Summary

Canada’s defence procurement system has become bureaucratic, fragile, and slow. Multiple departments, endless approvals, and a risk-averse culture mean mean that the average time to acquire a piece of military equipment is now 16 years¹ and there are routinely 20-year plus delays on critical projects. Today, global threats to Canadian sovereignty in the arctic and beyond demand immediate investments to arm our military. As such the government has committed over $62 billion in new defence spending over five years². To ensure this money is not entirely wasted we must fundamentally restructure how we do procurement.

The solution is to focus on growing capabilities rather than describing systems: decentralize buying decisions to military commanders, create streamlined contracting vehicles, and build infrastructure to turn Canadian startups into global defence winners. If implemented correctly this approach could transform military procurement from a bureaucratic obstacle to a source of significant military and industrial strength.

Background and Motivation

Prime Minister Carney has warned that Canada faces threats “from a more dangerous and divided world” that are “unravelling the rules-based international order,”.³ As a result we must “change the way we arm the men and women who serve” to defend Canadian territory from “the seafloor to the Arctic to cyberspace.” These are ambitious aims, to achieve them though will require significant reform of the procurement system.

Today, Canada’s military procurement system is driven by committees rather than capabilities. Responsibility is split across the Department of National defence (DND), Public Services and Procurement Canada (PSPC), Innovation, Science and Economic Development (ISED), and Treasury Board Secretariat (TBS). No single minister or agency controls the entire process and every decision must go through multiple rounds of complex alignment and the final requirements are often highly prescriptive in a way that further adds time and money to the process.

The results are clear. Two-thirds of all defence projects face delays of at least one year⁴. The average time to acquire a new piece of military equipment is now 16 years. And, the Parliamentary Budget Officer found DND fell $12 billion behind its capital spending plan from 2017 to 2023. When procuring new military equipment takes more than a decade and wastes billions of dollars in the process, operators, soldiers and war fighters receive less than they otherwise could and are constantly using tools that are outdated for the conflicts they face.

This system is an entrenched form of risk aversion. Public servants fear legal challenges, Auditor General criticism, and political embarrassment. As a result they look for “gold-plated” requirements, demanding exhaustive documentation, and avoiding sensible shortcuts like sole-sourcing. One former official noted that civil servants have become “extraordinarily reticent” to make decisions⁵, creating gridlock throughout the system.

Recent geopolitical shifts have made this dysfunction a serious threat to Canadian sovereignty. The federal government has identified that the world has become more dangerous and divided and announced massive defence spending increases to secure the country. In June 2025 they announced over $9 billion of additional immediate spending and committed to maintaining 2% of GDP for defence spending moving forward⁶. This will amount to $62 billion over five years, roughly eight times the previous annual pace⁷. This is an ambitious and appropriate response but, without reform to the procurement process, this additional money is liable to be eaten up by delays and waste or be used to procure equipment that is no longer useful by the time it arrives.

These reforms are especially urgent because the nature of combat has changed dramatically. The war in Ukraine has shown that modern combat requires thousands of cheap, networked systems over expensive platforms. Ukrainian forces produced 2.2 million drones in 2024 and now manufactures over 200,000 monthly⁸. These drones cause 69% of strikes on troops and 75% on vehicles⁹. And, the pace of change is extreme. New drone designs appear every 8-12 weeks¹⁰. In the current environment, a multi-year delay on a decade long procurement project is simply not acceptable.

The good news is Canada has everything it needs to resolve these issues. The commanders, operators and soldiers in the CAF are talented and understand the capabilities they need and Canadian industry is ready to supply world-class equipment. To reform procurement requires system changes to decentralize decision making, create new contracting vehicles and develop robust infrastructure for scaling the defence startups that can provide the equipment of tomorrow. 

Decentralization

Instead of centralizing all decisions and requiring sign off by multiple departments, Canada must empower military commanders with substantial buying authority. When individual officers have meaningful budgets, they can individually fund prototypes, test new capabilities, and buy equipment that works. An ecosystem of decision makers will ensure healthy competition between different approaches and an emphasis on capabilities rather than bureaucratic monopolies that favors large incumbents skilled at navigating red tape.

