CALGARY, April 1, 2015 /CNW/ - Faced with a dangerous world, the federal government has made recapitalizing and updating Canada's armed forces a priority. Unfortunately, fiscal pressures obliged the government to deviate from its Canada First Defence Strategy, cutting staff and delaying military hardware acquisitions.
With the introduction of the Defence Procurement Strategy in February, 2014 - Ottawa can use improved approaches to buy equipment that would otherwise have been purchased already under the DND's opaque capital expenditure system. At present, DND capital funds are mostly subject to accrual accounting. Capital costs are charged against the defence budget as annual amortization expenses over equipment lifecycles. While this enables multiple capital projects to go ahead simultaneously, not all of the money covering capital costs is treated this way.
A policy brief released today by The School of Public Policy highlights the pressing need for reform in Canadian defence procurement. Since 2007/2008, an estimated $6.42 billion wasn't used as intended. While some of this can be carried forward, there are limits. Leftover funds exceeding them are returned to the Treasury and are thereby lost. According to the brief "It's up to the DND to make up losses out of future funding. Just as bad, the accrual method doesn't fully account for inflation, so when schedules slip, project purchasing power diminishes by hundreds of millions of dollars."
The defence budget has been cut, the nature of the funding commitment altered and the capital program delayed. This delay that has been so problematic for National Defence, gives the opportunity to change the way defence goods are procured. Without reform, ambitious initiatives end up taking hits to reflect harsh budgetary realities and the capabilities of Canada's soldiers suffer.
The paper can be downloaded at http://www.policyschool.ucalgary.ca/?q=research
SOURCE The School of Public Policy - University of Calgary
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