-recognized best practices. The system will be implemented within the department over a 5-year period. In parallel, Treasury Board Secretariat is assessing wider implementation of E-procurement to other departments under Phase Two of implementation. The system is in the process of being connected to the department’s financial system and is being supported by a rigorous change management strategy and training.
Cost and Profit Assurance Program
The Cost and Profit Assurance Program provides auditing and other assurance services on domestic and international contracts, primarily for high-risk defence contracts, to ensure that actual procurement costs and pricing are fair and reasonable. The program is also pivotal in discharging Canada’s international obligations by providing services to the Canadian Commercial Corporation and in meeting international defence auditing requirements in the North Atlantic Treaty Organization (NATO) agreement for allied partner nations (primarily the United States). Canada has introduced enhanced changes to its pricing framework that continues to support the program’s objectives to ensure integrity in pricing and payments.
Contract simplification initiative
The contract simplification initiative (the initiative) was established to address perceived inconsistency and complexity of government contracts from the supplier community and to pursue 2 objectives: 1) simplify contract terms and conditions to reduce complexity and to improve readability, and 2) rethink and revise the structure of government contracts to achieve greater consistency and to align them with commercial best practices. As part of the initiative, more than 7,000 departmental contracts were analyzed, which revealed that the department’s current contracts were often more complex than necessary, that contacts did not follow conventional deal structures found in the marketplace, and that contract language had opportunities to better align with commercial best practices.
The department is developing and testing a new contractual model that is focused on simplifying and restructuring contracts, including removing unnecessary duplication/redundancy; reorganizing contract structure to improve supplier understanding and readability; and further simplifying contract terms and conditions, where appropriate. A simplified contractual model has been developed and simplification concepts are now being tested and validated on active procurements.
Practitioner’s guide for procurement pricing
The department is developing a guide for government procurement experts to refer to for developing contracts that are easier to administer, promote innovation among suppliers, and ensure greater clarity and understanding of contract pricing. The practitioner’s guide for procurement pricing aims to inform contracting officers on pricing decisions for both competed and negotiated contracts in Canada.The first phase of the pricing guide is available on the consultation page of BuyandSell.gc.ca for use and feedback by the procurement community, and work is underway on training and additional guidance related to basis of payment and the determination of profit.
Given the significant purchasing power of the federal government, procurement is a vital opportunity for advancing social objectives, including: diversity, inclusion, reconciliation, accessibility, and emissions reduction. In fall 2018, the department launched a 2-year socio-economic procurement experimentation project to advance socio-economic outcomes and foster supplier diversity. To date, 38 pilots have been launched across Canada to incorporate socio-economic outcomes in federal procurement and have shown early promise, including 40% of the department’s standing offers and supply arrangements incorporating environmental considerations as of September 2019. A report summarizing findings from the 2-year project is scheduled to be completed for fall 2020.
The Government of Canada is part of 12 trade agreements that include substantive government procurement obligations having implications for federal procurement activities (Annex A: Current trade agreement thresholds).
All of the government’s trade agreements contain obligations based on the principles of non-discrimination, an open and transparent tendering process, competitive procurement, and a fair procurement process. This helps foster global competition and innovation by enabling Canadian suppliers to compete on a higher level with firms in other jurisdictions.
In general, a procurement is covered by a trade agreement if its estimated value is equal to or greater than the relevant monetary threshold, the client department is covered, the commodity is covered and there are no exclusions applicable. If a procurement is covered by a trade agreement, it is subject to the procedural rules of that agreement. Where procurements are covered by more than one trade agreement, all applicable agreements must be complied with at the same time.
Procedural rules in trade agreements are comprehensive and rigorous, addressing essentially all aspects of the procurement process. Some key obligations of trade agreements include publishing bid solicitations on the BuyandSell website, providing bidders with a reasonable time to respond to bid solicitations (most agreements fix a minimum period), and using generic specifications or reference to international standards, rather than specifying a name brand. It is important to note, however, that many of the obligations found in the trade agreements also exist under the Government Contracts Regulations, at common law, or in Government of Canada policies, and as such must be respected even where trade agreements do not apply.
A procurement may be subject to a set-aside (for example, minority business set-aside) or an exception (for example national security exception). Set-asides and exceptions allow for contracting officers to deviate, where necessary, from the procedural rules of the trade agreement(s) in order to serve the purpose for which the exception is being used or the set-aside is being applied.
International trade agreements contain provisions that restrict how government procurement can be used to promote domestic content and support domestic suppliers. When a procurement is covered by the Canadian Free Trade Agreement only, Canadian content requirements may be applied, so long as those requirements do not discriminate between provinces, territories, or regions and are applied in a manner consistent with Canadian Free Trade Agreement obligations. Barring the invocation or application of certain limited exceptions, local preferences and benefits are prohibited by all of Canada’s trade agreements.
The Canadian International Trade Tribunal (the tribunal) is the mechanism by which Canada enforces the implementation of the procurement obligations in the trade agreements. The majority of complaints filed against the department’s procurement activities are filed by suppliers who feel they have been unfairly evaluated or unfairly disqualified from a procurement process. The department generally faces a low level of tribunal litigation.
Recent amendments to the Canadian International Trade Tribunal Procurement Inquiry Regulations further clarify the original policy intent that the tribunal does not have jurisdiction to review the rationale for invoking a national security exception (NSE), nor conduct an inquiry into a procurement for which an NSE has been properly invoked.
The government recently implemented the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This agreement, which came into force for Canada on December 30, 2018, is a free trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Once fully implemented, it will be one of the largest free trade agreements in the world, representing 495 million people with a combined gross domestic product of $13.5 trillion Canadian dollars (CAD), or 13.5% of global gross domestic product. It is expected to benefit Canada by providing enhanced market access to key Asian and Latin American markets. The procurement obligations of the agreement are similar to those of Canada’s other international trade agreements, and therefore its implementation had minimal impact on federal procurement activities.
The Canada-United States-Mexico Agreement was signed on November 30, 2018, and is expected to replace the North American Free Trade Agreement. Once ratified by all 3 parties, it will enter into force after a brief implementation period.
