Military contracts going to city firms; General Dynamics Canada, Thales net deals


By David Pugliese


The Ottawa Citizen

March 7, 2009


Two Ottawa companies will be awarded major military contracts on Monday as Defence Minister Peter MacKay moves to quell criticism that the Harper government has left domestic firms on the sidelines when it comes to supplying the Canadian Forces.


The deal will see major upgrades for the army’s existing command and control and communication systems, as well as the purchase of new software and equipment to improve how units share information and are controlled on the battlefield.


The army has earmarked around $260 million for the overall program, which will run until 2015. The project will begin this year.


General Dynamics Canada as well as Thales Canada, both of Ottawa, will be awarded the contracts, with the bulk of the work going to General Dynamics.


New jobs are expected to be created by the contracts, but at this point it is unclear how many positions will be added at the firms. The work will also maintain existing jobs.


Defence officials declined to discuss Monday’s announcement at headquarters.


But the award to the two firms will be portrayed by MacKay and Public Works Minister Christian Paradis as contracts being supplied to “Canadian” firms, according to defence insiders. Although General Dynamics Canada is owned by a U.S. corporation and Thales by a French consortium, both firms have a significant presence in Canada.


General Dynamics has about 1,500 workers in the Ottawa area as well as facilities in Calgary and Halifax. Thales has more than 260 Canadian employees, the bulk in Ottawa. It also has offices in Kingston and Quebec City.


The production work on the communications equipment will be done in Canada.


Monday’s announcement is in contrast to many of the other large-scale defence contracts announced over the last two years that went to American firms who did the work in the U.S.


Members of the country’s aerospace and defence industry, as well as opposition MPs, have been critical about the lack of work for Canadian-based firms from the multibillion-dollar equipment programs the Conservatives have under way for the Canadian Forces. In the summer of 2006, the Harper government announced that it would spend billions of dollars on C-17 and C-130 J transport planes and Chinook helicopters.


The C-17s, already delivered, were built in California while the C-130Js are going to be built in Georgia. The Chinook helicopters that the government is in the process of trying to acquire will be built in Philadelphia, Pennsylvania.


MacKay has also recently been pushing to launch a $3-billion program to buy new search-and-rescue aircraft for the Canadian Forces. His preferred choice is an Italian-designed aircraft being built in the U.S.


In January, MacKay came under criticism from Canadian autoworkers after he announced a $274-million contract to Navistar to build army trucks in Texas.


The same firm, however, recently laid off 500 Canadian workers at its assembly line in Chatham, Ont. Another 200 workers are expected to be laid off there by the spring.


Defence analyst Allen Sens said it is common for all governments to highlight military spending announcements as creating domestic jobs and supporting national economies. “But given all these big-ticket items purchased from foreign companies in the past couple of years, there’s a greater urgency to this particular announcement in highlighting the Canadian jobs it will create,” said Sens, a professor at the University of British Columbia.


MacKay has defended the awarding of various contracts to foreign firms, noting that, ultimately, Canadian companies benefit. In the case of the Navistar truck contract, he noted that the tires would be made in Canada and that Canadian mechanics would work on the vehicles.


Government officials also point out that each defence contract pays back more than its original value in what is known as industrial region benefits. In other words, foreign aerospace and defence firms that win contracts must spend at least the equivalent amount of the contract in Canada.


But the organization representing Canada’s aerospace industry has warned that domestic firms are not seeing quality work from the multi-billion-dollar defence contracts.


“Our industry remains acutely concerned that major defence procurements are proceeding in a way that will not fully engage and strengthen capabilities resident in the domestic industrial base,” Charles Lajeunesse, president of the Ottawa-based Aerospace Industries Association of Canada, wrote MacKay on Jan. 9. The association represents more than 400 companies in a industry that employs 90,000 workers.


There is a lack of “high value-added” jobs going to Canadian industry, Lajeunesse warned.


Those inside the Defence Department have been limited in what they can say publicly about the issue. But they privately argue that military needs come first and jobs for Canadians should be a secondary consideration.


Industry executives, however, say considering the ongoing economic problems facing the country, jobs for Canadians should be taken into account. They also argue that providing work to Canadian-based defence firms supports the military in the long run, since it develops and keeps much-needed expertise in-country.


Monday’s contracts are part of an ongoing army communications upgrade and support program that originally started in 2005. This is known as a “life extension” to that project, meaning that it will further modernize the equipment.


The work is designed to make use of improvements in technology to eventually electronically link various equipment in the military’s inventory so they can share information. In some cases, data from unmanned aerial vehicles and satellites would be quickly transmitted to troops. The project will also provide what is known as a “Battle Command on the Move” system to improve the flow of information from the battlefield back to senior officers.




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