This article originally appeared in iPolitics.
By Tony Clement, December 2, 2025
Canada’s defence procurement system is back in the news and on the public policy agenda. And rightly so.
Meeting our NATO defence spending commitments is front and centre for the Carney government. And commentators have noticed this kind of project cannot occur overnight. Moreover, how Canada chooses and funds defence procurements has been neither smooth nor efficient for decades.
I served in two key defence procurement roles in the Harper Government: industry minister and Treasury Board president — essentially the government’s chief operating officer. In those roles, I participated in procurement decisions for Canada’s shipbuilding strategy, and the purchasing of items like F-35 fighter jets and fixed-wing search and rescue planes, among others. Much can still be learned from these procurements.
Why do these decisions take so long and why do costs escalate so greatly? There are many culprits, but two come to mind: industrial and technology benefits (ITBs) and the oversight process.
ITB policy — known as industrial and regional benefits (IRBs) during my time government — requires awardees of defence contracts to undertake business activity in Canada close or equal to the contract’s value. This holds the potential for Canadian jobs, and exports for Canadian firms as part of the defence supply chain. But a major failing with ITBs is that they tend to not result in long-term economic benefits. Rather, they are short-term reciprocal contractual arrangements that end with the original procurement.
This limitation is partly why the national shipbuilding strategy — which is now producing ships in Quebec, British Columbia, and Nova Scotia—was created. However, it also comes with a downside. Establishing a domestic supply base often results in delays and cost overruns. That was the case with Canadian shipbuilders, who were more expensive than other options, like South Korean shipyards. But the political imperative was to create local jobs for these massive purchases and keep the defence supply chain within Canada.
The push and pull of ITBs versus value for money is pertinent. Both Korea’s Hanwha Ocean and Germany’s Thyssen Krupp Marine Systems are pitching for the contract to build Canadian Navy subs. They’re also promising technology transfer and job creation in Canada, and accelerated delivery. With local supply chain resilience now part of the discussion, the balancing act of local versus foreign will continue.
The F-35 fighter jets also offer lessons. The Harper Government announced the F-35 as the replacement to the CF-18s in 2010, when I was industry minister. There were significant benefits to local defence suppliers, who would be manufacturing F-35 parts for the global supply chain. But the whole thing was derailed by a 2012 Auditor General’s report, insisting on a life-cycle costing mechanism which escalated costs multifold. Media and the Liberal opposition termed this a “fiasco.” That sucked the life out of getting things moving with the prime minister and cabinet. Under the new normal, the AG’s insistence on “life-cycle” cost calculations means very large numbers —even if some costs like fuel and maintenance could be as large or larger if carrying on with older equipment. This produces eye-watering total costs that are harder to defend politically.
The lesson from this last procurement — still in limbo and now a victim of the Trump tariff situation — is that the Auditor General process has made it extremely difficult to actually get deals done and decisions made in official Ottawa. Bureaucrats and politicians don’t want to fall victim to the next Auditor General report. I contend large procurement decisions are paralyzed as a result.
The Carney government is poised to announce its own defence industrial strategy, focusing on a new Defence Investment Agency, longer-term strategic partnerships, and support for Canadian industry through local supply chains and industrial benefits. It remains to be seen whether this Defence Investment Agency — another cook in the kitchen — will cut the Gordian knot of procurement delays, or simply add another bureaucratic layer.
For the sake of actually getting defence procurement done, I believe we need a cultural shift — away from endless bureaucratic battles and politicization, and toward the prime minister and his team making decisions efficiently. This means sometimes choosing lower cost alternatives without Canadian benefits, while others can truly proceed with bolstering a Canadian supply chain.
Assessing which procurement path is better suited for a given program will be difficult, but should be weighed between a grounded assessment of the CAF’s needs and the potential economic benefits that could be accrued if being sourced from a domestic supplier. That might be unpalatable to some, but the government will need to be able to justify these decisions to the public. Allowing superfluous considerations — like misleading Auditor General reporting, parochial political interests that do not serve the state’s overall needs, or any number of other distractions — will only serve to perpetuate the existing problem.
The rest of the world will no longer wait for Canada’s present unfit-for-purpose defence procurement disaster.
The Honourable Tony Clement was an MP from 2006-2019, serving in cabinet as health minister, industry minister, and Treasury Board president. He is a contributor to the Macdonald-Laurier Institute.