The Canada-United States-Mexico Agreement includes a government procurement chapter that will apply only to the United States and Mexico. It will not apply to Canada. Rather, Canada and the United States agreed to continue abiding by the procedural rules and market access commitments set out in the World Trade Organization—Agreement on Government Procurement, while Canada and Mexico will rely on the procedural rules and market access commitments set out in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. As such, Canada-United States-Mexico Agreement is expected to have minimal impact on the federal procurement process, though some additional flexibility with respect to bid periods is anticipated.
The department is ready to support any further trade negotiation.
Annex A: Current trade agreement thresholds
A procurement may be subject to a trade agreement if the estimated value in Canadian dollars (including options and applicable taxes) is equal to or greater than the applicable threshold.
The below thresholds are valid until December 31, 2019.
|Canadian Free Trade Agreement (CFTA)||25,300||101,100||101,100|
|North American Free Trade Agreement (NAFTA)||32,900||106,000||13,700,000|
|World Trade Organization Agreement on Government Procurement (WTO-AGP)||237,700||237,700||9,100,000|
|Canada-European Union Comprehensive Economic and Trade Agreement (CETA)||237,700||237,700||9,100,000|
|Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)||237,700||237,700||9,100,000|
|Canada-Ukraine Free Trade Agreement||237,700||237,700||9,100,000|
|Canada-Chile Free Trade Agreement||106,000||106,000||9,100,000|
|Canada-Colombia Free Trade Agreement||106,000||106,000||9,100,000|
|Canada-Honduras Free Trade Agreement||106,000||106,000||9,100,000|
|Canada-Panama Free Trade Agreement||106,000||106,000||9,100,000|
|Canada-Korea Free Trade Agreement||100,000||100,000||9,100,000|
|Canada-Peru Free Trade Agreement||173,700||173,700||9,100,000|
Indigenous Procurement Strategy
Federal procurement is widely recognized as an important lever for increasing socio-economic benefits for Indigenous businesses and peoples.
On average, the department’s contracts with Indigenous businesses total between $20 to $50 million a year (representing approximately 4.86% of the department’s operational spend). This includes those set-aside under the Procurement Strategy for Aboriginal Business Policy and those performed outside of the policy.
Furthermore, the department, as a common service provider for federal acquisitions, awards on average $15 billion per year on behalf of client departments and agencies, of which $516 million (3%) goes to Indigenous suppliers.
There are currently 25 modern treaties, also known as comprehensive land claims agreements, in effect and most contain economic obligations which impact federal procurement activities. The Nunavut Land Claims Agreement is the only one that embeds a specific obligation to develop a federal procurement policy aimed at providing contracting opportunities to Inuit businesses.
Indigenous procurement strategy: 5% performance objective
The department is working with Indigenous Services Canada to set a multi-year government-wide performance objective to increase contracting with Indigenous businesses to 5%, by 2023. This performance objective applies to all departments and agencies with an annual contracting budget in excess of $1 million. The goal would be for these departments and agencies to allocate 5% of their contracting budget to Indigenous business.
This target will include contracts awarded under the Procurement Strategy for Aboriginal Business policy, and other contracts, such as those awarded on an open, competitive basis and those providing benefits to Indigenous people via subcontracting, employment and skills development/training.
The department is pursing efforts to expand procurement opportunities for Indigenous businesses, notably via enhanced use of Indigenous benefit plans embedded in contracts, and through the the new Treasury Board Directive on Government Contracts, including Real Property Leases, in the Nunavut Settlement Area.
Indigenous Services Canada is also currently examining approaches to refresh its Indigenous Procurement Strategy, namely the 1996 Cabinet-approved Procurement Strategy for Aboriginal Business.
Outreach and engagement
The department’s Office of Small and Medium Enterprises helps Canadian enterprises, including Indigenous businesses, understand the federal procurement process through seminars, awareness sessions and presentations. The office outreach activities in support of Indigenous businesses, in fiscal year 2018 to 2019 (up to the third quarter), included:
- 2,076 Indigenous individuals assisted
- 102 events for Indigenous communities
The office’s engagement will increase through a number of activities, including:
- Support for the implementation of the Nunavut Tunngavik Inc, whereby the Office will increase outreach and engagement activities with Indigenous businesses and communities in Nunavut
- The Office has partnered with the Council for the Advancement of Native Development Officers, a national Indigenous organization involved in community economic development. The agreement is designed to help the Council and its economic development officers support Indigenous businesses, across Canada, interested in participating in federal procurement, by providing focused access to the Office support and information
In addition, the minister’s Supplier Advisory Committee contributes to understanding and addressing barriers that smaller businesses face in federal procurement, including those faced by Indigenous-owned businesses. The Canadian Aboriginal and Minority Suppliers Council, represented by its President Cassandra Dorrington, is a member of the committee.
The Treasury Board directive
The new Treasury Board Directive on Government Contracts, including Real Property Leases, in the Nunavut Settlement Area comes as a result of an out-of-court settlement signed in 2015 between Canada and Nunavut Tunngavik Inc. in relation to a long-standing dispute regarding the implementation of the Nunavut Land Claims Agreement. The directive takes effect on December 20, 2019.
The directive represents a major shift in Canada’s contracting policy for procurement in the Nunavut Settlement Area. It imposes strong obligations on federal departments and agencies as part of a prescriptive process, with new mandatory procedural justification, documentation and reporting requirements that apply very early in the procurement planning process.
A committee co-chaired by the Treasury Board Secretariat and Nunavut Settlement Area, with the support of the department and Indigenous Services Canada, will be established to monitor outcomes and identify possible improvements to the directive, and a formal evaluation will be conducted after 5 years to ensure that it is meeting its objectives.
It is possible that other comprehensive land claims agreements-designated Indigenous organizations will request the negotiation of more prescriptive procurement requirements of Canada in their agreements, similar to what the new directive provides for Inuit businesses.
Going forward, the department will continue to leverage its role and expertise as the common service provider for federal procurement services and is the main contact for federal contracting professionals for procurement advice, guidance and training on the new directive.
