Prime Minister Stephen Harper's government is under increasing pressure to streamline its defense procurement infrastructure, record-keeping and reporting methods affecting dealings with Parliament.
The government's conduct in the planned purchase of F-35 fighters was criticized by Auditor General Michael Ferguson, who said the Department of National Defense failed to exercise due diligence in choosing the F-35 to replace the aging CF-18s.
Ferguson said the government wasn't forthcoming with Parliament about the jets' true estimated cost and made key decisions without required approvals or proper documentation.
His report showed the department made internal estimates that 65 F-35 jets would cost $25 billion over 20 years, but stated a much lower cost of $14.7 billion in public comments and submissions to Parliament.
The new command structure ties into growing concerns about Canadian defense costs and about lack of government transparency after allegations Harper and senior aides played down Canadian expenditure in Afghanistan.
The new Canadian Joint Operations Command will bring together various units of the Army under one command that will be in charge of operations in Canada, North America and across the world.
The CJOC will be introduced over the coming months and will be headed up by a lieutenant general, MacKay said in a statement.
"Transformation is built on some hard-learned lessons from a period of unrelenting operational pace," MacKay said. "It will give the (Canadian forces) the agility to adapt as the future security environment dictates at the best cost to Canadian taxpayers."
He said the restructuring will "result in a 25 percent reduction in national-level command and control overhead, and it will make more efficient use of administrative resources," the statement added.
Defense industry sources they could not yet calculate what the cuts would mean in terms of loss of business, retrenchment of work force and supporting staff and reduced orders from the military.
Chief of the Defense Staff Gen. Walter Natynczyk said CJOC will result in "a smaller, more efficient organization that will continue to deliver the same excellence in operational support to all of our people, at home and abroad."
The Canadian navy recently merged five naval schools in one training authority, with wide implications for procurement and revenue of supplier companies.
Although Canada pulled out of Afghanistan in December last year it still has a training program in the country. Canada's participation in the Afghanistan project has cost the taxpayer more than $11 billion and left 157 Canadian troops dead.
Most controversial of the planned cuts are likely to be in Afghanistan, while the troops remain deployed there.