"O'Connor has $8B military 'wish list"

[MarkOttawa]

"New cargo jets a top priority for Defence Minister, sources say"

Excerpts from National Post story, May 29:
http://www.canada.com/nationalpost/news/story.html?id=b57feeea-de73-40be-976f-7076f9331301&k=88600

"The federal government will be asked this week to approve a multi-billion-dollar "wish list" of equipment purchases for the Canadian Forces, including new transport aircraft, helicopters, long-overdue trucks for the army and multi-purpose troop transport and supply ships for the navy.

Defence sources say Gordon O'Connor, the Defence Minister, will make a pitch to a Cabinet committee tomorrow for six major projects worth more than $8-billion...

At the top of Mr. O'Connor's list will be four new C-17 Globemaster cargo jets, which the sources said would be bought directly from the U.S. manufacturer, Boeing, in a "sole source" acquisition.

The government will also be asked to approve the purchase of 17 tactical transports -- smaller, propeller-driven aircraft that can land troops or cargo in remote, rough airstrips. The likely winner of that contract will be the C-130J, the latest model of the venerable Hercules now in service with the Canadian air force.

Mr. O'Connor is also proposing to buy as many as 20 new heavy-lift helicopters for the army and a total of 18 new search-and-rescue planes.

The army is to get a replacement for its 24-year-old logistics trucks, while the navy will get approval for its three new joint-support ships [JSS], a combination troopship and resupply vessel due to be built over the next five years, the sources said..."

I have expanded on the story in this post at "The Torch":

"Military procurement: Déjà vu all over again--plus; and a Quebec kicker"
http://toyoufromfailinghands.blogspot.com/2006/05/military-procurement-dj-vu-all-over.html

Mark
Ottawa

 

[MasterStryker]

I for one am glad that someone is finally going to get us some new stuff. we have needed this equipment for a long time so i hope this list is approved. I support our Canadian firms but I still think that we should buy off the shelf equipment from foreign suppliers. this way its cheaper and and it is already in production. I hope that the PM backs this list and I hope it passes the vote.

 

[Hot Lips]

Let's hope our Economics educated PM is in a shopping mood...would be nice to see.
Shopping off the shelf would make it much faster would it not?  So why not do it?

HL

 

[Edward Campbell]

Let's hope our Economics educated PM is in a shopping mood...would be nice to see.
Shopping off the shelf would make it much faster would it not?  So why not do it?

HL

I know I am repeating myself, but: ‘off the shelf’ = ‘sole source’ and our experience with sole source procurement is, with a few notable exceptions, terrible.  We, like most customers who buy sole source, get taken to the quality and cost cleaners.

The exception is clear: COLOG which means Cooperative Logistics.  While there is a NATO COLOG programme the only one which made any sense, for Canada when I was still serving was the US one.  To make COLOG work you must satisfy a few simple but strict conditions, including:

• The item being procured must have a sufficiently US long service life to make COLOG support feasible;

• The item being procured must meet all Canadian operational requirements in all respects;

• The life cycle cost of the item being procured must be no greater than the other options; and

• The Canadian Forces must adhere to US configuration management in order to keep the logistics pipeline operating efficiently.

When these condition exist (as they almost certainly do for the C-17 and C-130J) then sole source/COLOG procurement makes good sense.  But: sole source procurement means that you are buying in a seller’s market.  The whole point of competition – the very secret of the Western way of life – is that we compete for almost everything and, by so doing, we get more for less.  The ‘worst’ capitalists are always, in all ways more efficient and effective the ‘best’ socialists, and communist are stupid failures.

Sole source procurements is, at its heart, communistic.

 

[GAP]

Often I read in these threads about the "Canadianization" of equipment. It amazes me how little attention we pay to the Huge Monolith just south of us. They try vast amounts of equipment for their armed forces, some good - some bad. Instead of sitting here cherry picking the proven stuff, we navel gaze endlessly and panic when we have to make a decision.