Office of Small and Medium Enterprises and Stakeholder Engagement
The Office of Small and Medium Enterprises and Stakeholder Engagement works to encourage the participation of small and medium enterprises in federal government procurement; one of the department’s most public functions across the country.
The office educates and assists small and medium enterprises in doing business with the federal government through free seminars, events and one-on-one assistance, delivered through a network of 6 regional offices and 4 satellite offices. Small and medium enterprises can also get information about the procurement process through a national infoline.
A cross-country network of partners that support under-represented supplier communities is being developed. These partnerships provide opportunities for small and medium enterprises to become aware that the federal government can be a client and receive advice and tips on how to sell to the government. They also contribute to the department’s understanding of under-represented supplier communities.
Further, the office plays an advocacy role in advising on policies, strategies and procurement processes to help reduce barriers faced by small and medium enterprises, including businesses owned or led by Canadians from under-represented groups, and social enterprises. To do so, evidence-based data collected through yearly online surveys, research studies and direct feedback is leveraged to validate and understand the barriers these businesses face.
The office also supports minister’s Supplier Advisory Committee, which is an ongoing consultative body co-chaired by the department’s Assistant Deputy Minister for Procurement and a representative of the private sector. The committee is composed of representatives from leading national industry associations, and its mandate is to provide advice and feedback and make recommendations to you concerning procurement issues, including improvement of the procurement process. You have an open invitation to attend any of the committee’s meetings.
To provide more opportunities for businesses to reach more potential markets, the department’s procurement instruments have been made available for use by provinces, territories, and the broader public sector (such as municipalities, school boards, academic institutions and health institutions) through the Canadian Collaborative Procurement Initiative. To date, 7 provinces, the 3 territories and 124 broader public sector organizations are currently benefitting from access to 60 federal standing offers. This collaborative approach leverages our joint public sector buying power to obtain best value for Canadians. It also reduces administrative and legal burden for all participating entities while streamlining the procurement process. For the supplier community, the Canadian Collaborative Procurement Initiative facilitates opportunities for businesses to provide goods to provincial, territorial, municipal and other public sector-related markets.
In 2018 to 2019, the office participated in 1,493 outreach events across Canada, reaching 43,442 individuals (including more than 15,000 inquiries to the National InfoLine).
Defence and marine procurement
- Defence and marine procurement overview
- National Shipbuilding Strategy overview
- Third shipyard and program icebreakers
- Emergency towing vessels
- Interim auxiliary oil replenishment capability
- Transport Canada ferries
- Future Fighter Capability Project
- Future Aircrew Training Program
- Light armoured vehicles
- Strategic Tanker Transport Capability Project
- Risk-based pilot Project
Defence and marine procurement overview
Defence and marine procurement is essential to building the capabilities needed by the Canadian Armed Forces and the Canadian Coast Guard to exercise Canada’s sovereignty, while also generating economic benefits for Canada.
It is a complex process with many stakeholders (both internal and external) and substantial policies and procedures, which receives a high level of public attention. It is also a significant contributor to the Canadian economy. It is estimated that the defence industry contributed close to $6.2 billion in gross domestic product and 60,000 jobs to the Canadian economy (in 2016).
In 2017, the Department of National Defence released Canada’s Defence Policy, which outlines its investment strategy for the Canadian military. The Defence Policy included significant funding for major platforms, including replacing the CF-18 fleet with 88 advanced fighter aircraft and funding for the full complement of 15 Canadian surface combatants.
In May 2019, enhancements to the National Shipbuilding Strategy were announced to respond to future federal fleet requirements including those of the Canadian Coast Guard. These include directing the procurement of 18 new vessels (2 arctic and offshore patrol ships and 16 multi-purpose vessels) to existing shipyards and expanding domestic shipbuilding capacity through the selection of a third shipyard in Canada to build 6 program icebreakers.
There are 3 broad objectives to defence and marine procurement: 1) the timely delivery and sustainment of appropriate equipment for the Canadian Armed Forces and Canadian Coast Guard; 2) a fair and transparent procurement process that results in value-for-money; and 3) the leveraging of defence procurements for the economic benefit of Canadians.
Four departments are central to achieving these objectives:
- Public Services and Procurement Canada: develops the procurement strategy; leads the solicitation process; and manages the resulting contract and vendor performance
- Department of National Defence: defines requirements; conducts cost and options analysis of defence equipment; obtains Government of Canada policy approval; and manages projects and budgets
- Department of Fisheries and Oceans Canada: is responsible for the Canadian Coast Guard; defines requirements; conducts cost and options analyses of equipment; obtains Government of Canada policy approval; and manages projects and budgets
- Innovation, Science and Economic Development Canada: administers the Industrial and Technological Benefits Policy; and determines evaluation criteria intended to leverage economic benefits from resulting contracts
Public Services and Procurement Canada leads interdepartmental governance at the deputy minister level and below, which coordinates many aspects of the process for defence and marine procurements. There are over 150 procurements with a value of $20 million or more that have moved through the oversight of interdepartmental governance committees.
As the exclusive authority to acquire defence goods and services of all kinds on behalf of the Canadian Armed Forces, the Canadian Coast Guard, and other government departments, the department is actively working to identify opportunities to streamline the procurement approval process that falls under its auspices, including by supporting National Defence in reducing project delivery time by at least 50% for low-risk and low-complexity projects, increasing National Defence’s contracting delegation, and growing internal procurement capacity.
Of note, the department has an office in Washington which was established in 1951 to act as the single window for Canadian purchases under the U.S. Foreign Military Sales Program. It is the only office with delegated authority to undertake foreign military sales on behalf of Canada, as per the Defence Production Act. Foreign Military Sales, a US Security Assistance Program, allows Canada and other allied foreign governments to acquire defence articles, services and training from the US Department of Defence. The office provides end-to-end management of over 342 government-to-government agreements, referred to as active cases, currently worth approximately USD$4.34 billion which includes: developing the procurement strategy, reviewing requirements, initiating agreements, managing cases, managing funds, directing payment of the monthly special bill, exporting goods and re-transferring defence articles/services.
