Archive for the ‘PROCUREMENT’ Category


January 28, 2010


By David Pugliese

Ottawa Citizen

The Politics of Procurement: Military Acquisition in Canada and the Sea King Helicopter

By Aaron Plamondon

254 pages

Publisher: UBC Press

ISBN-10: 0774817143

ISBN-13: 978-0774817141

With black and white photos

In The Politics of Procurement, University of Calgary military historian Aaron Plamondon skillfully lays out the multi-decade saga of the Defence Department’s quest to replace the air force’s aging Sea King helicopters.

Plamondon argues that the procurement of military weapons and equipment in Canada has often been controlled by partisan political considerations and not by a clear desire to increase the capability of the Canadian Forces. As a result, he maintains that Canada has often failed to be effective in the design, production, or even the purchase, of weapons and equipment.

Plamondon touches on some early Canadian military equipment procurements to prove his point but his prime example to argue his case is the Sea King helicopter procurement.

It is probably the most famous or (infamous) military procurement of recent time. The EH-101 was originally selected in the early 1990s to replace the Sea Kings but that contract was cancelled by Prime Minister Jean Chrétien when he came to power in 1993. Chrétien had made the EH-101 an election issue and he cited the helicopter as an example of how the Conservative government was poorly using taxpayer’s dollars. His government paid $478 million in cancellation fees to scuttle the deal.

The military had to restart the process to buy a Sea King replacement, with the project divided into two elements, the acquisition of a search and rescue helicopter and the eventual purchase of a maritime helicopter.

In 1998 the winning search and rescue aircraft was selected but much to the embarrassment of the Chrétien government, the Canadian Forces had selected the EH-101 variant, the Cormorant.

After that there were more delays on the purchase of the maritime helicopter,  allegations of political meddling and legal battles.

Plamondon’s coverage follows the early days of the Sea King replacement program to Chrétien’s cancellation of the EH-101 and on to the purchase of the Cormorant. The book also takes the reader into the current controversial and much delayed Cyclone maritime helicopter project.

The strength of the book is that it ties together the story of the helicopter procurement over many years. Plamondon uses DND documents obtained through the Access to Information process, records from the National Archives and DND’s history branch, interviews with former procurement officials as well as news articles from over the years about the EH-101 and Cyclone acquisitions (including some of this writer’s articles – ones I had forgotten I had penned since the Sea King replacement stretches back more than two decades).

The book is a very good read for anyone interested in Canadian defence policy and a must read for those studying procurement issues.

One suggestion, however, for readers. Unless you are independently wealthy I would take a pass on hardcover version of this book which costs $85. Instead try to get the more reasonably priced softcover version at $32.95. UBC Press says the publication date for the paperback is July.



January 26, 2010


By David Pugliese

Ottawa Citizen

It appears another attempt to change defence procurement in Canada has fallen into the black hole of the federal bureaucracy.

Last year the Conservative government asked the Canadian Association of Defence and Security Industries (CADSI) to carry-out country-wide consultations with industry executives and other interested parties to establish more efficient procurement practices.

At the time Public Works Minister Christian Paradis, whose department is responsible for developing procurement contracts, said the consultations would provide for better planning and would build on ongoing initiatives for improving defence acquisitions.

But Paradis is gone with the recent Cabinet shuffle. Rona Ambrose is in and still has to get up to speed on her portfolio, with lots of issues on the go.

CADSI delivered its report in mid-December and it promptly disappeared into bureaucratic oblivion.

Defence Watch contacted CADSI president Tim Page in December shortly after he delivered the report but more than a month later he has yet to return that phone call.

Defence sources, however, say they expect the CADSI report to languish on a shelf collecting dust for quite a while. There are questions whether it will result in any changes.

The report join the government’s much ballyhooed Shipbuilding Policy, which may or may not be unveiled in the spring.

“The Department of National Defence is working with other stakeholder Departments on a recommended shipbuilding approach that will be brought forward to the Government in due course,” DND spokeswoman Lynne Rattray told Defence Watch last month.

She never defined what “soon” meant but industry representatives think that the strategy could be ready by the end of the first quarter of this year – maybe.

Meanwhile the Arctic Patrol Ship program and the Joint Support Ship program remain in limbo until the Shipbuilding Strategy is unveiled.

The consultations led by CADSI to improve procurement were equally ambitious. “The purpose of the events is to ensure the Government of Canada gets broad input from key Defence and Security stakeholders in the development of comprehensive and viable options that could establish more efficient procurement practices and help align domestic industrial objectives with procurement priorities,” noted the invitation to industry last year to take part in the process.

