Canada’s new Defence Investment Agency will be made more muscular and have additional authority to negotiate procurement contracts, as well as make investments in key defence sectors when it’s turned into a Crown corporation, the federal government announced on Tuesday.
Bill C-40, which would make the agency — currently operating under the umbrella of Public Services and Procurement Canada — more independent was tabled in the House of Commons.
It will have its own board and CEO, a clear mandate, a permanent structure and more specific powers to move military purchases along more swiftly, federal officials said at a background briefing early Tuesday.
The agency will report to a newly created associate minister of defence once Bill C-40 is approved by Parliament.
“This bill builds on that work already underway and it gives the agency the authority and flexibility it needs to meet the challenge,” said Stephen Fuhr, the secretary of state for defence procurement.
“Defence procurement involves complex contracts and negotiations with some of the world’s largest companies. The agency needs the talent, authorities and commercial expertise to negotiate confidently, make timely decisions and to manage those relationships over decades.”
Defence Minister David McGuinty says changes in the government’s approach to Canada’s defence industrial strategy like ‘dropping the number of procurements from the U.S.’ contributed to the need for an independent Crown corporation to speed up military purchases.
The legislation, once passed, would give the DIA’s board of directors “greater authority to negotiate and manage contracts,” according to background documents released as the bill was tabled.
It also empowers the soon-to-be Crown corporation to engage in “defence production” and invest in strategic sectors as needed.
In some respects — organizationally — it is a return to the way the federal government handled defence procurement during the Second World War and up to the 1960s.
During the Cold War, the Department of Defence Production (DDP) was formally created in 1951 and handled buying for the military until it was disbanded in 1969, according to a Library of Parliament research paper written in late 2020.
The big difference between then and now is that the DPP was a federal department and the government of Prime Minister Mark Carney is proposing an arm’s-length corporation.
Even still, Fuhr said, the new entity will be subject to ministerial direction and accountability.
“There will be ministerial oversight. That’s written in,” Fuhr said. “It’s unambiguous so that means the government of Canada will be involved — ergo Parliament will have the ability to hold the government to account.”
The auditor general will be tasked with doing yearly audits of the DIA, federal officials said.
Fuhr said there’s an urgency to getting equipment into the hands of the military.
“I think gone are the days where a government takes three bids and takes the lowest bidder and we move on with our lives,” Fuhr said. “We expect much, much more out of our procurement system and the incredible amount of money we’re going to spend on behalf of Canadians.”
The Parliamentary Budget Office said on Tuesday that the federal government is on track to spend over $163 billion a year on defence by 2035, responding to rising geopolitical tensions.
The way defence procurement is done now, the federal Treasury Board Secretariat must sign off on procurements at various stages.
Defence Minister David McGuinty said he’s confident the new structure will satisfy the military, which sets the requirements for the equipment its needs.
“The job of the minister of defence is to ensure that the women and men of the Canadian Armed Forces get the equipment that meet their operational needs and requirements,” McGuinty said.
He said the federal government studied military procurement models elsewhere in the world as it designed its plan.
Minister of National Defence David McGuinty, right, is seen at a defence trade show in Ottawa in May. (Justin Tang/The Canadian Press)
Federal Conservatives said there’s been a lot of talk about buying equipment in the year since the DIA was created, but few contracts signed.
They’re also worried about accountability.
“As C-40 comes before Parliament, Conservatives are concerned by changes that could remove much-needed parliamentary oversight from the DIA, creating potential opportunities for waste and mismanagement,” said defence critic James Bezan in a statement.
Philippe Lagassé, a defence expert at Carleton University, said there are several positive aspects to what the government has proposed. He said making the DIA independent and able to operate more like a business rather than a bureaucracy is a good thing.
He noted some familiar accountability mechanisms will remain, including reporting to the federal Treasury Board, which has held enormous sway in the old system. With its multiple approval levels, it was also seen as a major obstacle to moving projects along swiftly.
However, “a Crown corporation model comes with big risks,” Lagassé said.
“The whole reason that you have to create a Crown corporation is that they are at arm’s length from the government. And although you do have a minister that has overarching authority over the corporation in the bill, this does permit a lot of finger-pointing.”
When something goes wrong, Lagassé said, the minister gets asked about it in Parliament and can argue “this is a decision that was made by the board or by the CEO and we only provide strategic direction.
“The CEO before a parliamentary committee may say, ‘Well, look, we were directed to do this.’ And so I do worry that when you set it up that way it allows for obfuscation of where responsibility was.”