Much of what we want and need is readily available. Some minor changes might be in order, but I see little in the way of dramatic styles of warfare between the two nations, other than in states of quantity. Competitive bidding would solve some of the minor details.

The same principle applies to much of the equipment utilized by NATO countries. We are in an enviable position, and yet we are determined to make it hard on ourselves. ???

 

[Kirkhill]

Edward:

I take issue with the statement "off the shelf = sole source".  Unless I completely misunderstand the situation there are more than one truck immediately available (Oshkosh and S&S obviously but also MAN and Volvo amongst others), the heavy lift helicopter requirement could be met by either the CH-47 or the CH-53 and possibly the Merlin,  the FWSAR project is being contested by the C27J and the C295/C235 aircraft while the JSS project has already received statements of interest from something like five consortia. 

With the exception of the JSS project where Canadian requirements are driving the creation of a new class of vessel unknown to the rest of the world all of the other projects I mentioned see competing off the shelf products.

The only real sole source issue I see is between the C17 and the C130 and the A400M.  The problem for the A400M is that due to poor planning and purchasing practices in the past (heh 5Ps, not quite 6Ps) is that Canadian governments have boxed themselves into a corner by creating the situation that the need is imminent and a competitive solution is distant.  Basically the choices are: buy the C17 now, without competition, and take some of the load off the existing C130 fleet to buy time and allow a competition between C130s and A400s later; or wait until the A400s are available to compete with the C130s because the C17 won't be available as competition as its production lines will be closed.  In the meantime, in the second case, the existing C130s will continue to wear out faster than they would if the C17s were in service increasing the risk of a gap in capabilities developing between the time that the existing units fail and the C130Js or the A400s become available.

For what it is worth, for my money I would be leasing C17s immediately to reduce the load on the C130s,  stretch out the existing fleets life by whatever means are possible (it seems from EADS and other reports that it might be possible to secure some additional -Hs as a bridge, until a competition can be held between a flying A400 and the C130Js.

Cheers 

 

[KevinB]

As far as the C17 and C130J goes -- good!

Same with the MH-47G or whatever version of hook we buy.

they are the only platforms that fit -- if we can tag onto US orders - even better since those lines are rolling and we dont pay thru the nose for "one of's"

 

[Cloud Cover]

With all these large purchases, I hope the smaller, yet equally important items do not get left out- bullets, beans, training, parts.

 

[KevinB]

Screw Airbus. ^-^

 

[prom]

Kirkhill if I'm not mistaken the order is for both the C-17 (4) and the C-130J (17), or that is how the text reads.

At the top of Mr. O'Connor's list will be four new C-17 Globemaster cargo jets, which the sources said would be bought directly from the U.S. manufacturer, Boeing, in a "sole source" acquisition.

The government will also be asked to approve the purchase of 17 tactical transports -- smaller, propeller-driven aircraft that can land troops or cargo in remote, rough airstrips. The likely winner of that contract will be the C-130J, the latest model of the venerable Hercules now in service with the Canadian air force.

I think that the JSS is a good concept for Canada, so long as the BHS does come into the equation and is not axed because of the JSS fleet. For the BHS i would think that we will acquire the San Antonio Class LPD that the US is currently bringing into service. The USN has ordered 14 but has recently decided that they will only put 11 into operation. that gives us an option of picking up our 2 BHS ships.

then as replacement of the Halifax class frigrates and out aging destroyers approach, pick up a single class to replace them all.... perhaps the Type 45 destroyer from the Brits. Scrap half of the existing Halifax class, and the reaming 6 get refitted and passed over to the CG for coastal patrol.....

 

[Kirkhill]

whiskey:

I am less worried about the beans, bullets and bandages etc, now than I was.  As the article seems to confirm accounting for the funds spent will now be on an accrual basis rather than a cash basis.  Ultimately that means little to anybody but accountants because the cash flows in the same manner it always did and will, but it shows up on the books spread over time.