At the time, CADSI president Page said the meetings would allow his organization to determine where Canadian industry believed its top capabilities are centered and in what areas it can meet national security needs. “It’s a good opportunity to quantify and qualify what Canadian industry is good at,” he added.

CADSI represents more than 800 defense and aerospace firms.

At the time Page said the Conservatives appeared serious about improving and changing the defense procurement process.

“I don’t see this, and I don’t believe they see this, as an academic exercise,” he said. “I think they are genuinely interested in understanding how the country can benefit through a strengthened domestic economy in areas of strategic national interest to Canada.”

Some industry observers wonder, however, if CADSI put itself in a precarious position. By accepting a contract from the government it limits the ability of the organization to raise concerns or criticize government action or inaction on defence procurement, according to some observers.

Canada’s domestic defence industry is not happy that the Conservative government has spent billions of dollars over the last several years purchasing new military equipment, with little of that going to Canadian-based firms.

The anger has grown with news of layoffs in the domestic aerospace sector and the fact, revealed in September, that Germany has now replaced Canada as having the fourth largest aerospace industry in the world. Canada is in fifth place with the U.S., France and Britain maintaining their positions as first, second and third, according to the study done by AeroStrategy Management Consulting in the U.S.

The study was done for the Aerospace Industries Association of Canada (AIAC) and the federal government’s Industry Canada.

AIAC president Claude Lajeunesse has praised some the changes brought in last year by Industry Minister Tony Clement to improve how the government approaches Industrial Regional Benefits or IRBs.

But Lajeunesse has also said that industry must continue to be vigilant about the issue of defence procurement and the role domestic firms can play. “While we have achieved success on IRBs and the door is open on engaging industry in revising the approach to defense procurement, we must continue to advocate for a strong Defence Industrial Base in Canada to optimize the impact of defense procurement,” he said.

For more Canadian Forces and Defence Department news or articles by David Pugliese of the Ottawa Citizen go to David Pugliese’s Defence Watch at:


January 26, 2010

Navy says no to buying American U.S. restrictions on technology can lead to delays

The Ottawa Citizen

Jan 25 2010

By David Pugliese

Faced with delays and restrictions about what it can and cannot do with U.S. technology, Canada’s navy has opted to modernize its frigates using as much non-American equipment as possible for key systems on the ships.

The Defence Department had stipulated that the command-and-control systems on the multibillion-dollar frigate upgrade be free of U.S. regulations, say officials with Lockheed Martin Canada in Ottawa, the company handling the contract.

In the past, the strict enforcement by the U.S. government of technology restrictions under International Traffic in Arms Regulations (ITAR) has delayed the delivery of military equipment to Canada. In addition, in 2006 U.S. government officials tried unsuccessfully to limit the type of Canadians who could work on Canadian defence programs, specifically requesting that those who were born in certain countries or who had dual citizenship with particular countries not be allowed access to American technology.

Such restrictions violate Canadian law.

As a result, key radars, sensors and software to be installed on the Halifax-class frigates are coming from Canada, Sweden, Israel, Germany and the Netherlands.

“It was a desire (by the customer),” Don McClure, Lockheed Martin Canada’s vice- president of business development, said of the decision to use technology that wasn’t controlled by ITAR. “The primary thing is during the life of a warship there is the need to modify certain tactics or add certain sensors and the navy didn’t want to be restricted to having to ask permission (from the U.S.) for that.”

McClure said the command-and-control system the firm is developing in conjunction with Saab Electronics Systems of Sweden will be free of any U.S. export controls.

That will also allow the Ottawa company to market the system to other navies without having to seek U.S. permission.

Some of the weapons on the Canadian frigates use U.S.-technology and there are other American-made components that aren’t covered by ITAR on the vessels.

McClure said the frigate modernization is on track, with the first ship expected to be worked on starting in the fall. The Defence Department is spending a total of $3.1 billion on the program, which not only includes the work being done by Lockheed Martin Canada and its partners, but mid-life improvements to mechanical systems on the vessels to be done by shipyards on the east and west coasts.

The modernization of all 12 frigates will be finished by 2017.

Defence Department spokeswoman Jocelyn Sweet sent an

e-mail noting that the department did not specify that the materials and work associated with the mid-life maintenance of the frigates be free from U.S. ITARS.