Under this approach members of the Canadian military would be empowered to act. A Canadian commander at CFB Alert could identify drone threats to arctic patrols and order counter-drone systems within weeks. Instead of filing reports through four departments and waiting years for approval, the commander would use their annual budget to purchase portable electronic warfare jammers and short-range interceptor drones directly from Canadian suppliers. The equipment would arrive before winter ends, protecting sovereignty patrols immediately rather than becoming another decade-long procurement study. 

Of course this decentralization will mean there will be some mistakes and duplicate purchases. Some commanders may choose inferior equipment or overpay. But, these errors are acceptable costs for gaining the speed and innovation needed to defend Canada against modern threats. 

Contracting Vehicles

The transformation also requires new contracting vehicles modelled after America’s Other Transaction Authority, to streamline agreements and reduce oversight burdens. Canada needs explicit policies favouring “80% solutions” that can deliver most capabilities at a fraction of traditional costs. 

Defence Startup Infrastructure

Finally, Canada must build infrastructure to commercialize defence technologies. The country needs more dedicated testing grounds, commercialization units focused on startups, matched funding programs, and export support to help Canadian companies compete globally. These changes would transform defence spending from consumption into investments that build Canadian industrial capacity.

Real World Solutions

United States’ Other Transaction Authority proves streamlined agreements can move commercial technology into service fast. Exercising these powers the Army signed a $480 million OTA with Microsoft in November 2018 to build prototypes for a Integrated Visual Augmentation System (IVAS) mixed‑reality goggles, requiring the prototypes to arrive in four increments within just 24 months¹¹.The program reached a production decision in early 2021—about four years faster than traditional acquisition paths¹². 

Canada’s Urgent Operational Requirement Process allows the Department of National defence to bypass normal timelines when equipment is critical for operations¹³. To counter the rising IED threat, Canada urgently acquired RG-31 “Nyala” mine-resistant vehicles from South Africa as an accelerated, off-the-shelf buy. From initial request to operational deployment took just over one year¹⁴. The UOR process enabled DND to circumvent peacetime bureaucracy and field these Mine-Resistant Ambush Protected vehicles quickly.

Britain’s Urgent Operational Requirement Framework bypasses normal defence procurement bureaucracy to field equipment needed in theatre immediately, using special Treasury funding. Facing severe IED threats in Afghanistan, the Ministry of defence rapidly procured Mine-Resistant vehicles under UOR funding. The Mastiff, bought off-the-shelf from an American design, was rushed into service for British forces in 2006-2007. These heavily armoured trucks were delivered and deployed to Iraq and Afghanistan quickly, providing life-saving protection¹⁵. 

What Must Be Done

The government must restructure defence procurement to prioritize speed over process perfection. This requires empowering military decision-makers while building commercial infrastructure that turns defence spending into economic growth.

Decentralize Procurement Authority

• Decentralize and push down buying authorities – To truly transform defence procurement, authority must be decentralized. When more individuals across the system are empowered with substantial buying authority—around $25 million annually—they can fund meaningful prototypes, pilots, and multi-year procurements. While this introduces inefficiencies and variance in purchasing, it also drives healthy competition: different actors back different capabilities, which then compete on performance and value. This stands in stark contrast to centralized procurement systems, where limited competition favours the largest incumbents skilled at navigating bureaucracy, not necessarily those with the best solutions. Decentralization invites diversity of approach, accelerates innovation, and ultimately yields stronger outcomes.

Create New Contracting Vehicles

• Create a Department of Defence only managed alternative contracting authority – Modelled after the U.S.’s Other Transaction Authority (OTA), a new contracting vehicle would streamline contracts, reducing accounting obligations and eliminating oversight by multiple agencies.

• Favour 80% solutions - The future of military power will not be determined by the most exquisite hardware, but by the most effectively scaled and networked family of capabilities. Many of these capabilities will be attritable. Not disposable, not cheap, not expendable—but deliberately engineered to be used fully, deployed widely, and replaced quickly. There should be a contracting vehicle that explicitly states: “if you can achieve 80% of the requirements for 25% of the cost of the alternative, DND is mandated to acquire that capability.”

