Focus on building relationships that create sustainable value in Canada key to CF-18 Hornet replacement contract (Part 1) by Andy Akrouche

Posted on March 21, 2013


Editor’s Note: The following article is from the Relational Contracting Intelligence blog by Andy Akrouche.

Given the high profile debate surrounding Canada’s failed F-35 fighter jet acquisition, the timing of Akrouche’s article could not be better.

“I am not pro or against the technology, I just want to build value in Canada. So let’s take the focus off of politics and technological leanings and place it where it best serves everyone’s interests. What I am talking about is leveraging the proper industry analysis, strategic vendor capability assessment tools and to build the relationships that are necessary to create sustainable value in Canada. If you do that you will inevitably make the right decision.” If you do that you will inevitably make the right decision.”

The above is the response that I gave regarding a recent question from the media surrounding the controversy of the F-35 situation, and in particular the paper by the Conference of Defence Associations Institute.

Click to access CDAI Report

Click to access CDAI Report

I of course read the F-35 paper with great interest, noting in particular that the authors and the institute itself at least indirectly, seem to be championing the fighter jet as being the right answer for Canada’s military needs.

For me the paper’s efforts to stack the deck in favor of the F-35 by suggesting that a new procurement framework be used to specifically select the fighter under the proposed “international model for defense procurement scheme” thereby averting our usual procurement regime, is disconcerting on many levels.

To start what the paper is suggesting would ultimately mean our abandoning an investment in Canada and leaving it to the “International Allies” to throw us some “leftovers” under a sub-contract arrangement. This is hardly the ideal scenario under which we can develop our own capability to build weapon systems of significant military value. It would also mean that a select few US, UK, French and German corporations would become the de-facto suppliers, thereby reducing our national role to that of nothing more than a trained consumer of defense systems and technologies. In practical terms this would all but kill the whole idea of using procurement to promote innovation and jobs in this country.

Let’s look at Canada’s Industrial and Regional Benefits or IRB policy.

The primary goal of the IRB policy is to ensure “that Canadian industry benefit from Government defence and security procurement.” In this capacity, the IRB policy is a crucial instrument for SME innovation which, as everyone would agree, is the engine of our economy.

Now there are those who contend that by actively working towards achieving the goals associated with the IRB policy, it will cost more to build warships and fighter jets. That may be true, but as an investment in our country’s industrial base, we will create an economic endowment in Canada in which the benefits will far outweigh the additional initial cost, for generations to come. I am not just talking about jobs. I am also talking about progressing and securing the nation’s economic position in the world by developing the all-important Tertiary and Quaternary industrial sectors.

For those of you who may be unfamiliar with this reference, the Quaternary sector is considered to be an extension of what was originally referred to as the “three-sector hypothesis of industry.” Developed by Colin Clark and Jean Fourastie, the hypothesis includes the extraction of raw materials (Primary), manufacturing (Secondary), and services (Tertiary). The Quaternary sector is generally viewed as being the engine driving both innovation and expansion. It consists of those industries providing information services such as “computing, information & communication technologies, consultancy, research and development.”

Because this transitional process spans many years, the groundwork for where we are today was laid a long time ago, through different times and involving many different governments. Therefore from a political perspective, and in relation to my earlier reference regarding government procurement, we have to both ask and answer the following question; “has the government done enough to stimulate development and growth (including re-training) through each sector for future generations?”

Given the significant cuts in recent years to Department of Defence budgets, the fact that we would potentially reduce our industrial stake in remaining contracts – such as the CF-18 Hornet replacement undertaking – to that of a spectator, would suggest that the answer to my question would be no.

What is particularly important to note, is that this is truly a bipartisan issue that should not solely rest at the feet of the current administration. As a result, the adherence to the true intent of the IRB policy is critical because it transcends political agendas and affiliations as well as which party is or is not in power.

In part 2 of today’s post, I will talk about what needs to be done to refocus our attention on leveraging military spend to achieve IRB objectives, including the tools that are available to ensure that we build the proper relationships to meet Canada’s military needs today and solidify our economic position in the emerging global economy.