DND to privatize holdings by 2015

Number of companies to manage vast, aging Canadian military infrastructure

The Defence Department will turn to the private sector to help manage its vast holdings of properties and plans to have a number of companies in place by 2015 to handle that job, according to a highlevel document obtained by the Citizen.

The department is the largest landholder in the federal government, with more than two million hectares of property from coast to coast. Those holdings include 20,000 buildings as well as 23 major installations including bases such as CFB Petawawa.

The plan, signed off Dec. 20 by Deputy Minister Robert Fonberg and Chief of the Defence Staff Gen. Tom Lawson, is the department’s answer to concerns raised by the Auditor General Michael Ferguson about crumbling and aging military infrastructure.

The DND intends to move quickly on its plan, creating “Tiger Teams” to help with the process, including cataloguing potential candidate sites that companies could manage.

In the Ottawa area, those could include Connaught Range, the Dwyer Hill Training Area, facilities at Leitrim and Dow’s Lake, Defence Research and Development Canada locations in Ottawa, as well as National Defence headquarters. Canadian Forces Base Petawawa is also on the list compiled by the DND Real Property Management Renewal Tiger Team.

Inclusion on the list, however, doesn’t automatically mean the running of those installations would be turned over to the private sector.

Many armouries across Canada and a number of bases are also included on the list. According to the DND plan, the first phase, to be completed early this year, would look at various operating scenarios.

The second phase, completed by early 2014, would develop the procurement strategy to move the property management over to private firms. “Phase III, which will transition the transfer of specific real property management services to the private sector (completion in early 2015),” Fonberg and Lawson point out.

The plan does not detail exactly what services might be transferred to private firms.

But a union leader questions whether private firms will have the expertise to handle such a massive job or whether it will actually save money. He warns the scheme could end up wasting large amounts of tax dollars.

Union head John MacLennan said his organization has been kept in the dark about the plan, even though its members could be seriously affected by the hiring of private companies to manage the DND facilities.

“We don’t know how far this will go; will they privatize just the management or will they contract out the jobs of construction engineers, or inspectors?” said MacLennan, national president of the Union of National Defence Employees. “We haven’t been told the extent of this but it’s the start of a slippery slope.”

He noted the privatization plan appears to be moving so quickly that he questioned whether DND has even produced a business plan showing there are savings to be had from such a process.

The Defence Department noted in an email to the Citizen that it and the Canadian Forces have taken steps to improve management of its real estate portfolio. They intend to centralize real property management and focus on providing a consistent level of service at defence installations across the country, an email stated.

“The new approach will leverage private sector capabilities with the re-alignment of internal resources to oversee the right mix of in-house and external delivery options in order to ensure sound financial management of taxpayer dollars,” the email read. “DND continues to seek new ways to maximize the effectiveness of every dollar invested in the Defence portfolio while ensuring the proper resources are in place to realize the important missions for which they are responsible.”

DND also noted it is “committed to maintaining a constructive dialogue and appropriate consultation forums with its employees’ unions representatives as it refines its real property management.”

In his report issued several months ago, the auditor general noted that DND had not yet put in place a real property management framework or national strategy for managing its property.

There was also a lack of funding. “Bases often do not receive funds for maintenance and repair and capitalization early enough in the fiscal year to match plans and projects with the construction cycle,” the audit noted.

“The focus is often on maintenance after breakdown, resulting in a premature failure of real property assets,” it added.

DND spent about $189 million on maintenance and repair, not including salaries, during 2010-2011 period.

But department officials acknowledged to auditors they do not have enough staff to do some of the jobs. DND, however, cannot hire new personnel because of the government’s austerity measures.

The DND reported in 2010 a steady decline in the condition of its real property infrastructure. Most of that is over 50 years old. Military commanders have also voiced earlier concerns about using the private sector for some of the property services.

Last year the head of Canada’s army rejected Defence Department plans to spend millions of dollars to hire private firms to maintain fire protection systems at bases across the country, arguing that doing so could hurt his organization’s military readiness.

Senior officers instead countered that such work could be done by in-house civilian staff whose ranks could be increased slightly, in the end saving taxpayers’ money.

Army commander Lt.-Gen. Peter Devlin raised the concerns about the price tag of hiring private firms for maintenance of fire protection systems, pointing out that just the administration fees alone could cost the military $4 million.