Through collaboration between the department, Treasury Board of Canada Secretariat and National Defence, an 18-month pilot project for risk-based contract approvals began in late 2018. The pilot is testing a new process for low risk and low or medium complexity defence procurements to be approved within Public Services and Procurement Canada instead of by the Treasury Board. This streamlined process is intended to help Canadian Armed Forces members receive the equipment they need faster, without compromising on oversight and due diligence.
The department is also taking steps to ensure maximum competition in evaluation processes by using phased bid compliance, or cure processes, as part of large, complex competitive procurement processes. For example, as part of recent bid evaluations for the Canadian surface combatants project—the largest procurement ever for the Canadian Government—bidders were given an opportunity to fix their proposals if they had not initially demonstrated compliance with the requirements set out in the request for proposals. This approach reduces the risk of procurement processes not resulting in a compliant bid as a result of technical errors or omissions in bid documents. This approach proved successful and will be applied to other large defence procurements in the future.
National Shipbuilding Strategy overview
The National Shipbuilding Strategy (the strategy) is a long-term commitment to renew Canada's federal fleet of vessels for the Royal Canadian Navy and Canadian Coast Guard, create a sustainable marine sector, and generate economic benefits for Canadians.
On June 3, 2010, the strategy, then named the National Shipbuilding Procurement Strategy, was announced. The 3 objectives of the strategy are to:
- renew the Royal Canadian Navy and Canadian Coast Guard fleets in a timely, affordable manner
- create and support a sustainable marine sector in Canada
- generate economic benefits to Canada
The strategy consists of 3 distinctive pillars:
- large ship construction
- small ship construction
- ship repair, refit and maintenance
For large ship construction, Canada established a strategic relationship with 2 Canadian shipyards, Irving Shipbuilding Inc. and Seaspan’s Vancouver Shipyards. The 2 shipyards, selected through an open and fair national competition, were designated as strategic sources of supply: Irving Shipbuilding Inc. for combat vessels and Seaspan’s Vancouver Shipyards for non-combat vessels. Canada has signed an umbrella agreement with each of the 2 shipyards. These agreements are strategic sourcing arrangements that define the framework for the business relationship between the government and the shipyards for years to come. For smaller ship construction (1000 tonnes or less), Canada sets aside the individual projects for competitive procurements amongst Canadian companies other than the shipyards selected to build the large ships. For ship repair, refit and maintenance, these requirements are competed through publicly announced requests for proposals.
In August 2019, a competitive process was launched to select a third Canadian shipyard as a strategic partner for large ships under the strategy. This new shipyard will first build 6 program icebreakers for the Canadian Coast Guard.
Contracts awarded between 2012 and June 2019 are estimated to contribute $13 billion ($1.2 billion annually) to gross domestic product and create or maintain 11,192 jobs in the Canadian economy annually during the period of 2012 to 2022.
The government’s Industrial and Regional Benefits Policy and the Industrial and Technological Benefits Policy ensure that Canadian industry benefits from Canada’s defence and security purchases. Shipyards are meeting and exceeding their required commitments. As of 2018, Irving Shipbuilding Inc. has completed over $2 billion of its required $3.96 billion in Industrial and Regional Benefits Policy obligations. As of 2018, Seaspan’s Vancouver Shipyards has completed over $729 million of its required $1.05 billion in policy obligations. In addition, through the value proposition, the strategy requires the shipyards to invest a value equal to 0.5 percent of contracts to benefit the domestic marine industry in 3 priority areas:
- human resources development
- technology investment
- industrial development
As of 2018, the shipyards’ contracts have generated $15 million in obligations under the National Shipbuilding Strategy value proposition.
Irving Shipbuilding Incorporated
Irving Shipbuilding’s original work package consisted of 6 arctic and offshore patrol ships and 15 Canadian surface combatants for the Royal Canadian Navy. In May 2019, it was announced that Irving Shipbuilding will build an additional 2 arctic and offshore patrol ships variants for the Canadian Coast Guard to conduct sea-borne surveillance such as fisheries patrols as well as other missions, including emergency response, buoy tending, icebreaking support and ocean science. The total budget for the Irving Shipbuilding work package is $61.8 billion to $65.8 billion Footnote 1
Arctic and offshore patrol ship project
A total of 8 arctic and offshore patrol ships are being built by Irving Shipbuilding Inc. under the National Shipbuilding Strategy. The arctic and offshore patrol ships project will deliver 6 vessels to the Royal Canadian Navy to conduct sovereignty and surveillance operations in Canada's waters, including the arctic, as well as a wide variety of operations abroad with a project budget of $4.3 billion. The project will also deliver 2 modified arctic and offshore patrol ships to the Canadian Coast Guard to conduct sea-borne surveillance such as fisheries patrols as well as other missions, including emergency response, buoy tending, icebreaking support and ocean science.
Canadian surface combatants
Fifteen Canadian surface combatants will replace the Royal Canadian Navy’s existing fleet of frigates and retired destroyers. The new fleet of surface combatants will take approximately 25 years to design and build and will be the backbone of the Royal Canadian Navy for the next 50 to 60 years. The Canadian surface combatants project is the largest and the most complex procurements in Canadian history, with specifically the design and integration process of the technology-laden combat system posing the highest risk. Canada and Irving Shipbuilding Inc. aim to have a sufficiently mature design to enable construction of the first vessels in early 2020s. The project schedule is expected to mature as the design work progresses.
The estimated cost is $56 to $60 billion (excluding taxes), which includes designing and building 15 ships as well as other project costs such as initial spares, training, the project management office, infrastructure, ammunition and contingency. On February 8, 2019, following an open and transparent competition and a due diligence process, a contract was awarded to Lockheed Martin Canada to provide the Canadian surface combatants design and design team, along with the Combat Management System Software Support contract.
Irving Shipbuilding has been awarded approximately $3.9 billion in strategy contracts since 2012. Four arctic and offshore patrol ships are under construction at Irving Shipbuilding with the first vessel expected to be delivered to the Royal Canadian Navy in early 2020. To build arctic offshore patrol ships 7 and 8, the existing design will be modified to meet Canadian Coast Guard requirements while minimizing differences between the Royal Canadian Navy and Canadian Coast Guard fleets.
