04/25/2013 05:07 EDT | Updated 06/25/2013 05:12 EDT

The Government's Costly Hot Potato


If you need a symbol for the budget challenge facing Stephen Harper, look no further than the old Nortel campus in Ottawa's western suburbs.

Purchased by the feds for $208 million in 2010 from the bankrupt Canadian tech giant, the mammoth 370-acre complex could house an army. Covering 2.35 million square feet in 11 interconnected buildings, it was once the largest industrial research facility in the country, housing 15,000 Nortel staff.

An army, it seemed, was exactly what the Harper government had in mind for the massive space. Officials even scheduled an announcement in October of 2010: the Department of National Defence (DND) would take over the site, emptying a million square feet of office space in downtown Ottawa, and slashing its roster of locations in the nation's capital from 42 to just seven.

But somebody slammed the brakes on the announcement. And nearly three years later, no Conservative politician has set foot on the pricey property to publicly share the government's plans for it.

The site is turning into a costly hot potato for the government. Three years ago, military planners shocked analysts with their initial $623 million estimate for fixing the place up. Fast-forward three

years, and the latest estimated price tag is said to have jumped over 40 per cent, to $880 million.

If you're trying to figure out why anybody would spend $880 million to renovate a $208 million, nearly-new, state-of-the-art high technology complex, you're not alone.

National Defence is renowned for its cosy relationships between military brass and retired buddies, who supplement their pension income working as lobbyists, suppliers and contractors. In a 2011 report, retired Major General Andrew Leslie blew the whistle on the incestuous goings-on at DND headquarters. Leslie called for a 30 per cent reduction in the military's $2.7 billion spending on consultants.

Almost none of General Leslie's recommendations have been acknowledged, much less acted upon. So a green light to move DND into the Nortel complex could set off a feeding frenzy amongst

well-connected former brass who populate the executive suites of DND construction contractors.

Last year, Harper aggressively slammed the brakes on military spending, in a letter that was leaked to the media, he chastised Defence Minister Peter Mackay for not doing enough to reign in the generals.

Then in October, Harper used the installation ceremony for General Tom Lawson, the new Chief of Defence Staff to send a message that he wants the military to have "more teeth and less tail," warning of "very real budget constraints."

Between 2004 and 2010, DND's headquarters payroll bloated by 38 per cent, with the addition of 3,385 civilian employees, 756 regular-force soldiers, and 845 reserve soldiers -- at the same time that the Royal Canadian Navy was shedding 1,119 sailors.

This year, the government is planning to slice $1.8 billion and 1,641 positions from the military payroll. But when General Lawson appeared before the Senate defence committee in March, he denied there was any fat in the defence budget, even at headquarters.

"I would like to think that there was fat in the armed forces," General Lawson told the defence committee. "I do not think there is. I think that where we have invested taxpayers' dollars across the capabilities and capacities, and even in headquarters and contracting, the investment has been well responded to in terms of capabilities."

Maybe General Lawson -- and 110 generals and 350 colonels who report to him -- really expect the Prime Minister -- and Canadians -- to believe there's no fat in the military. Then he should explain why they need seven extra buildings, in addition to 2.35 million square feet of space in the Nortel complex, to house Canada's military headquarters. And they should explain why they need to blow $880 million, or more, on renovating a nearly new building.

Budget Highlights 2013