Tory proposal for ethical procurement regime could further muddle defence buys

OTTAWA — The Harper government’s proposed new integrity regime, aimed at ensuring it only does business with ethical companies, could inadvertently shrink an already shallow pool of defence contractors, observers warn.

The proposal, contained in the federal budget introduced Tuesday by Finance Minister Joe Oliver, has been the subject of intense speculation and quiet angst on the part of the defence industry, say insiders.

The budget promised the new scheme would be transparent, rigorous and consistent, but also sounded a conciliatory note, saying it would “ensure that all suppliers are given due process.”

Marcel Poulin, a spokesman for Public Works Minister Diane Finley, said the government is determined to listen to their concerns.
“Public Works is consulting with a number of industry associations and will be taking their feedback into consideration before making a decision on a path forward,” Poulin said in an email.

The government will also engage an outside expert in procurement ethics to make sure the discussions are “balanced.” That is likely to be a long process that would not be complete before the next election.

Alan Williams, the former head of procurement at National Defence, said he’s puzzled why the government is beating the drum so loudly when it could simply write stronger ethical guidelines directly into its requests for proposals.

“I think all of this is to pretend to be doing stuff, when they’re not,” Williams said. “If they wanted to do it, they could just do it.”
He wondered how much of the measure is window-dressing ahead of the federal election in October.

The Department of Public Works has reportedly been working for months to modify already tough anti-corruption rules that could bar some major multinational companies — notably Siemens AG and Hewlett-Packard Inc. — from doing business with the Canadian government.

Williams says the ethics regime could have a big impact on the defence sector, where some big players have faced corruption allegations abroad.

He says nobody wants to deal with an unethical organization, but imposing an ethics regime is complicated and could further muddle the already convoluted procurement system.

“For major weapons systems, there aren’t that many contractors to start,” said Williams. “How do you define an ethical one? If a major company does something in Europe, They have a scandal in their European office, nothing to do with North America. Is that part of the criteria against which North American bids cannot be accepted?”

The question isn’t just hypothetical. Last year, German prosecutors launched an investigation into Airbus Group NV for alleged corruption in multibillion-dollar border security projects in Saudi Arabia and Romania. Both Boeing and Lockheed Martin faced contract and ethics scandals in the U.S. over a decade ago.

More recently, Montreal-based engineering giant SNC-Lavalin, whose subsidiaries have had multiple contracts with National Defence, recently pleaded not guilty to fraud and corruption charges in connection with its business dealings in Libya.

“It’s a very complicated issue,” said Williams. “It sounds nice and maybe it’s good because it sounds nice, makes a great sound bite.”
“How you do it is potentially not easy, and the ramifications are it may restrict future bids.”

A spokesman for the Canadian Association of Defence and Security Industries declined to comment on the proposal.

© 2015 The Canadian Press