With respect to the Canadian surface combatants, the first design activity is called requirements reconciliation, which involves more thoroughly examining the design, reviewing how all requirements are met and reconciling the requirements of the starting point ship design (the UK Government’s requirements for the type 26) with Canada’s requirements. This process will produce a single, integrated set of requirements which will be used to evolve the design for the Canadian surface combatants ships. During this phase the build cost estimate will continue to be refined and, prior to the completion of the design phase, a build contract will be awarded to Irving Shipbuilding.
Seaspan’s Vancouver Shipyard
Vancouver Shipyards’ original work package consisted of 3 offshore fisheries science vessels, 1 offshore oceanographic science vessel and 1 polar icebreaker for the Canadian Coast Guard, as well as 2 joint support ships for the Royal Canadian Navy. In May 2019, Canada decided to remove the polar icebreaker from Vancouver Shipyards’ work package and add up to 16 multi-purpose vessels for the Canadian Coast Guard. The total budget of the Vancouver Shipyard work package is $18.6 billion. Footnote 2
Offshore fisheries science vessels
The offshore fisheries science vessels project will deliver 3 vessels to the Canadian Coast Guard to replace 3 existing vessels, one of which was decommissioned in 2016, and has a project budget of $687 million. The vessels will continue critical scientific research and ecosystem-based management, as well as contribute to Canada’s stewardship of fishery and ocean resources. Equipped with wet labs, these vessels will have accommodation for up to 23 crew and 13 scientists.
There has been significant challenges in the construction of the vessels, including overly optimistic cost and schedule estimates
Joint support ships
The joint support ships project will deliver 2 support vessels to the Royal Canadian Navy to supply other Royal Canadian Navy ships with fuel, ammunition, spare parts, food and water. These ships will also provide a home base for maintenance and operation of helicopters, a limited sealift capability, and support to forces deployed ashore. Vancouver Shipyards was selected as the prime contractor for both the development and implementation phases of the project. The project budget is under review and negotiations for the joint support ship construction contract are underway.
It was determined in 2013 that joint support ships would be sequenced third in Seaspan’s Vancouver Shipyards’ work package, following the construction of 3 offshore fisheries and science vessels and 1 offshore oceanographic science vessel. However, cumulative delays in the offshore oceanographic science vessel resulted in a production gap between the 2 classes of science vessels. To mitigate the gap, Canada decided to advance preliminary construction of sjint support ships in 2018. An early build construction contract worth $66.6 million was signed in May 2018, with a steel cutting ceremony held on June 15, 2018. Under the revised sequencing confirmed in early 2019, Vancouver shipyards will complete construction on joint support ships 1, followed by the offshore oceanographic science vessel and then joint support ship 2. This will allow for uninterrupted transition from early block construction to full production on joint support ship 1. This will also allow time to incorporate lessons learned into joint support ship 2, and better optimizes Vancouver Shipyards’ engineering workforce.
Offshore oceanographic science vessel
The offshore oceanographic science vessel project will replace the Canadian Coast Guard’s largest science vessel, the Canadian Coast Guard Ship Hudson. The vessel will be capable of multi-tasking oceanographic, fishery, geological and hydrographic survey missions, and will contribute to Canada’s understanding of the oceans and the impacts of climate change. The budget for the offshore oceanographic science vessel was originally established in 2007, prior to the announcement of the National Shipbuilding Strategy and is under review.
The offshore oceanographic science vessel was initially sequenced second in the Vancouver Shipyards’ work package, following the construction of 3 offshore fisheries science vessels and prior to the construction of 2 joint support ships. However, delays resulted in a production gap between the 2 classes of science vessels, which is being addressed through the advancement of the first joint support ship.
Sixteen multi-purpose vessels will replace the capabilities provided by a number of existing Canadian Coast Guard ships. Among their primary missions, the vessels will provide icebreaking services and support; conduct the deployment, recovery and maintenance of fixed and floating navigation aids; and conduct searches on the water, respond to marine distress calls, and provide assistance and towing to disabled vessels. The multi-purpose vessels will also perform a variety of secondary missions including conservation and protection, environmental response and support for scientific research.
In May 2019, Canada decided to remove the polar icebreaker from Vancouver Shipyards’ package of work and add up to 16 multi-purpose vessels, to be built after the second joint support ship. This substitution will break the cycle of short production runs in Vancouver Shipyards’ original work package—providing the yard with the ability to generate efficiencies and economies of scale, as well as ensure greater workforce stability and minimize gaps in production. The estimated project cost for 16 multi-purpose Vessels is $14.2 billion.
Vancouver Shipyard has been awarded approximately $1.7 billion in strategy contracts since 2012. The first offshore fisheries science vessel, the Sir John Franklin, was delivered to the Canadian Coast Guard in June 2019. The second and third offshore fisheries science vessels for the Canadian Coast Guard are under construction at Vancouver Shipyard, with offshore fisheries science vessel 2 to be delivered in late fall 2019 and offshore fisheries science vessel 3 in summer 2020.
Construction of early blocks for the first joint support ship is underway, with 12 blocks completed and 27 under construction. The first joint support ship is expected for delivery in summer 2023. The second joint support ship will begin construction after the offshore oceanographic science vessel and is expected for delivery in fall 2025.
Construction of the multi-purpose sessels is expected to begin in the mid-2020s, with the first vessel delivery in the late 2020s. It is anticipated that the start of production of the offshore oceanographic science vessel will begin later in 2020, with delivery scheduled for 2024.
A competitive process was launched in August 2019 through an invitation to qualify to select a third Canadian shipyard as a strategic partner under the strategy to build 6 program icebreakers. The process is now closed; 2 bids have been received and are currently being evaluated.
Third shipyard and program icebreakers
A competitive process is under way to select a third Canadian shipyard as a strategic partner under the National Shipbuilding Strategy. This third yard will build 6 new program icebreakers for the Canadian Coast Guard.