For instance, if we take a look at the 8,000,000,000 CAD projected in the article and assume a life expectancy of the kit of 25 years on average (probably a safe bet considering the age of the kit being replaced) then the annual cost to the budget of the capital equipment is 320,000,000 CAD.  Even with a budget of only 12,000,000,000 CAD that represents less than 3% of the annual budget.

Or look at it another way, over 25 years at 12,000,000,000 per year the CF will have access to 300,000,000,000 CAD in government funds.  These projects only constitute 8,000,000,000 of non-recurring  expenses during that time frame.

It is largely due to the rules by which the accountants choose to play and has little to do with "reality" (dollars out of the wallet) but it allows the Forces and the Government to act in the short term to make significant capital investments and overcome this mountain of rust that currently exists.

prom:

Just read your post and you're right.  That is what is apparently being discussed and I really don't have an issue with it.  I was just suggesting that there might be an alternative solution that could work.  But my main point still stands regardless of the solution adopted: government policies have reduced the flexibility available to be able to make good decisions.

As to the JSS/BHS I'll "wait out" on that one.  It has also been well discussed on other threads on this board.

Cheers to both.

 

[blacktriangle]

I just hope they actually go through with these purchases soon, and without the whole competition deal. Hopefully, the government can hang on long enough to get the stuff to you guys, that way no one can cancel the order on us/  ;D

Here's praying. 

 

[IN HOC SIGNO]

There is of course another need which might be fodder for a different thread. We have to have the people to use this equipment. We all know that the Government has approved the idea of increasing numbers but that is easier said than done. We are in a huge competition with the private sector right now for a limited number of young people coming into the work force.
Finding young people who meet the fitness levels is becoming a challenge we will have to address too. Maybe we have to get creative and start offering courses to get people in shape and ready to enroll.

For some time we have known that our recruiting system is cumbersome and goes in some cases to discouraging recruits rather than encouraging them. Our training system is also limited in the numbers we can take in and get trained in a short period of time.

When in Gagetown for the last four years I was also aware that a growing number of young people have no problem with the use of "illegal substances." This use has been accepted in our society as "recreational use of drugs" Many of our young recruits fall afoul of the regulations and although they were warned on entry to the Forces...the message of the wider society is what is uppermost in their minds.

How do we get quality recruits to use the quality equipment the Government seems willing to start procuring?

 

[vonGarvin]

As far as the C17 and C130J goes -- good!

Same with the MH-47G or whatever version of hook we buy.

they are the only platforms that fit -- if we can tag onto US orders - even better since those lines are rolling and we dont pay thru the nose for "one of's"

+1.  Take what's proven and hitch a ride on the procurement train.  Makes SO MUCH more sense than going through years of "trials and studies" just so that we get stuff that is out of date by the time we get it.

 

[Scoobie Newbie]

Which truck are they looking at here and will they buy one with the intention of using it oversea's in a hostile environment or will they get something for domestic ops?

 

[Scoobie Newbie]

Edit:
After reading the actual article they discuss the MLVW in question.

 

[63 Delta]

What exactly happened to the Chinooks the forces used to own? Were they scrapped or sold?

 

[HItorMiss]

Sold to the Dutch, who still fly them today.

 

[Kirkhill]

But until the projects are approved by Cabinet, there is no way of knowing for sure how much they will cost, Mr. MacDonald said. "You're really looking at a whole bunch of numbers," he said.

"What will it all eventually cost? Nobody knows the answer to that question."

Mr. O'Connor declined repeated requests for an interview on the proposed new purchases or the total bill for the new equipment.

However, according to estimates by industry and defence analysts the new spending would easily top $8-billion, once parts and services for the new aircraft, ships and vehicles are included.

This comment got me thinking again about the business of pricing projects.  The flavour of the month has been "life cycle costing" which includes AFAIK maintenance, training and operations.

