The Harper government and space company MacDonald Dettwiler and Associates Ltd. are like a tempestuous couple that just can't quit each other. With Ottawa signing a $706-million contract this week with the Richmond, B.C.-based firm for the construction of three radar satellites, everyone's in a good mood again. Perhaps this is a good time to see what we can learn from their last tiff.
Five years ago, the Conservative government blocked the sale of MDA's space business to a U.S. company, a move that enraged MDA CEO Daniel Friedmann. To make up, the Conservatives moved ahead on a stalled commitment by the previous government to develop a next-generation satellite radar system to defend Canada's Arctic sovereignty, called Radarsat Constellation. In 2010, the government committed $500-million in financing through the Canadian Space Agency over five years for the MDA-led project.
But then in last year's budget the government froze spending on the radar system. A furious Mr. Friedmann lashed out at government for cutting the space industry off at the knees and forcing him to cut 100 jobs.
In fact, the government's budget freeze on Radarsat last year was justified. Costs for the project had begun to spiral out of control as MDA and the space agency amended the satellite design contract no less than 11 times over a 13-month period, increasing costs at every step.
Sources told The Globe and Mail that the problem from MDA's perspective was the space agency and its internal government clients – among them the Canadian Forces (Mr. Friedmann could not be reached for comment). They kept pushing for more bells and whistles, including a system to identify ships, all of which added time and costs to the project, or what procurement pros call "scope creep."
Inside government, sources familiar with the situation say, there were concerns about the space agency's inexperience in managing such a large and sophisticated project, as well as lines of financial and decision-making accountability. There were also concerns the size of MDA's cost increases were going unchecked by independent reviewers or market forces.
Senior officials from Treasury Board, Industry and Public Works got involved, and an outside consulting firm was called in to validate the scope and cost of the project. The Prime Minister, understandably ticked off, decided to stall any further spending on satellite programs until the parties got a handle on the Radarsat project.
One can only presume – or hope – the new contract has been fortified with protections for both parties. But the saga is all too common for complicated procurement contracts between government and industry, and not just in Canada.
Fortunately, Ottawa has an opportunity to do something about it. In November, a government-mandated aerospace review panel led by former cabinet minister David Emerson suggested several changes that would have precluded the sorts of problems seen in the Radarsat Constellation file.
The panel's recommendations, now in the hands of government, included a tighter procurement system led by Public Works, greater enforcement by government of firm contractual obligations for product development and delivery – with penalties for falling short – and clearer lines of authority and accountability among government stakeholders in space contracts. In other words, the panel calls for signing and executing contracts with the same degree of diligence and protections as those between commercial entities.
"The government should act as a savvy customer rather than an overweening supervisor," the report said. That would undoubtedly leave the government and MDA happier together.