In May 2019, major investments were announced to renew the Canadian Coast Guard fleet in a timely manner, including the construction of 6 new program icebreakers to replace the Canadian Coast Guard’s heavy and medium icebreakers that operate in Atlantic Canada and the St. Lawrence waterways during the winter and in the Arctic during the summer. These icebreakers are fundamental to year-round safe and efficient movement of ships and goods in Canadian waters. In Atlantic Canada, the program icebreakers will help ensure year-long ferry service, escort ships through ice-covered waters and clear off ice from harbours and wharfs, which is essential to Canada’s commercial fisheries. In the Arctic, they will provide icebreaking support to ships with vulnerable cargoes, such as dangerous goods and perishable products, and support vessels transporting cargo that is a vital part of the northern communities’ sealift and resupply.
A competitive process was launched in August 2019, through an invitation to qualify, to add a third Canadian shipyard as a strategic source of supply for the construction of large vessels under the National Shipbuilding Strategy.
The invitation to qualify is now closed; 2 responses have been received. The evaluation of the invitation to qualify is completed and the results have not yet been released to the respondents or publically. The next steps in the selection of the third shipyard are:
- public announcement of qualified respondents: November 2019
- technical due diligence process: November/December 2019
- request for proposal (includes financial due diligence and evaluation of proposals): winter 2020
Emergency towing vessels
On August 9, 2018, the department, on behalf of the Canadian Coast Guard, awarded a contract to Atlantic Towing Limited for the chartering services of 2 emergency towing vessels as part of the Oceans Protection Plan.
On February 5, 2018, the department issued a request for proposals for the lease of 2 emergency towing vessels under the Oceans Protection Plan to meet an immediate need for increased emergency response capacity on the West Coast. These vessels form part of a broader strategy under the Oceans Protection Plan to bolster Canada’s marine safety system. This strategy also includes an in-depth towing needs analysis.
Industry and stakeholders were consulted extensively on this process and the requirements for this contract, and all parties were given several opportunities to provide input.
On August 9, 2018, Atlantic Towing Limited of Saint John, New Brunswick, was awarded a 3 year contract worth $67 million (taxes included) for the lease of 2 emergency towing vessels. The contract includes options for extensions.
The first emergency towing vessel entered into service in November 2018 and the second emergency towing vessel in December 2018.
In August 2018, Horizon Maritime Services Limited/Heiltsuk Horizon Maritime Services Limited (Heiltsuk Horizon) filed a complaint with the Canadian International Trade Tribunal, alleging that the department incorrectly evaluated Atlantic Towing’s bid as compliant with mandatory requirement MR-12 (the minimum bollard pull requirement).
In January 2019, the Canadian International Trade Tribunal found the complaint to be valid, in part, and recommended the department re-evaluate MR-12 for all bids received.
The department proceeded with the re-evaluation, which confirmed the original results. As with the original evaluation, an Independent Fairness Monitor oversaw the re-evaluation, which was conducted by a new team of evaluators.
In June 2019, the Canadian International Trade Tribunal accepted for inquiry a second Complaint by Heiltsuk Horizon, alleging that the re-evaluation was flawed and that the department engaged in impermissible bid repair by allowing the successful bidder to provide new information regarding its compliance with MR-12. In July 2019, the government filed its response to the complaint with the Canadian International Trade Tribunal and Horizon Maritime Services Limited, filed its reply.
In August 2019, the Canadian International Trade Tribunal accepted for inquiry a third Complaint by Heiltsuk Horizon, which alleges that the government failed to re-evaluate all bids in accordance with MR-12 and that the government engaged in impermissible bid repair in respect of all bids. On September 3, 2019, the government filed its response to the allegations made in the third complaint. Heiltsuk Horizon filed its reply on September 17, 2019.
At the time of writing, the Canadian International Trade Tribunal rendered its combined decision on Heiltsuk Horizon’s second and third complaints on October 18, 2019. The tribunal determined that the complaints are valid in part. The tribunal recommends that all of the bids be re-evaluated solely with respect to compliance with mandatory criterion MR-12, in accordance with the tribunal’s directions set out in the reasons for this determination, including permitting the submission of new information regarding compliance with MR- 12. The statement of reasons has not yet been issued by the tribunal. Next steps and timelines will be established only after the statement of reasons is issued. Canada has 30 days from the determination date to provide a response to the tribunal.
Interim auxiliary oil replenishment capability
The interim auxiliary oil replenishment ship is giving important support to the Royal Canadian Navy. Public Services and Procurement Canada and the Department of National Defence are currently working through contractual issues with the company.
In September 2014, the Royal Canadian Navy announced that its 2 support ships would be retired earlier than anticipated. New joint support ships are expected to be delivered in the mid-2020s, leaving a significant gap in the Navy’s oil replenishment capability.
In November 2015, the government entered into a contract valued at up to $587 million (exclusive of taxes) with Federal Fleet Services Inc. to develop and provide an interim auxiliary oiler replenishment capability. This contract included the conversion of a commercial container ship into an auxiliary oiler replenishment ship. The value of the contract does not include other current program costs of [Redacted], which brings the current total program cost to [Redacted].
The conversion work on the MV Asterix was sub-contracted to Chantier Davie. The vessel entered into service on January 29, 2018 and was officially accepted by Royal Canadian Navy on March 8, 2018.
Federal Fleet Services Inc. continues to provide at-sea oiler replenishment services. The initial period of service delivery is 5 years, with options to extend the period of service by up to 5 additional one-year periods. An option to purchase the vessel is included in the contract.
Public Services and Procurement Canada and the Department of National Defence officials are focused on ensuring value for Canadians in the provision of interim auxiliary oiler replenishment services. [Redacted]
The National Shipbuilding Strategy will deliver the right mix of platforms for the Navy to meet future defence and security challenges and therefore there are currently no plans to pursue any additional Interim auxiliary oiler replenishment ships.
Transport Canada ferries
Transport Canada has a requirement to replace 2 ferries that provide inter-provincial ferry services in Atlantic Canada and Eastern Quebec.