My problem is this.  All of these projects, with the exception (perhaps) of the heavy lift helicopters can be seen as re-equipping existing units that are currently operating and maintaining existing equipment.  Life Cycle costing may be useful when considering buying a new "capability" ie standing up a completely new type of unit, or even for comparing existing equipment to potential new equipment.  However it means nothing in and of itself when it comes to budgeting.

For instance we currently operate and maintain 2 AORs (it used to be 3).  The 3 JSS are to replace the 2 AORs and the crewing requirements would seem to suggest that the bodies allocated to the 2 ships will be distributed amongst the 3 new ships this maintaining personnel costs at rough parity. 

When the JSS was originally announced as a 2.1 BCAD project it was my understanding that that was to be the Capital cost (about 0.7 BCAD) and the life cycle cost (about 1.4 BCAD).  Since then I have read that 2.1 BCAD is the Capital Cost and the Operating Cost for 30 years is to be something like 4.2 BCAD.  That does make comparison shopping difficult.  However, in either case, neither project cost means anything unless the Operating the existing AORs for another 30 years is available.  I believe it is probably a fair assumption that it will cost more to keep the 2 AORs going for another 30 years than it will cost to keep 3 new JSSs going for the same period, but let's assume that the costs are the same.  The only real cost that imposes additional demands on the budget is the actual capital cost of the equipment.

If we apply this thinking to the C130 fleet we find that the CF is maintaining (loosely defined) 32 aircraft with 128 engines and 160 flight crew positions to be able to lift about 540 tonnes of supplies at once (32 x 17 tonnes). With the MND's proposed buy of 4 C17s and 17 C130Js that represents 21 aircraft with 84 engines and 63 flight crew positions to lift 628 tonnes of supplies in one go (4 x 72 tonnes + 17 x 20 tonnes).  That represents a 16% increase in lift, a 35% reduction in airframes and engines to maintain and a 60% reduction in flight crew positions, not to mention the greater variety of cargo to be hauled.  The operations and maintenance budgets can't help but be smaller than the existing budget.  That leaves only the real, capital cost of the aircraft outstanding as a budget item.  At 161 MUSD per copy for the C17s and something like 70 MUSD for the C130Js that represents a total cost of 1.83 BUSD (2 BCAD) for both aircraft combined or about half of the 4 BCAD cited in the article.

And yes I know I am skipping over the cost of spare engines included in the 4 BCAD but that is my point.  That cost would be there, probably moreso, regardless of what aircraft we flew.

The same logic applies to the JSS, the Strat/Tac lift, the FWSAR and especially to the truck project (replacing all 2700 MLVWs with either the FMTV or the MTVR is not likely to cost more than 500 MCAD - those trucks are being bought at prices around 150 KUSD each).

 

[Infanteer]

If we apply this thinking to the C130 fleet we find that the CF is maintaining (loosely defined) 32 aircraft with 128 engines and 160 flight crew positions to be able to lift about 540 tonnes of supplies at once (32 x 17 tonnes). With the MND's proposed buy of 4 C17s and 17 C130Js that represents 21 aircraft with 84 engines and 63 flight crew positions to lift 628 tonnes of supplies in one go (4 x 72 tonnes + 17 x 20 tonnes).  That represents a 16% increase in lift, a 35% reduction in airframes and engines to maintain and a 60% reduction in flight crew positions, not to mention the greater variety of cargo to be hauled.  The operations and maintenance budgets can't help but be smaller than the existing budget.  That leaves only the real, capital cost of the aircraft outstanding as a budget item.  At 161 MUSD per copy for the C17s and something like 70 MUSD for the C130Js that represents a total cost of 1.83 BUSD (2 BCAD) for both aircraft combined or about half of the 4 BCAD cited in the article.

You should be my accountant - I'm sure I'd get some more on my tax return....  ;D