Defence Investment Plan 2018 - Canada

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DEFENCEINVESTMENTPLAN 2018Ensuring the Canadian Armed Forces is well-equipped and well-supportedSTRONG PLANSECURE DELIVERENGAGED ENABLE

ISSN 2562-0525PDF: D3-42E-PDFPaper: D3-42EDefence Investment Plan 2018DGM-11418-8JN (ADM(PA)

TABLE OF CONTENTSMESSAGE FROM THE MINISTER OF NATIONAL DEFENCE 2MESSAGE FROM THE DEPUTY MINISTER OF NATIONAL DEFENCE ANDTHE CHIEF OF THE DEFENCE STAFF 3INTRODUCTION 5PART I1.1 Strong, Secure, Engaged: Canada’s Defence Policy 61.2 Defence Investment Plan 2018 91.2.1 Capital Investment Fund 91.2.2 Defence Capabilities Blueprint 111.3 Investing in Canada’s defence: ensuring capability and capacity 121.3.1 The case for investment 12PART II2.1 Transforming the way National Defence works 132.1.1. Project planning 132.1.2. Project selection 132.1.3 Project costing 142.1.4 Project approval 142.1.5 Project governance 152.2 Maximizing Defence’s success 162.2.1 Capitalizing on innovation 162.2.2 Optimizing procurement 172.2.3 Centralized operations 182.2.4 Helping Government go green 182.2.5 Inclusive workplace 20PART III3.1 Planned expenditures 213.2 Canadian Armed Forces capital investments 21CONCLUSION 29

MESSAGE FROMTHE MINISTER OF NATIONAL DEFENCEI am pleased to release the Defence Investment Plan. The plan sets out the key equipment, infrastructure, andservices investments required to deliver Canada’s defence policy vision — a vision in which Canada is Strongat home, Secure in North America, and Engaged in the world.At its core, Canada’s defence policy is about caring for the women and men of the Canadian ArmedForces (CAF). This includes providing them with the right equipment to do their jobs effectively. It is why theGovernment of Canada made a significant, long-term investment in the capabilities that our military needs tocarry out current and future operations.To forecast how much it would cost to implement the defence policy over its 20-year horizon, we conducteda rigorous exercise with external accounting firms. We also recognized that, no matter how realistic and credibleour costing forecasts, a 20-year policy needs to have the flexibility to adjust to changes in major capital projects.Adjusting these cost forecasts over time is done through the investment planning process.The Investment Plan provides important direction to guide how Defence funding is managed and spent.It includes all approved capital projects under Canada’s defence policy. It will be refreshed annually andapproved by the Treasury Board every three years. This will help Canadians understand how the Defencebudget is changing and why these changes will help the CAF succeed.This Plan delivers on our commitment in Strong, Secure, Engaged to provide Canadians with greatertransparency on defence spending. It gives industry more information on our government’s defence investments in order to provide the equipment and infrastructure our women and men in uniform need to do theirjobs.Yours sincerely,The Honourable Harjit S. Sajjan PC, OMM, MSM, CD, MPMinister of National Defence2DEFENCE INVESTMENT PLAN

