Workshops

Best Value Procurement

Debunking the Myth Behind Canadian Defence Procurement
Digital Workshop
July 9, 2020

The Canadian Government procures most systems, equipment, and services through Public Services and Procurement Canada (PSPC). PSPC applies a best value basis of selection to choose the best overall technical and financial solution in each procurement. In defence contracting, PSPC considers an extra factor, called offsets, when it chooses the winning defence contractor.

In 2014, the Canadian government overhauled its offsets program as part of the Defence Procurement Strategy, and called the offsets program the Technological Benefits and Value Proposition (ITB/VP) program. The ITB/VP program requires defence contractors to offset, or divert, their revenues to industries, sectors, or regions that are of strategic importance to the Canadian government. For example, the ITB/VP program might require the contractor to support exports, small and medium businesses, or specific regions of Canada. While these offsets may economically benefit the targeted industries, sectors, or particular regions, it is essential to recognize that they have nothing to do with the actual system, equipment, or service Canada is procuring. Supporting small and medium sized Canadian businesses, for example, does not make a fighter jet more capable, efficient, or reliable.

Through a combination of restrictions PSPC applies to technical and financial evaluations, coupled with the importance Canada places on offsets, ITB/VP has become the single most important and influential factor in defence procurement. This overemphasis on offsets, which have nothing to do with what is being procured, applies to Canada’s purchases of ships, fighter jets, ground vehicles, facilities, and services. In other words, Canada relies more heavily on offsets than it does on the technical merits and financial benefits of the proposed solutions when selecting the winning bidder for major defence contracts.

Procurement officers will argue against this assertion, claiming technical evaluation dominates the basis of selection, usually followed by price, and finally ITB/VP. What well-meaning procurement officers do not understand is the restrictions PSPC places on technical and financial evaluations limits the leverage, or influence, a bidder can exert in its technical and financial solution so drastically that offsets dominate the basis of selection. This is what we mean by the Best Value Procurement Myth.

Best Value Procurement – Debunking the Myth behind Canadian Defence Procurement is a short video that walks step-by-step through PSPC’s defence procurement processes. It follows the counterintuitive but inescapable logic of how a typical major defence procurement weighted at 60% Technical, 25% Financial, and 15% ITB/VP favours ITB/VP over the technical and financial scores. The video uses Canada’s own facts and figures to unequivocally show how Canada’s Defence Procurement Strategy discriminates against Canadian owned defence contractors.

This agenda-free video does not require a detailed knowledge or understanding of defence procurement or offsets. It treats the subject matter and interested parties with respect, and it draws incontestable conclusions based on evidence collected and published by the Canadian government.

The EXA Consulting Group is Canada’s leading firm in Capture Support, Proposal Support, and Strategic Enablement. With over 30 years’ experience, EXA generally leads pursuits for programs over $100M.

The Canadian Government procures most systems, equipment, and services through Public Services and Procurement Canada (PSPC). PSPC applies a best value basis of selection to choose the best overall technical and financial solution in each procurement. In defence contracting, PSPC considers an extra factor, called offsets, when it chooses the winning defence contractor.

In 2014, the Canadian government overhauled its offsets program as part of the Defence Procurement Strategy, and called the offsets program the Technological Benefits and Value Proposition (ITB/VP) program. The ITB/VP program requires defence contractors to offset, or divert, their revenues to industries, sectors, or regions that are of strategic importance to the Canadian government. For example, the ITB/VP program might require the contractor to support exports, small and medium businesses, or specific regions of Canada. While these offsets may economically benefit the targeted industries, sectors, or particular regions, it is essential to recognize that they have nothing to do with the actual system, equipment, or service Canada is procuring. Supporting small and medium sized Canadian businesses, for example, does not make a fighter jet more capable, efficient, or reliable.

Through a combination of restrictions PSPC applies to technical and financial evaluations, coupled with the importance Canada places on offsets, ITB/VP has become the single most important and influential factor in defence procurement. This overemphasis on offsets, which have nothing to do with what is being procured, applies to Canada’s purchases of ships, fighter jets, ground vehicles, facilities, and services. In other words, Canada relies more heavily on offsets than it does on the technical merits and financial benefits of the proposed solutions when selecting the winning bidder for major defence contracts.

Procurement officers will argue against this assertion, claiming technical evaluation dominates the basis of selection, usually followed by price, and finally ITB/VP. What well-meaning procurement officers do not understand is the restrictions PSPC places on technical and financial evaluations limits the leverage, or influence, a bidder can exert in its technical and financial solution so drastically that offsets dominate the basis of selection. This is what we mean by the Best Value Procurement Myth.

Best Value Procurement – Debunking the Myth behind Canadian Defence Procurement is a short video that walks step-by-step through PSPC’s defence procurement processes. It follows the counterintuitive but inescapable logic of how a typical major defence procurement weighted at 60% Technical, 25% Financial, and 15% ITB/VP favours ITB/VP over the technical and financial scores. The video uses Canada’s own facts and figures to unequivocally show how Canada’s Defence Procurement Strategy discriminates against Canadian owned defence contractors.

This agenda-free video does not require a detailed knowledge or understanding of defence procurement or offsets. It treats the subject matter and interested parties with respect, and it draws incontestable conclusions based on evidence collected and published by the Canadian government.

The EXA Consulting Group is Canada’s leading firm in Capture Support, Proposal Support, and Strategic Enablement. With over 30 years’ experience, EXA generally leads pursuits for programs over $100M.