ARCHIVED Defence Procurement Strategy

Introduction

On February 5, 2014, the Honourable Diane Finley, Minister of Public Works and Government Services and the Honourable Robert Nicholson, Minister of National Defence, launched Canada’s new Defence Procurement Strategy.

See the News Release.

Purpose

The Defence Procurement Strategy (DPS) represents a fundamental change in the Government of Canada’s approach to defence procurement, and includes the following components:

• Delivering the right equipment to the Canadian Armed Forces in a timely manner;
• Leveraging our purchases of defence equipment to create jobs and economic growth in Canada; and
• Streamlining defence procurement processes.

Background

The DPS is informed by the Government’s extensive engagement with the industry and by the recommendations found in the Jenkins and Emerson reports commissioned by the Government of Canada.

The DPS fulfills the Government’s commitment to ensure defence equipment procurement creates economic opportunities and jobs for Canadians.

Effective Date

This Policy Notification is effective February 5, 2014. The implementation of the Defence Procurement Strategy will begin immediately with a phased implementation following ongoing industry consultations. Please see the Implementation Plan for important details on how the strategy will be implemented.

The Defence Procurement Strategy will be implemented through a whole-of-government approach to meet the three objectives of the strategy and will be supported by a new decision-making regime, including a Deputy Ministers’ Governance Committee and a new permanent Defence Procurement Secretariat within PWGSC.

Policy

Information on the various components of the strategy is provided in the following sections. Additional details will be provided to contracting officers in the near future through updates to this Policy Notification and other communications.

The DPS represents a fundamental change in the Government of Canada’s approach to defence procurement, and includes the following components:

Delivering the right equipment to the Canadian Armed Forces and the Canadian Coast Guard in a timely manner:

• Ensuring early and continuous industry and client engagement in the procurement process (see the Policy on Engagement);
• Starting in June 2014, publishing an annual Defence Acquisitions Guide (DAG) that outlines National Defence (DND) procurement priorities; and
• Establishing within DND an independent, third-party challenge for military requirements.

Leveraging our purchases of defence equipment to create jobs and economic growth in Canada:

• Using a weighted and rated Value Proposition (see further information below) to assess bids for defence and major Canadian Coast Guard procurements. (Key departmental officials will be invited to training, focusing on the development and use of Value Propositions);
• Implementing an Export Strategy to support international sales opportunities and participation in global value chains;
• Identifying and applying Key Industrial Capabilities (KICs) to inform potential economic benefits of individual procurements so that they meet the CAF’s needs and increase the competitiveness s of Canadian firms in the global marketplace;
• Establishing an independent, third-party Defence Analytics Institute which will provide expert analysis to support the objectives of the Defence Procurement Strategy (DPS) and its evaluation.

Streamlining defence procurement processes:

• Adopting a new regime to ensure streamlined and coordinated decision-making for defence and major Canadian Coast Guard procurements;
• Establishing a Defence Procurement Secretariat within PWGSC;
• Reviewing the current National Defence delegated authority to purchase goods with a view to increasing the level from the current $25,000 to achieve more efficient procurement practices.

Value Proposition and Industrial and Technological Benefits

Under the Defence Procurement Strategy, the Government has committed to ensuring that purchases of military equipment create great economic opportunities.

Traditionally, procurement bid proposals have been evaluated based on the rating and weighting of technical compliance and price only—the ‘benefit to Canada’ element was assessed on a pass/fail basis. A key feature of the Defence Procurement Strategy (DPS) will be the use of the Value Proposition as a weighted and rated element of a procurement bid evaluation.

The specific composition of Value Propositions will reflect activities and investments supporting outcomes of benefit to Canada that should be realized for a particular procurement, including the following:

• Investments to support productivity enhancements that would improve Canadian firms’ competitiveness in the global marketplace and deliver best value for Canada.
  
  Examples include: intellectual property and technical data transfer, research and development and innovation-related activities, high-value job creation, development and growth of international business and exports.
• Investments that support Key Industrial Capabilities (KICs).

Using Value Propositions, industrial considerations will factor into the determination of which bidding firm wins the contract. When applied, the default weighting of the Value Propositions within the overall evaluation will be 10%. The actual percentage will be determined on a procurement-by-procurement basis. In addition, where the Government chooses to specify a targeted, desired industrial outcome, Mandatory Requirements will be used, as appropriate.

Value Propositions will be informed by early engagement between industry and government, and by detailed analysis and information on the Canadian and international defence industry. The use and composition of a Value Proposition will be identified on a procurement-by-procurement basis:

• Procurements valued between $25,000 and $20 million will be assessed for their economic potential and the revised Canadian Content Policy will be applied to realize this potential. Note that a Policy Notification regarding the revised Canadian Content Policy will be released in the near future.
• Procurements valued at $20 million and above will be reviewed for the application of a Value Proposition.
• Procurements valued at $100 million or more will require a Value Proposition as part of a comprehensive ITB plan.

In addition, Industrial and Regional Benefits (IRBs) will be transformed into Industrial and Technological Benefits (ITBs).

Industrial and Regional Benefits Policy – Revised

The revised policy will include two important changes:

• ‘Benefit to Canada’ commitments will no longer be assessed on a pass/fail basis but will be rated and weighted as part of a Value Proposition in the bid evaluation process.
• ‘Benefit to Canada’ obligations will have a public reporting requirement. Exemptions may be granted if a reasonable argument is made that the information concerning a given commitment is commercially sensitive, or for security reasons.

Next Steps

In the coming days and weeks you will be provided specific guidance on implementation details of how the DPS will impact upcoming procurements. This policy will not impact current solicitations. You may however, get questions from suppliers and clients on implementation details. If you are unable to answer questions based on the information here, please speak to your supervisor or contact PAretroaction.APfeedback@tpsgc-pwgsc.gc.ca for additional information or clarification.