MESSAGE FROMTHE DEPUTY MINISTER OF NATIONAL DEFENCEAND THE CHIEF OF DEFENCE STAFFLast year, the Government of Canada issued Canada’s defence policy, Strong, Secure, Engaged. This policysupports a healthy, highly motivated, and skilled military force of soldiers, sailors, airmen, and airwomen whoare ready and able to defend Canada and Canadian interests at home and abroad.The policy also provides for the necessary investments to guarantee and enhance the capabilities and capacityof the Department of National Defence and the Canadian Armed Forces over the coming decades. It is avision the Defence Team is fully engaged in realizing.For the very first time, Canadians have a first-hand look at how the funds to deliver this policy will be used,and a view of how Defence is planning these investments. This is a significant improvement in the transparency of the defence budget, and gives Canadian taxpayers the opportunity to see for themselves that theirinvestments in Canada’s defence and security are being well spent. It is a rigorously costed policy, to ensure theCanadian Armed Forces’ requirements will be met, and the proud women and men who serve in our Forceswill succeed in their missions.As promised in Strong, Secure, Engaged, Defence Investment Plan 2018 includes capital projects over 5 millionas well as services contracts over 20 million. It also incorporates information about the long-range spendingplans of National Defence, which were previously provided in the Defence Acquisition Guide, and are nowavailable in the online Defence Capabilities Blueprint. With more and easier access to information, businesseswill be able to make informed investments in research and development, and strategic partnership decisionsbased on the Canadian Armed Forces’ anticipated needs.This plan also provides crucial planning direction to guide the major investments that will strengthen theForces’ ability to carry out its mandate, and improve the Department’s ability to deliver affordable programswhile ensuring valuable resources are focused on vital initiatives that protect Canada and Canadians.This carefully crafted and comprehensive investment plan will ensure the Canadian Armed Forces remainready and able to take on the missions the Government of Canada asks of it, and has the necessary resourcesto get the job done, whatever the assignment.Jody ThomasDeputy MinisterDepartment of National DefenceGeneral Jonathan VanceChief of the Defence StaffDEFENCE INVESTMENT PLAN3

INTRODUCTIONAt any given time, the Government of Canada can call on the Canadian Armed Forces to undertake missionsto protect Canada and Canadians and to maintain international peace and stability. It will often call upon theForces to deploy on multiple operations simultaneously.Defence Investment Plan 2018 outlines how the Royal Canadian Navy, the Canadian Army, the RoyalCanadian Air Force and the Canadian Special Operations Forces Command will be funded in the comingdecades to ensure the Canadian Armed Forces is well equipped and well supported to carry out whatever missions are assigned by the Government. It also explains the policy context behind funding decisions made by the Defence Team, an integrated unit composed of Canadian Armed Forces personnel andDepartment of National Defence civilian employees.Defence Investment Plan 2018 offers Canadians an unprecedented perspective on hundreds of projects andcontracts—for capital equipment, infrastructure investments, and services—that will enable the Forces to keepCanadians safe and to support our allies and partners abroad.This document is meant to inform Canada’s defence and security industries of future investment opportunitiesthat will generate jobs and economic growth across the country. It will also be of interest to parliamentarians,academics and engaged Canadians seeking accountability for the use of federal tax dollars, as it demonstratesNational Defence’s commitment to affordability and effective resource management.Defence Investment Plan 2018 includes funded projects outlined in Strong, Secure, Engaged. As part of modernmilitary planning, Defence continuously examines the future security environment and identifies capabilityrequirements to ensure the Canadian Armed Forces is properly positioned to meet Canada’s defence needs.This includes keeping pace with new technologies, and ensuring old and new systems can work together.The Forces also ensures its equipment remains compatible with other nations with whom Canada’s militarypersonnel work.The Canadian Armed Forces is taking a number of concrete steps to improve its ability to anticipate threats,challenges and opportunities. For example, the expansion of CAF space and cyber capabilities is a priority.The CAF is also enhancing intelligence collection, analysis and fusion capabilities, and supporting and leveraging the expertise of Canada’s defence and security academic community. New ideas are being supportedthrough investment in research and flexible procurement arrangements. This will allow Defence to test newproducts to meet evolving capability needs. Future capabilities and projects will only be added to the Investment Plan when they have been fully assessed and funded.However, Defence Investment Plan 2018 is much more than numbers and sound accounting methods. It istestament to the determination of National Defence to enhance the Canadian Armed Forces’ capabilitiesand capacity to achieve excellence across the entire spectrum of military operations as our Forces personnelprotect Canada and its sovereignty.DEFENCE INVESTMENT PLAN5

