The Defense spending problem and the need for finding the balance between contractual imperatives and relational execution

Whether in recent headlines or within the confines of inner circle discussions talking about Defense procurement and the challenges the Canadian government has been facing in getting it right is a hot topic.

A series of recent articles including one by the CBC titled “After years of missteps, Canadian Military officials hope procurement now on track” provides just one of many examples of the ongoing interest in how the Government spends taxpayer money for defense purposes.

The CBC article attributes many of the problems associated with the purchase of new aircraft, naval ships, and other equipment to poor planning, red tape, and internal bickering. While these challenges are still notable, the CBC also reported that there is a general belief within the Government that they “have learned their lessons” and are on track toward an improved procurement practice.

In this post, I would like to examine what I believe are the causes of the problem, including why I have concluded that the DND is still in the very early stages of the needed transformation to a more efficient and effective process.

Ironically, when it comes to acquisitions within a complex environment, red tape is necessary to; ensure that the proper checks and balances are in place, provide optimum value for money, and to ultimately protect the interests of Canadians while ensuring that we are all pulling in the same direction. Although there is no argument that adequate planning is needed, there should also be a clear understanding that no amount of planning can create certainty in the long term.

Fortunately, the procurement challenges we are discussing here are not unique to Canada. Even though there are many variables, some of which are not as clear cut as they may initially appear, the “real” problem is rooted in the underlying business model, and management framework relating to the acquisition of military equipment and in-service support functions. The creation of the original model occurred during a time when there was no internet when things moved at a snail’s speed. The process then was laborious and intricate. Unfortunately, this older model has not been updated to accommodate today’s fast paced information driven business environment.

Residing in the following three critical areas, the disconnect between the way “we have always done things” and how they now need to be done today is at the heart of the problems we are facing with procurement and complex project or program management:

Transactional Mindset – most troubled acquisitions are usually complex, have a high degree of variability and have many unknowns that require significant collaboration among diverse stakeholder groups to resolve them. By continuing to structure such arrangements as static and rigid transactions or deals that don’t respond well to change or collaboration perpetuates the challenges while limiting the ability to resolve issues. This Artificial Transactional Mindset (ATM) which is the practice of attempting to create certainty in a business arrangement where certainty does not or cannot exist is a seemingly indigenous component of most performance based contracts in the public sector.

Oversight models of management– while there is a requirement for overseeing complex acquisitions, without meaningful insight, such “oversight” is almost always superficial leading to wrong conclusions and failed outcomes. The “oversight without insight” approach operates on the assumption that once a contract is signed all that needs to be done to achieve the desired result is monitor the relationship through the establishment of an army of watch dogs and governance systems to hold a vendor’s feet to the fire.

Adversarial mindset – complex acquisitions such as the ones referenced in the CBC article require the parties involved to work together to resolve problems as they arise. The level of collaboration needed to achieve optimum outcomes increases with the complexity of the acquisition, particularly as it relates to future sourced contracts in which neither the buyer nor the supplier has any previous experience. However, the way we source or establish those arrangements ( transactions ) and the way we manage them (compliance based oversight model) have created an adversarial mindset and an environment where trust cannot flourish. Such an environment is counterproductive to working together to achieve common objectives.

So what is the solution to these as well as other acquisition-related challenges?

If we have learned anything in the last 20 years, we learned that the solution has little to do with reducing red tape, increasing levels of planning or centralizing accountability under one government entity.

The answer lies in what we refer to as the Relational Business Model (RBM™).

RBM™ is an adaptive business model which enables the achievement of optimum outcomes by addressing the root problem. It is a business model that strikes the required balance between contractual imperatives and relational execution.

The Relational Business Model™ consists of three components:

Relational Contracting – an industry engagement and an open and transparent partner selection methodology that achieves ongoing alignment of stakeholder strategies, capabilities, and competencies with overarching program objectives. Relational Contracting recognizes that the entire agreement is not complete in that it will be influenced and affected by the relation of the parties and the changing political, economic and technological conditions that will arise over the life of the agreement. Therefore having the flexibility to evolve and adapt to these changing conditions while maintaining stakeholder alignment is essential.

Relationship Management – managing stakeholder engagement and communications means elevating communications from one-to-one conversations to a system of coordinated interactions encompassing decisions making, delivery management and oversight processes.

Collaborative Working – having the systems, disciplines, and competencies needed to facilitate collaboration within working teams.

This Relational Business Model is now supported by ISO 44001, a standard for collaborative business relationship management. The RBM™ operationalizes ISO 44001 and puts it into practice.

So how do we make the transition?

Although they have only just started marching down this road, there are certain pockets within the Government and more specifically the DND who have recognized the urgent need to make the transition to the relational model and as such, have taken measures to begin the transition. However promising, we are still talking about a change in culture and mindset. Alternatively, to put it another way systems and processes are easy to adjust or modify, but changing the culture and mindset within any organization – public or otherwise, is a slow process and requires incremental introduction and considerable training.

On the subject of training, the article I referred to earlier in this post mentions that DND is considering adding 300 people to the ADM MAT organization. While this is a sound strategy, they should also consider hiring individuals who are free of the old adversarial mindset and see collaboration and achieving joint objectives as the right way to go. In short, the DND must ensure that they are not indoctrinating newcomers in the old way of doing things.

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