MONTREAL – A recently retired general who headed a major cost-cutting effort at the Canadian Forces has been hired by CGI Group (TSX:GIB.A) to head its new defence, public safety and intelligence unit.
Andrew Leslie, who retired as a lieutenant general earlier this month after a 30-year career, led a review that recommended more than $1 billion in cuts through a reorganization of National Defence headquarters, including chopping thousands of personnel.
“I look forward to serving Canadians in a different capacity but with equally targeted objectives,” Leslie said in a statement.
“An efficient government able to take innovative actions combined with technologically savvy military and intelligence capabilities are needed to defend and protect all Canadians.”
Leslie was unavailable for an interview.
For one year, the retired general will be restricted by government rules from making direct representations to the Defence Department on behalf of CGI.
The Conservative government has dramatically increased defence spending since it came into office, but has been looking at ways to trim some costs as it tackles the deficit.
Among the options believed to be considered is outsourcing of some functions.
In his report, Leslie said the Defence bureaucracy in Ottawa has grown four times faster than those deployed on the ground, describing it as the “tail has grown bigger than its teeth.
The Defence Department said the report’s recommendations will be considered as the government develops its 2012 budget and will define “necessary organizational changes to prepare the Canadian Forces for the next decade.”
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The Montreal-based company said it was attracted to Leslie because of his efforts to improve the efficiency of military spending, knowledge of IT spending and military experience on the ground.
CGI spokesman Lorne Gorber added that Leslie’s knowledge of the key decision-makers is what makes him especially invaluable.
“For any of our senior guys here relationships are what matters most in this business,” Gorber said.
Jay Paxton, a spokesman for Defence Minister Peter MacKay, said the minister thanked Leslie “for his exemplary service to Canada” and wished him well in his future endeavours when asked if he had concerns that CGI may gain an unfair advantage from Leslie’s government work.
CGI has a history of hiring former top officials in government. It used that playbook in the United States where it hired senior officials in the EPA, housing and health-care departments, said analyst Ralph Garcea of Northland Capital Partners.
“He’s such a great hire because he just spent the last year looking at what’s wrong with the Canadian Forces,” Garcea said in an interview.
He said Leslie will be able to marry the technical expertise from CGI’s Stanley acquisition in the United States with his knowledge of the areas that need fixing in Canada.
“There’s a lot that needs to be fixed from a modernization perspective and he’s going to have some pretty interesting insights on the low hanging fruit.”
He estimates that CGI can eventually increase the Canadian unit’s annual revenues from under $10 million to between $50 million and $100 million.
Despite a 35-year history of working with nearly 100 Canadian government civilian agencies, CGI’s work in the defence and intelligence sector has remained limited.
The defence and intelligence area is one of the few remaining growth opportunities for CGI in Canada, which accounts for 48 per cent of its $2 billion in total annual revenues.
The Canadian government defence and intelligence market is estimated to be worth up to $3 billion a year. CGI’s key competitors include multinationals such as Lockheed-Martin, Northrop Grumman, IBM and CSC.
The company will offer services such as advanced analytics, biometrics and cybersecurity, operational logistics, systems engineering and training.
CGI’s role could be anything IT-related “all the way up to the classified James Bond-type of stuff but all the way down to the help desk for the guys out in the field,” Gorber said.
The experience gained by CGI’s acquisition of Stanley Inc., which gave it an entry into the defence and intelligence side of the U.S. government, will be key to helping win Canadian contracts, he added.
Some Stanley workers may help the Canadian unit but CGI plans to hire additional staff in Ottawa.
CGI paid US$1 billion for Stanley which handles sensitive work for the U.S. government including processing and doing security checks for visa applicants on behalf of the U.S. State Department.
Earlier this year, CGI chief executive Michael Roach said the Canadian work likely wouldn’t involve visa applications, but rather other IT services.
Among the most pressing for the government is cybersecurity, to protect against computer hackers and ensure identification security.
On the Toronto Stock Exchange, CGI’s shares gained 46 cents, or 2.4 per cent, at C$19.96 in afternoon trading.
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