PART I1.1 STRONG, SECURE, ENGAGED:CANADA’S DEFENCE POLICYThe strategic context in which the Canadian ArmedForces operates has shifted dramatically over thelast decade or more—driven by an evolving balanceof power, the changing nature of conflict, and therapid evolution of technology. These new challengesdemand a new response in the way the Forces operates and is funded.In 2016, National Defence set out to determinehow best to confront threats and challenges in theyears ahead. As part of this comprehensive review,the Defence Team turned for input to parliamentarians from all parties, to industry, academia, partners,allies, and interested Canadians through unprecedented consultations. Nine roundtables were heldacross the country, including discussions dedicatedto industry and innovation, gender perspectives, andIndigenous issues. As well, over 20,000 Canadiansprovided their feedback on the defence policy reviewthrough an online portal.Following this fulsome engagement exercise andguided by an independent Minister’s Advisory Panel,the Government of Canada released Strong, Secure,Engaged: Canada’s Defence Policy in June 2017.This policy outlines Canada’s defence prioritiesfor the coming 20 years and provides the fundingnecessary to meet Canada’s defence needs now andinto the future. It articulates how the Governmentof Canada will support and employ the CanadianArmed Forces to defend domestic interests andcontribute to a more secure and peaceful world.6DEFENCE INVESTMENT PLANStrong, Secure, Engaged provides a bold new visionto defence that will make Canada:A NEW CANADIAN APPROACH TO DEFENCEStrong, Secure, Engaged will make Canada moresecure and add value to Defence’s contributionsto global security by enabling the Canadian ArmedForces to:ANTICIPATE and better understand potentialthreats to Canada and Canadian interests so as toenhance our ability to identify, prevent or preparefor, and respond to a wide range of contingencies;ADAPT proactively to emerging challenges byharnessing new technologies, fostering a resilientworkforce, and leveraging innovation, knowledge,and new ways of doing businessACT with decisive military capability across thespectrum of operations to defend Canada, protectCanadian interests and values, and contribute toglobal stability. Strong at home, its sovereignty well defended bya Canadian Armed Forces also ready to assistin times of natural disasters, other emergencies,and search and rescue Secure in North America, active in a reneweddefence partnership in NORAD and with theUnited States Engaged in the world, with the Canadian ArmedForces doing its part in Canadian contributions to a more stable, peaceful world, includingthrough peace support operations and peacekeeping

Central to achieving this vision is the ability to anticipate new challenges, adapt to changingcircumstances, and act decisively with effective military capability. In turn, this demands that Canadahas an agile, multi-purpose, combat-ready militarythat is operated by highly-trained, well-equipped,and professional personnel. Given the uncertaintyand complexity of the global security environment,now and into the future, a flexible and versatileForce that can take informed, decisive action toaccomplish the Government’s objectives is essentialto the military’s operational effectiveness and longterm success.Strong, Secure, Engaged focuses on defencepriority areas, which are reflected and reinforced in theDepartment of National Defence and the CanadianArmed Forces 2018-19 Departmental Plan.These include: Fostering well-supported, diverse, and resilientpeople and families with a wide range of initiatives that transform how personnel are cared forand supported—from recruitment through transition to post-military life. Canada cannot meetits defence needs without dedicated, motivated,and highly skilled people. National Defence willimplement concrete actions that ensure personnel and their families are well supported andresilient: physically, psychologically, and socially. Growing and enhancing Canadian Armed Forcescapability and capacity by providing the DefenceTeam with the training and skills required to do thedifficult and complex work asked of them. UnderStrong, Secure, Engaged, the Regular Force willgrow by 3,500 to 71,500 members and the Reserveswill increase by 1,500 to 30,000 members. Inaddition, Defence will align its strategic andoperational plans to ensure the CanadianArmed Forces is able to conduct the full rangeof operations, whether it is helping Canadiansin times of need or making meaningfulcontributions to international peace and security. Exploiting defence innovation by ensuring thatthe Defence Team can tap into creativity andexpertise available outside of government. It willcompete for the best research, technology, andnew ways of doing things to take advantage ofthe most ground-breaking concepts generated byacademics, universities, and the private sector.Strong, Secure, Engaged commits to innovationand research in emerging domains as well asinvestment in critical areas such as intelligence. Modernizing the business of Defence by continuously improving the way the Defence Teamworks—streamlining the procurement process,adopting innovative ways of delivering criticalinfrastructure services, and working as efficientlyand effectively as possible to deliver results.It also means being a responsible steward of theenvironment by reducing the environmentalfootprint of National Defence, minimizing theimpact of its activities on the natural environment, and managing resources responsibly.To advance these priorities, Canada’s defencepolicy has assigned significant financial resourcesand commits to greater openness regarding howDefence investments are managed, to make sure theadditional resources provided will achieve the expected results. Increased transparency through regular reporting on major investments will strengthenCanadians’ confidence that their tax dollars are wellspent and that members of Canada’s military havethe tools and resources they require to do their jobs.This first Defence Investment Plan under the newpolicy delivers on this commitment, providing financial details about the capital equipment and infrastructure projects over 5 million as well as supportcontracts above 20 million expected to begin in thecoming years that the Canadian Armed Forces willrequire to conduct its missions over the next twodecades.1.2 DEFENCE INVESTMENT PLAN 2018National Defence has always placed a premium oncapability planning and has consistently applied bestpractices to make sure the Canadian Armed Forceshas the capabilities and resources required to fulfillDEFENCE INVESTMENT PLAN7