The marine vessel Madeleine, operating between Quebec and Prince Edward Island, and the marine vessel Holiday Island, operating between Prince Edward Island and Nova Scotia, must be replaced as both ferries are at the end of their life cycles. Procuring 2 new vessels will ensure continued safe operations, improve long-term reliability of the ferry services and improve the experience for passengers.
In line with the Buy-in-Canada Policy, these ferries are to be constructed in Canada. Thirdparty and government analyses identified Chantier Davie Canada Incorporated as the sole Canadian shipyard capable of delivering the ferries in the required timeframe: by 2024 to 2026.
On May 22, 2019, an advance contract award notice was issued signaling Canada’s intention to enter into a contract with Chantier Davie Canada Incorporated for the construction of the 2 ferries. Other interested suppliers had 15 calendar days to submit a statement of capabilities to show they met the requirements laid out in the advance contract award notice. None were submitted.
Contract negotiations with Chantier Davie Canada Incorporated began in June 2019 and are ongoing. It is expected that an initial ancillary contract with Davie will be in place in late October/early November to perform engineering studies on behalf of Transport Canada, and to assist in the preparation of concept design. The value of the follow-on full-scale design and construction contracts and timelines will be confirmed once negotiations with the shipyard are completed in 2020.
Future Fighter Capability Project
On July 23, 2019, Canada released the formal request for proposal for the Future Fighter Capability Project, with bidders’ proposals expected in March 2020.
On November 22, 2016, the Government of Canada committed to launch an open and transparent competition to acquire a permanent replacement for Canada’s CF-18 fighter aircraft fleet. This decision followed consultations held in summer 2016 with partner countries on fighter aircraft currently or scheduled to be in production.
On December 12, 2017, Canada launched the competitive procurement process by inviting fighter aircraft manufacturers and their governments to qualify as a team on a suppliers list for future fighter capability. It was also announced that Canada will continue to participate in the Joint Strike Fighter II Program. Canada’s ongoing participation in the program allows companies in Canada to continue to benefit from contracts and provides the option to buy the aircraft through the program, should the F-35 be successful in the competitive procurement process.
On February 22, 2018, the government established a list of 5 eligible suppliers that were invited to participate in formal engagement activities. This initial list included foreign governments and fighter aircraft manufacturers as follows: France-Dassault, Sweden-SAAB, UK-Airbus, US-Boeing and US-Lockheed Martin. Three supplier weeks were conducted in 2018 and 2019 where officials engaged with the eligible suppliers to share and obtain initial feedback on Canada’s requirements and planned solicitation approach.
In October 2018 and June 2019, Canada released drafts of the request for proposal to eligible suppliers for their review and feedback. Canada also invited eligible suppliers for a first-hand look at existing fighter operations and infrastructure at its main operating bases in late 2018. Canada made many changes to the request for oroposal throughout this period with the objective of promoting as much competition as possible.
On November 8, 2018, the France-Dassault supplier team officially withdrew from the future fighter capability competition citing difficulties in meeting Canada’s security and interoperability requirements under a 5/2 eyes (Canada/US) context. On August 30, 2019, United Kingdom (UK)-Airbus also officially withdrew from the competition due to the cost incurred to them for meeting Canada’s security and interoperability requirements under a 5/2 eyes (Canada/US) context and due to adapted approach of the Industrial and Technological Benefits Policy that is applicable to the Future Fighter Capability Project.
Currently, there are 3 eligible suppliers in the competition Sweden-SAAB, US-Boeing and US-Lockheed Martin.
Canada is also engaging with the Canadian aerospace and defence industries and other stakeholders to ensure that they are well positioned to participate in the future fighter capability competitive procurement process. In addition to an Industry Day held on January 22, 2018, Canada also completed 6 regional forums in spring 2018. In August 2019, Canada with support from the Canadian Association of Defence and Security Industries and the Aerospace Industries Association of Canada, presented to the Canadian industry the Future Fighter Capability Project competitive process, timelines and the economic benefits approach, with a particular focus on the value proposition and priority areas where Canada will encourage investments.
On October 4, 2019, Canada received preliminary security offers from the 3 eligible suppliers. The preliminary security offers outline how the suppliers intend to meet Canada’s security and interoperability requirements. Canada will assess these offers and provide feedback to suppliers by December 2019, which will provide them with an opportunity to address this feedback in their initial proposals expected in March 2020. Following evaluation of the initial proposals, Canada plans to conduct a dialogue phase with one or more of the compliant bidders starting in winter 2020 to address any gaps and risks for final proposals. Contract award is anticipated in the 2021 to 2022 timeframe, with the first replacement aircraft delivered as early as 2025 and initial operating capability achieved in 2026.
Future Aircrew Training Program
The Department of National Defence has an ongoing mandate to train aircrew. The current pilot training program is conducted under 2 services contracts:
- North Atlantic Treaty Organization (NATO) flying training in Canada is a $3.5 billion, 22-year contract with Canadian Aviation Electronic (CAE) Military Aviation Training. It operates out of Moose Jaw, Saskatchewan and Cold Lake, Alberta and provides basic, advanced, and lead-in fighter pilot training
- contracted flying training and support is a $2.2 billion, 20-year contract with Allied Wings. It operates out of Portage la Prairie, Manitoba, and provides basic and advanced helicopter and multi-engine aircraft pilot training
NATO flying training in Canada ends in 2023 and includes a one-year option period. Contracted flying training and support ends in 2027. The Future Aircrew Training Program is intended to replace these contracts, and will be one of the larger competitive processes during the coming mandate.
The current programs accommodate a combined total of approximately 285 Canadian and international students. Approximately 100 Canadians graduate annually. The contracts include provision of classroom instruction, simulator training, flight training, and on-site support services in Moose Jaw and Portage la Prairie, including road and runway maintenance, aircraft and other training equipment maintenance, facilities management and maintenance, air traffic control activities, snow and ice clearance and food services. In February 2016, air combat systems operator and airborne electronic sensor operator training currently being provided by the Canadian Armed Forces in Winnipeg, were added to the program, in part to streamline aircrew training through integration with pilot training service contracts.
