Calgary Herald

Audit finds threats to Defence projects

Navy’s frigate modernizat­ion could be in trouble

- DAVID PUGLIESE

Defence Department officials have been kept in the dark on a $369-million program to upgrade maritime patrol planes while a $2.8-billion modernizat­ion effort for the navy’s frigates could be running into trouble.

Two newly released reports from Defence Department auditors have raised concerns about military equipment programs being handled by the same organizati­ons that had overseen the troubled plan to purchase F-35 stealth fighters.

The audit by DND’S Chief of Review Services found the project to upgrade the Halifax-class frigates, the backbone of the navy’s surface fleet, is sailing into troubled waters. “Planned delivery of 12 modernized frigates within 75 months could be at risk,” the audit noted.

The Defence Department hopes to have work on the ships completed by December 2016.

But auditors noted similar naval projects conducted previously have been delayed more than two years.

They also found that the procuremen­t project office overseeing the upgrades for the ships “needs to implement better risk management and control processes.”

In addition, the audit questioned why the defence department reduced the amount of money it could hold back as a penalty if companies working on the program didn’t meet the stated requiremen­ts. Originally, DND was going to hold back $176 million in fees, but that was reduced by $48 million, a move not discussed by senior officials. “Decreasing the holdback reduces the incentive for the vendor to complete important milestones and carry out warranty commitment­s,” the audit warned.

DND officials could not comment on the audit.

The audit was not intended to assess the performanc­e of the companies working on the program, but was instead an examinatio­n of the practices within the Assistant Deputy Minister (Materiel) organizati­on. That is the same group, along with Public Works, that had overseen the troubled F-35 stealth fighter program.

In another report, DND’S Chief of Review Services looked at a project to install a new data management system on board the Aurora maritime patrol aircraft. The initial contract for $196 million was awarded in 2002 for the design and integratio­n of the flight computer and sensors.

But DND increased the scope of the program after it started and in 2009 the contract value jumped to $369 million. But the Chief of Review Services (CRS) has raised concerns about the informatio­n DND procuremen­t officials are receiving.

“The audit followup found that Dnd contract mangers have not been receiving monthly progress reports as required by the contract; the last report provided by the vendor was over a year ago,” the CRS added.

The CRS examinatio­n also warned the contractor was not reporting about the risk of the project, adding that measures were needed to ensure the proper oversight existed.

DND says it takes the CRS findings seriously. “The department has reviewed the report’s recommenda­tions and is acting on them,” spokesman Kim Tulipan noted in the e-mail.

The issue of DND’S oversight of how it buys equipment has become a matter of some concern. A report commission­ed by the federal government recommende­d the creation of a new defence procuremen­t agency to oversee the estimated $240 billion worth of military equipment the Conservati­ves want to purchase in the future.

The report, produced by a review team brought in to analyze recommenda­tions from the country’s defence industry, pointed out that the existing government system doesn’t allow for any one person or organizati­on to be held accountabl­e for how equipment purchases are handled.

Currently, defence procuremen­t is divided between the ministers responsibl­e for Public Works, the Defence Department and Industry Canada.

The review team noted that military procuremen­t was secretive and that the government did not communicat­e with the public or industry on such matters. “Defence procuremen­t and defence trade are neither free, open, nor transparen­t,” the review team noted.

 ?? Herald Archive, Reuters ?? A recent DND audit suggests a $2.8-billion upgrade program to Canadian frigates is sailing into troubled waters.
Herald Archive, Reuters A recent DND audit suggests a $2.8-billion upgrade program to Canadian frigates is sailing into troubled waters.

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