The Defence Investment Plan is driven by ourassessment of the security environment and thecapital investments necessary to fulfill futureCanadian Armed Forces missions while ensuring theiraffordability, as laid out in Strong, Secure, TOTAL92,96662,61950,00025,00015,53314,812The Investment Plan distributed to the public willbe refreshed annually and reset every three years,following approval of the technical Investment planby the Treasury Board. Canadians will now be ableto understand how defence funds are being spent andthe Defence Team will have the necessary flexibilityto prioritize important investments that empowerthe Canadian Armed Forces to defend Canada andcontribute to a safer, more prosperous world.0CAPITALOPERATINGSUSTAINMENTTable 2: Total Cash Requirements for Strong, Secure, EngagedInvestments 2017-18 through 2036-37 ( millions)TOTAL553,003500,000283,67820 YEAR , Secure, Engaged identified projects andoutlined capital spending totaling 108 billionon an accrual basis ( 164 billion on a cash basis),along with operating expenditures of 283.7 billionand sustainment expenditures ofroughly 105.4 billion over 20 years. Defence InvestmentPlan 2018 illustrates these monies will be put to workover the duration of the policy.8DEFENCE INVESTMENT PLANTOTAL113,415105,359100,0005 YEAR TOTALDefence Investment Plan 2018 is based on thetechnical plan which has been submitted to andapproved by the Treasury Board of Canada. Theinformation in the technical plan has been condensedinto a more digestible and accessible product with anew online tool that provides industry with accessto information about defence investment opportunities. This meets the defence policy commitment todemonstrate transparency and accountability whilerespecting the department’s requirement to protectcommercially sensitive material. In this easy-to-useformat, time-saving searches for up-to-date information on projects can be conducted and sorted using avariety of criteria.TOTAL497,012283,67820 YEAR TOTALThis first investment plan ever to be made publicby National Defence is the product of the mostdiligently costed defence policy in Canada’s history.The Defence Team worked with external globaldefence costing experts who brought their expertisein the defence and security domain, gained fromdefence reviews in allied nations, to support thisprocess. In addition, the costing methodologies usedto confirm the Strong, Secure, Engaged vision underwent a third-party review conducted by five externalaccounting firms.Table 1: Total Approved Strong, Secure, Engaged Investments2017-18 through 2036-37 on an Accrual Basis ( millions)5 YEAR TOTALits engagements. Now, Defence Investment Plan2018 raises the bar—both in its strategic approach toinvesting and its ENT

