Canada must move from defence procurement to defence production

Nicolas Todd is head of the Canadian delegation to the NATO industrial advisory group and vice-president, government relations and communications, at the Canadian Association of Defence and Security Industries.

It has been said that problems with defence procurement began 10 minutes after defence procurement was invented. Canada’s challenges with purchasing military equipment – big cost overruns, multiyear and opaque decision processes, bespoke technical requirements that are often almost impossible to meet – are well-known and stretch back decades.

Some believe the only way to improve the situation is through radical reforms. The Carney government says it is determined to fix Canada’s broken system and is heading down just that road. It has committed to creating a new agency responsible for defence procurement to try to break up the risk-averse culture, bureaucratic turf battles and logjams.

But in a way, these are yesterday’s problems. And focusing on the arcane challenges with Canada’s military equipment acquisition processes might be aiming at the wrong target.

“Defence procurement” is a peacetime luxury, whereas “defence production” is the imperative in times of war. Though Canada is not at war, international peace and security is more fragile now than at any time since the end of the 1980s. The North Atlantic Treaty Organization and its member states’ territorial sovereignty and independence are under serious threat from Vladimir Putin’s Russia for the first time in a generation. While experts debate whether today’s world resembles a new Cold War, NATO is acting like it is, with defence production suddenly a top alliance priority.

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NATO’s 2023 Defence Production Action Plan (DPAP) and its 2024 Industrial Expansion Capacity Pledge (NICE) are the manifestations of this. The former aims to identify critical military technologies that are in short supply across the alliance and that need an immediate and sustained production boost. And the NICE Pledge commits the alliance to executing that boost in production: “We will accelerate the growth of defence industrial capacity and production across the Alliance, in line with Articles 2 and 3 of the Washington Treaty, building on the ambitions of the Defence Production Action Plan agreed at the Vilnius Summit in 2023.”

Both DPAP and NICE are a recognition that deterrence – NATO’s primary objective – cannot be achieved with the status quo defence industrial output across member states. They are also an acknowledgement that if deterrence fails, NATO lacks the industrial capacity today to fight a conventional war against Russia, a country that has successfully mobilized its economy to fight to the end in Ukraine.

While Canada, like all NATO states, is on the hook for both the DPAP and NICE pledge commitments, Ottawa has said little about them. Instead, we remain gripped by conversations around defence procurement and all its attendant pitfalls.

Canada’s Defence Production Act – which gives the government broad powers to shape defence industrial production – is never discussed in those defence acquisition reform debates. Ottawa has been working on a defence industrial strategy for nearly a year. Expanding domestic defence production must form part of those plans and it must enable the scale of domestic production required.

The Carney government has the right impulse and mindset with its boost to defence spending. It has attached urgency to this file, adding $9-billion to the annual defence budget this year, plus promises for much greater funding in the future as Canada strives to meet the new NATO 3.5-per cent-of-GDP defence-spending target – a basic measure of alliance burden sharing that Ottawa had avoided for a decade when it sat at 2 per cent. The government is also clearly of the view that defence procurement is broken and needs a radical fix.

But the Prime Minister and his team need to think beyond how to get military equipment faster, cheaper, with some economic spillovers, and focus their efforts at least in part on increasing domestic defence industrial output.

Canadian industry cannot persuade its boards or banks to make the big investments needed to ramp up production in response to promises or press releases from Ottawa. Only contracts from government will move the production needle, and that is what NATO demands of Canada today as another manifestation of alliance burden sharing.

Let’s not take another decade to meet this basic obligation to our allies.