The federal government tabled a bill Tuesday that would turn the Defence Investment Agency into a Crown corporation, a move Ottawa says will speed up military purchases and help it recruit outside talent, while leaving a minister able to direct its work.
Bill C-40, the Strengthening Canada’s Defence Sector Act, was sponsored by Joël Lightbound, the minister responsible for public works and procurement. In the government’s news release, Stephen Fuhr, the secretary of state for defence procurement, said Canada needs institutions matched to the scale of its defence spending plans.
What Bill C-40 does
A Crown corporation is a company owned by the government and run by its own board, with more freedom to operate like a business than a department has. The bill creates the Canadian Corporation for Defence Investment, which would carry on activities and identify itself as the Defence Investment Agency. Cabinet would appoint a part-time executive chairperson and a full-time chief executive officer to a board that also includes a deputy minister and up to two other directors.
Cabinet would designate the minister responsible for the corporation by order. The release says a new associate minister of national defence for procurement would answer to Parliament for the agency. After consulting the defence minister, the designated minister could direct the corporation to carry out or not carry out defence procurement activities, and the corporation “must do as the Minister directs.”
The corporation could make loans and advance payments and, with the finance minister’s approval, guarantee debts and buy shares in companies. Payments to it from the Consolidated Revenue Fund, the government’s general account, to buy goods and to make loans and advance payments could not exceed $1 billion at any time. Repayments and some other receipts are deducted from that total, and Parliament can change the cap through an appropriation act.
A transition clause would allow up to $30 million for the corporation’s expenses in its first 180 days.
Reasoning behind the move
Crown status would give the agency greater commercial flexibility, more autonomous approvals and more authority to negotiate and manage contracts. The government says that will let it deliver equipment faster, work better with industry and provide better value for money.
The agency would also move from Public Services and Procurement Canada to the National Defence portfolio. The release says that reduces handoffs and duplication by putting procurement and commercial authorities in one organization. National Defence, the Armed Forces and the Canadian Coast Guard would keep defining what capabilities they need and the criteria for accepting them.
Senior government officials said in a technical briefing that the structure would make it easier to keep procurement experts and draw on expertise from the board. Fuhr and Defence Minister David McGuinty also cited hiring from outside the public service as a benefit. Philippe Lagassé, a Carleton University defence procurement analyst, said the main obstacle in the past was an Ottawa culture that tries to protect ministers and avoids legal risk. He expects a corporation hoping to attract people from finance to set up its headquarters in Toronto or Montreal.
New procurement rules
Part 2 of the bill amends the Defence Production Act and renames it the Defence and National Security Production and Procurement Act. The amended law requires a competitive process before a defence contract is signed, with a list of 13 exceptions the public works minister can invoke. They include an urgent operational need, a sole qualified supplier, interoperability with allies’ equipment, sensitive technology and research and development.
One exception covers contracts the public works minister considers necessary to support a sector of the Canadian economy that is important to national defence or national security. That minister could also exclude a bidder the minister has reasonable grounds to believe poses a risk to national defence, national security or public safety, without giving reasons.
The bill also widens “associated government,” the foreign governments for which Canada can buy defence goods, to include NATO members and partners, the European Union and its member states. The release ties that to Canada’s participation in two European initiatives, Security Action for Europe (SAFE) and Readiness 2030, and says joint buying would give Canadian suppliers more access to allied markets.
The Liberals now hold a majority in the House of Commons after this year’s byelections and floor crossings, which should ease the bill’s path through Parliament.