• Establish a Dedicated Defence Commercialization Unit (DCU) – Replacing IDEaS, and augmenting DRDC, this entity’s entire purpose should be to scout for, test and procure dual use technologies from non traditional defence companies (eg: startups).

Build Infrastructure to Commercialize defence Technology

• Conduct continuous validation trials : Establish a walk in, “first relevant, first served” testing schedule for any company wanting to field test operationally relevant prototypes. Integrate successful prototypes within 3 months. Expanding and utilizing existing CAF experimentation proving grounds, including Area X in Ottawa and Canadian Forces Base (CFB) Suffield, to accelerate trials and validation. Additionally, establishing a new Arctic Proving Ground (“Arctic Snowbox”) near Whitehorse would enable testing of Arctic-hardened technologies, ensuring CAF maintains operational superiority in extreme environments.

• Expand ISED-SIF into Matched Funding Initiatives – To bridge the gap between research and development funding and recurring procurement, the government should provide matched funding for companies able to raise capital externally. For example, if a startup raises 10M or more for their company and that company has defence utility, they should be able to go to the DND, and get 10M in contracts for the services they provide.

• Establish an Office of Strategic Capital to fund private funds with long term loans - The Department of National Defence should establish an Office of Strategic Capital to provide long term financing and loans to corporate venture funds and independent venture funds investing at the intersection of deep tech and defence tech.

• The Prime Minister should require offset utilization within 90 days – Implementing stricter monitoring of offset agreements, ensuring that defence firms pledge and allocate these funds within 90 days of government formation to accelerate deployment and innovation.

• The Prime Minister should establish a Foreign Military Sales (FMS) Agency to help Canadian startups sell abroad – In collaboration with Global Affairs Canada and Export Development Canada, the government should establish its own FMS office that advocates within allied militaries for the use and procurement of Canadian capabilities.

• The Prime Minister should direct Canadian pension funds and banks to remove all restrictions on lending to Canadian owned and controlled defence contractors. Currently many top Canadian banks have strict rules that make it nearly impossible for them to finance Canadian defence startups; these need to be removed to allow new companies to access funding.

• Defence Procurement Advisory Committee - To support the modernization of Canada’s defence procurement system, the government should establish a Defence Procurement Advisory Committee composed of leading experts from industry, technology, finance, and national security. This committee would serve as an independent advisory body to both DND and the Treasury Board, providing real-time feedback on procurement bottlenecks, emerging technology trends, and best practices from global defence-industrial systems. Meeting monthly, the committee would ensure that procurement strategies remain aligned with the pace of technological change and reflect the operational needs of the Canadian Armed Forces.

Common Questions

Won’t decentralized buying create waste and inefficiency through duplicate purchases? Some duplication is inevitable and beneficial. Different commanders backing different solutions creates competition that drives innovation and reduces costs over time. Centralized systems appear efficient but often favour large incumbents skilled at bureaucracy rather than companies with superior technologies. The current system’s $12 billion in lapsed funding proves centralization doesn’t prevent waste.

How can Canada ensure accountability without current oversight mechanisms? Accountability improves through an emphasis on capabilities and consequences for poor performance not “gold plating” requirements ahead of time. By favouring 80% solutions Canada will achieve greater return on its investments in procurement and speed itself will be considered as an accountability measure since delayed capabilities harm national security.

Will these changes hurt Canadian industrial benefits and domestic job creation? Enhanced commercialization support, matched funding programs, and export assistance create more sustainable industrial benefits than current offset requirements. By creating the infrastructure to build globally competitive Canadian defence companies this approach will generate lasting employment and economic growth rather than temporary contract work. 

Conclusion

Canada’s defence procurement system optimizes for caution in an era demanding competition. Twenty-year timelines and billions in wasted funding is a failure for soldiers and taxpayers alike. With $62 billion in new defence spending committed over five years, the country cannot afford to continue with the current system unreformed.

The solution requires courage to decentralize authority, streamline contracting, and build commercial infrastructure. Empowering military commanders with meaningful budgets will drive speed and innovation while supporting Canadian startups to create lasting industrial capacity. These changes can transform defence spending from bureaucratic exercise into competitive advantage.