Defence Investment Plan 2018 is not a policydocument, as its underlying policy is Strong, Secure,Engaged. Neither is it an operational planning report,since it does not specify the precise timing of futureTreasury Board approvals or contracting processes.Defence Investment Plan 2018’s primary purposeis to inform Canadians, parliamentarians, industry,defence experts, media and academics, but it will bean equally useful resource within National Defence.The Defence Team now has a financially focusedstructure that provides accurate and timely information for decision makers, so that the CanadianArmed Forces can satisfactorily deliver its mandate.This will facilitate planning surrounding the complexinvestment, capability, and fiscal considerationsrequired to implement Canada’s defence commitments.1.2.1. CAPITAL INVESTMENT FUNDHistorically, different parts of the defence budgetwere managed according to differing rules, whichmade it difficult to spend all the money earmarkedfor National Defence. This approach also posedproblems in managing the funding of complex,multi-year projects with long lead times and madeit challenging to report to parliamentarians andCanadians.Strong, Secure, Engaged identified NationalDefence needs and the many forces at play drivingthese requirements. It also provided National Defencewith realistic and predictable funding of 213 billion—the sum of 108 billion for capital acquisitions fromthe Capital Investment Fund (commonly referred toas accrual space – see Table 1) and 105.4 billion forsustainment costs funded from reference level.ACCRUAL BASIS:costs of acquiring an asset are spread over its usefullife, not just at the time that bills are paidCASH BASIS:costs for the acquisition of capital assets and associatedoperating costs are booked immediately in the yearthe cash disbursement is madeStrong, Secure, Engaged fully funded the estimateddemand for both capital and operating funding tocover defence spending over this timeframe.National Defence plans its capital expendituresover the life of its assets. Since most of the majorcapital investments are made over multiple years, thedepartment needs to secure government funding thatreflects the full lifetime costs of projects.Strong, Secure, Engaged introduced a new funding mechanism by securing the money needed forinvestments in the fiscal framework for the next20 years ( 108 billion). This funding envelope, theCapital Investment Fund, represents the ceiling forplanned capital asset investments over the period onan accrual basis. In other words, the amortized costof defence capital assets required over the next twodecades is capped at 108 billion.FULL LIFE CYCLE APPROACHThe new funding mechanism also identifies theamount of cash funding that DND will requireto acquire capital assets. DND expects to spend 164 billion in capital investments over the next20 years.National Defence will complete a life-cycle cost estimate for all new major capital projects prior to theiracquisition. This requires Defence to estimate all costsover the entire useful life of a capital asset; in somecases, this can be 50 years or more. In completing alife-cycle cost estimate, Defence must forecast fourtypes of costs: project development and acquisition,operating, sustainment and disposal.Accrual accounting better reflects actual fiscalimpacts over time. However, reporting on a cashbasis gives parliamentarians, industry, and otherstakeholders a clearer sense as to the timing andestimated amounts of acquisitions outlined in IP2018. This is a much shorter timeframe than theamortization costs to be spread over the 20-yeartimeframe covered by Strong, Secure, Engaged.DEFENCE INVESTMENT PLAN9

CASH VIEW LIFE CYLE COST 250200Year 31Year 33Year 35Year 37Year 39Year 33Year 35Year 37Year 39Year 29Year 31Year 27Year 25Year 23Year 21Year 19Year 17Year 15GRAPH BGRAPH AACCRUAL VIEW LIFE CYCLE COSTCASH VIEW LIFE CYLE COST millions tainmentDisposalYear 29Year 27Year 25Year 23Year 21Year 19Year 17Year 15Year 13Year 11Year 9Year 7Year 5Year 3Year 39Year 37Year 35Year 33Year 31Year 29Year 27Year 25Year 23Year 21Year 19Year 17Year 15Year 13Year 9Year 11Year 7Year 5Year 3Year 1-Year 15050-Year 13Year 9Year 11Year 7Year 5Year 3Year 1150 accrual basis, however its year-to-year funding isNational Defence plans it capital investments on anmanaged on a cash basis. As an example, Graphs A 100andB below illustrate the procurement of an asset50with a useful life of 30 years at a total cost of 7.6 billion,reflecting both the accrual and cash views of theexpenditure.GRAPH BACCRUALEngagedVIEW LIFE CYCLEwillCOST grow annual cash defence spending from 18.9 billion in 2016-17 toStrong, Secure, 32.7 billion inAsset2026-27.Total defencespending over 20 years will be 553 billion on a cash basis. This willOperatingSustainmentDisposalenable National Defence to increase the size of the Canadian Armed Forces, affirm Canada’s unwaveringcommitment to its longstanding alliances and partnerships, and provide vital new investments to make surethat women and men in uniform have the modern tools and facilities they need to succeed in their operations. millions40035030025020010DEFENCE INVESTMENT PLANYear 39Year 37Year 35Year 33Year 31Year 29Year 27Year 25Year 23Year 21Year 19Year 17Year 15Year 13Year 11Year 9Year 7-The figure below depicts DND appropriations over a 40-year span to demonstrate the 70% increase in cashcommitments pledged in Strong, Secure, Engaged during the next two decades. This figure highlights the totaldefence budget, not just capital investments.Year 550Year 3100Year 1150