After a series of industry engagement sessions, solicitation was initiated in November 2018 and is ongoing in 3 phases:
- Phase 1: Invitation to qualify (complete)—Released by the department in November 2018 (W3471-130001/K) for the purpose of identifying qualified suppliers
- Phase 2: Engagement (ongoing)—Engagement with the qualified suppliers (including site visits, workshops, dialogue, submission of draft solicitation documents for comments, etc.)
- Phase 3: Request for proposal (under development)—Competitive procurement process between the qualified suppliers
In December 2018, the following companies were identified as qualified suppliers through an invitation to qualify:
- Airbus Defence and Space (note: in September 2019, Airbus Defence and Space informed Canada of its decision to officially withdraw from the solicitation process and is no longer a qualified supplier)
- Babcock Canada Incorporated
- BAE Systems (note: in April 2019, BAE Systems informed Canada of its decision to officially withdraw from the solicitation process and is no longer a qualified supplier)
- Leonardo Canada
- Lockheed Martin Canada Incorporated
- SkyAlyne Canada Limited Partnership
In December 2018, the Future Aircrew Training Program initiated formal engagement with qualified suppliers. Ongoing engagement includes workshops, one-on-one meetings, presentations, site visits, training plan co-development and document reviews. Workshops are expected to continue until December 2019 followed by release of a draft request for proposal in early 2020.
Light armoured vehicles
On September 5, 2019, a sole-source contract was awarded to General Dynamics Land Systems-Canada from London, Ontario, for 360 armoured combat support vehicles, logistics, spare parts and training.
The Department of National Defence has a requirement for combat support vehicles for the Canadian army. The current support vehicles, light armoured vehicles II Bison and M113 tracked light armoured vehicles, have exceeded their original life expectancy.
The decision to sole-source the procurement was based on exercising an exception to the default competitive procurement approach under the Government Contract Regulations on the basis that the nature of work is such that it would not be in the public interest to solicit bids. This exception was justified by the following key elements: operational (military) advantages of having a common light armoured vehicles platform with the majority of the Canadian army’s existing vehicles, maintaining a strategic source of supply and supporting key industrial capabilities in Canada.
A contract was awarded to General Dynamics Land Systems-Canada on September 5, 2019, in the amount of $2,006,116,771.19 (including taxes) for 360 armoured combat support vehicles, initial spare parts, technical manuals and training. Various kits are also included in the procurement such as: add on armour, mine blast, enhanced crew protection, laser warning system, side protection and remote weapon stations. The armoured combat support vehicles will support a range of operations which include domestic disaster relief and overseas peacekeeping missions.
The Industrial and Technological Benefits Policy, including value proposition, will apply to this procurement.
The Government of Canada will continue to work with the contractor.
Strategic Tanker Transport Capability Project
The Strategic Tanker Transport Capability Project seeks to replace the CC150 Polaris capability and increase the capability that the current fleet provides to include strategic airlift, air-to-air refueling, aeromedical evacuations and strategic Government of Canada transport. This project is identified in Canada’s Defence Policy.
The Strategic Tanker Transport Capability Project provides the Royal Canadian Air Force with the ability to refuel aircraft in flight and to provide global airlift for personnel and equipment. These are critical functions for the Canadian Armed Forces to be able to deliver on the vision for defence and core missions contained in Canada’s Defence Policy.
The Royal Canadian Air Force’s current fleet of CC150s is strained to fulfill its mandate owing to airframe fatigue, the reduction of commercial Airbus A310 users and associated supply chain, the decreasing availability of simulators, and limited to no ability to reconfigure the airframes between air-to-air refueling and airlift roles, resulting in decreased mission flexibility. Furthermore, the CC150 is increasingly obsolete and will be unable to meet modern avionics and military data requirements.
The CC130H Hercules aircraft legacy fleet and its associated air-to-air refueling capability on 4 airframes will cease operations on July 1, 2020. Losing the CC130H will further strain the CC150’s ability to fulfill core missions. Moreover, current Royal Canadian Air Force tankers are only equipped with one aerial refueling system (probe and drogue) making them unable to aerial refuel allied aircraft requiring a boom, and limiting their usefulness in the North American Aerospace Defense Command, North Atlantic Treaty Organization and coalition operations.
Industry engagement on this project is scheduled to begin in early 2020.
Risk-based pilot Project
[Redacted]. This allows Treasury Board to focus on higher-risk contracts and supports streamlined procurement processes that better meet the needs of the Canadian Armed Forces.
As set out in the Defence Production Act, the minister has the exclusive authority to acquire defence supplies and construction projects required by the Department of National Defence within its departmental contracting financial limits. Contracts above this financial threshold require approval by Treasury Board. This risk-based approach will allow lower risk contracts to be approved by the department (as opposed to Treasury Board), even in situations where its departmental limits are exceeded. This was identified as an important measure to increase the speed of defence procurements.
All procurements are categorized based on their respective complexity and risk assessments as follows:
- medium and high risk with any level of complexity go to Treasury Board for approval (using the current Treasury Board submission process)
- low or medium complexity with low risk are approved in the department at the assistant deputy minister level
The Treasury Board of Canada Secretariat is consulted via an early assessment briefing package to advise on the results of the complexity and risk assessment which determine whether to approve the procurement by Treasury Board (due to elevated complexity and risk), or by the department at the assistant deputy minister level (due to lower complexity and risk).
The Assistant Deputy Minister Defence Procurement Committee (which includes the Treasury Board of Canada Secretariat, Public Services and Procurement Canada and the Department of National Defence) is leveraged for reporting and oversight.
A progress report (Nov 2018 to June 2019) was provided to senior officials in June 2019 which highlighted:
- that 9 defence procurements worth $2.4 billion out of a total of 17 procurements that exceeded the department’s delegated contracting authority limits, were approved within the department. Prior to the launch of the pilot, all 17 would have required Treasury Board approval
- the pilot has been successful in focusing Treasury Board decision-making on higher risk and complex defence procurements
- the pilot is demonstrating success, but more time is needed to quantify efficiency and/or timeliness gains
As the pilot is currently scheduled to end in April 2020, options with respect to next steps are being developed for consideration.
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