This paper presents the challenges and lessons learned during the realization of a prototype collaborative engineering environment to support capability engineering under the auspices of an R&D Technical Demonstration Program within the Canadian Department of National Defence. The definition and motivation of capability engineering is discussed, followed by the role, relevance and approach taken towards enabling collaboration within it. The basics of the collaborative environment, both as a system of systems and as it was applied to a departmental use case are highlighted, with specific emphasis on the breadth of issues that arise, including application, technical, organizational, personnel, cultural and process.