1.2.2. DEFENCE CAPABILITIES BLUEPRINTDefence Investment Plan 2018 is an overview of theDefence Team’s planned expenditures during the20-year timeframe of Strong, Secure, Engaged. Anew online tool, the Defence Capabilities Blueprint,provides industry with access to information aboutdefence investment opportunities.Like the previous Defence Acquisition Guide,the Defence Capabilities Blueprint outlines planning information such as funding ranges and projecttimelines but goes further to offer improved accessto the full spectrum of investment areas of interest to National Defence. The cost ranges identifiedin the Defence Capabilities Blueprint are based onthe acquisition costs for projects. These costs includeproject management costs, infrastructure, contractsand contingency. The Defence Capabilities Blueprintprovides details about 200 projects funded underStrong, Secure, Engaged, including capital equipment and infrastructure projects over 5 million andsupport contracts valued over 20 million that areexpected to be awarded in the coming years.With this information, industry will be ableto make informed research and development andstrategic partnering decisions based on the projectedneeds of the Canadian Armed Forces, enablingthe defence and aerospace sectors to plan for andcompete in defence procurement opportunities.Defence Capability Areas (DCAs) are 13 broadcomponent categories, such as Land, Sea, Air, Space,and Cyber. These categories are further comprisedof smaller constituent components of more than150 Defence Capability Investment Areas (DCIAs).Examples of DCIAs are commercial pattern vehicles,ship parts and components, or avionics. Projects mayinclude more than one DCA and several DCIAs.Compared to the Defence Acquisition Guide, theinclusion of infrastructure projects over 5 million isa new feature of the Defence Capabilities Blueprint.Activities are also searchable under Innovation,Science and Economic Development Canada’s KeyIndustrial Capabilities (KICs). These capability areasinform industry about which key business activitiesare government priorities in defence procurement.KICs are significant factors in the design, rating, andweighting of Value Propositions.Project Sponsors are the service commandlevel or civilian equivalent organizations withinNational Defence. These are the Royal CanadianNavy, Canadian Army, Royal Canadian Air Force,Canadian Special Operations Forces Command,Assistant Deputy Minister (Material), AssistantDeputy Minister (Information Management), Assistant Deputy Minister (Infrastructure & Environment), and Assistant Deputy Minister (Science &Technology).What’s new?The Defence Capabilities Blueprint was designed toallow searches among the projects and services usinga number of different parameters:Lastly, there is an ‘Advanced Search’ function thatallows users to filter their searches to specific information such as select funding ranges, capability areas(DCAs/DCIAs/KICs), or project phases and dates.DEFENCE INVESTMENT PLAN11

DEFENCE CAPABILITIES BLUEPRINTIncludes: Projects: Capital equipment and infrastructureprojects with a value over 5 million that areplanned and funded under Strong, Secure,Engaged. Support Contracts: In-service support and professional services contracts with an expectedvalue greater than 20 million that will beawarded in the coming years to support thecapabilities being delivered under Strong,Secure, Engaged.Features a keyword search function, and segmentsinvestment opportunities into searchablecomponents by: Defence Capability Areas Defence Capability Investment Areas Project Sponsor

Defence Investment Plan 2018 outlines how the Royal Canadian Navy, the Canadian Army, the Royal Canadian Air Force and the Canadian Special Operations Forces Command will be funded in the coming decades to ensure the Canadian Armed Forc

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