OTTAWA - Defence Minister Harjit Sajjan will set the stage today for the Liberals' much-anticipated defence policy by casting a glaring light on what senior defence sources say is a massive "hole" in military spending.

The hole has been caused by years of under-investment in the Canadian Armed Forces, the sources argue, and resulted in little-to-no money for the replacement of essential, but aging, equipment.

The list, known in defence circles as the "Key 18," includes new logistical vehicles and engineering equipment, surveillance aircraft, and communications satellites for the Arctic.

The sources spoke on condition of anonymity.

The shortfall, which adds up to tens of billions of dollars, also includes upgrades to the military's current fleet of search-and-rescue helicopters and training for aircrews.

The result is that work that should have already been underway to buy 18 core pieces of equipment and services that the military needs has been stalled, the sources said, if it has started at all.

The extent of the problem hasn't been understood outside National Defence, said the sources, and caught the Liberals by surprise when they took office in November 2015.

It has since posed a real challenge as the government has drawn up its new defence policy, which is expected to be unveiled before NATO leaders gather in Belgium later this month.

The hole will be Sajjan's main focus when the minister addresses defence industry representatives and experts at a Conference of Defence Associations Institute luncheon.

But David Perry of the Canadian Global Affairs Institute questioned how the Liberals didn't know about the underfunding, which he and others such as the parliamentary budget office have highlighted for years.

"There was ample information available publicly that DND wasn't in a position to deliver on what was being asked of it," he said. "So the idea that this was a surprise to this government, that's just not credible."

Perry has previously estimated a gap of about $2 billion a year between current funding levels and promised new equipment in the next few years.

The parliamentary budget office released its own assessment in March 2015 that said the country's military structure would become unsustainable over the next decade at current spending levels.

A variety of factors have been blamed for the problem, including poor cost estimates during project planning and government's refusal to add more money when delays result in cost increases from inflation.

Sajjan is not expected to reveal how the Liberals plan to address the problem, including whether the government plans to put more money into the military or scrap some planned purchases.

Those details will have to wait for the actual defence policy, which the government says will be fully costed and could be released as early as next week.

But the fact the minister is raising the issue now has prompted questions in defence circles over whether the government is trying to lower expectations in advance of the new policy.

Perry said the Liberals are limited in what they can do to address the underfunding and ensure there is money available for the Key 18: add money; cut non-essential projects; or make tradeoffs in other areas.

The Liberals ran in the last election on a promise to create a "leaner, more agile" military and it's believed there is little room for significant new defence investments, given the current federal deficit.

But the sources noted the government wants more than the 65 new fighter jets previously promised by the Conservatives and Canada is facing pressure from the U.S. and NATO to increase defence spending.

Even if more money is added, however, there's no guarantee the department will be able to spend it, as evidenced by the decision to delay $8.4 billion in planned purchases over the next 20 years.

That problem has been blamed on a shortage of procurement staff, onerous amounts of red tape and a bureaucratic process that has slowed the military procurement system to a crawl.

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News from © The Canadian Press, 2017