But she added, “DND did require that any proposals related to the integrated combat system address how the contractor would mitigate any risk to the delivery schedule if they included sourcing of material or services from the U.S. that would invoke ITAR restrictions.”

Ottawa-based Thales Canada Defence and Security, which is also working on the frigate modernization, has noticed a spike in the desire for ITAR-free equipment at the Defence Department and from military forces around the world, said company official Conrad Bellehumeur. “Telling them something is ITAR-free produces a great interest” at DND, he added.

McClure noted that European companies are starting to gain an advantage in some marketplaces because of the U.S. ITAR restrictions.

ITARs have been partly blamed for the delays in the delivery of the Canadian Forces new maritime helicopter, the Cyclone, which is years behind schedule.

The U.S. enforces the ITARs as a way to prevent sensitive technology from falling into the hands of countries such as China and Iran.

But privately, some Canadian defence industry officials complain that the U.S. selectively uses ITARs to give equipment being provided by American-based companies an advantage in export situations. They say there have been cases where the U.S. State Department has used ITARs to prevent Canadian products from being sold overseas because those items have some American-technology in them, while at the same time giving approval to U.S. firms to sell the same components in the same foreign market.

Lockheed Martin officials said the frigate contract will create about 60 new jobs in Ottawa, largely in program management and manufacturing. Bellehumeur said the contract would maintain about 15 jobs in Ottawa at Thales.

For more Canadian Forces and Defence Department news or articles by David Pugliese of the Ottawa Citizen go to David Pugliese’s Defence Watch at:


December 6, 2009

By David Pugliese

Ottawa Citizen journalist

The Joint Support Ship project still sits idle waiting for the Harper government to move ahead on a new shipbuilding policy.

When will that be happening?

There was talk that the policy would be ready by the end of this year but that won’t take place. Some in industry expect a policy by the spring, unless a federal election gets in the way. If that happens, then all bets are off.

Work on a new shipbuilding policy was launched with great fanfare in the summer, with meetings between government and  industry representatives. But since then, the government has been focused on other issues.

The Canadian Navy, however, has signaled that it is ready to move ahead on JSS.

“We’re pretty much ready to be talking to the [defense] minister about what we need to do to advance the JSS so we’re ready to go,” Vice Admiral Dean McFadden told Defence Watch several months ago. “One thing that has caused us to take a bit of a pause in progressing that as an independent program is what I think is a superb initiative to try and develop a new and strategic relationship between government and industry in how this country goes about building ships.”

“That initiative gained a great deal of momentum in the summer,” McFadden added. “There was a forum held in Ottawa in July where I think we are coming to the fundamental issue — we want to stop doing a boom-and-bust building cycle in this country.”

And so it stands.

No Cabinet approval on a shipbuilding policy. Then no movement on JSS.

The big question in the maritime world is focused on when JSS will be delivered (although the more pessimistic ask, “Will it ever be delivered?”).

The project, before it ran into trouble, called for a contract to be awarded last year with the first vessel delivered in 2012.

But Dan Ross, the Defence Department’s Assistant Deputy Minister for Materiel, acknowledged the obvious to a Senate defence committee when he informed them that the delivery schedule won’t be met. But he still told the Senate committee (May 25) that he expected a request for proposals for the ships to be issued to industry in 2010. It could take another year to get to a contract and from there another four to five years to complete the ship, he noted.

That would mean the first ship would be delivered around 2016.

But even with that schedule Ross would not commit to the program delivering three Joint Support Ships at the end of the day. “I do not know if anyone here is prepared to state what the outcome will be,” he told the committee.

The JSS was originally announced in 2004 by the Martin government but the focus on Afghanistan diverted DND’s attention to equipment issues related to that war. As a result, JSS went on to the backburner for a bit. It did eventually proceed, only to derail in August 2008 after industry failed to meet the government’s specifications within the allotted budget.

The three JSS would replace the existing 40-year-old plus supply vessels which haul fuel and ammunition for naval task groups at sea. The ships would also provide support to the Canadian Army and special forces, carrying troops, vehicles, helicopters, ammunition and a hospital, as well as act as a command center for ground forces sent ashore.

For more Canadian Forces and Defence Department news or articles by David Pugliese of the Ottawa Citizen go to David Pugliese’s Defence Watch at:


March 29, 2009




By David Pugliese,

The Ottawa Citizen

March 23, 2009


A Cantley man and former soldier is in a battle with the Defence Department over his efforts to preserve a bit of military history.


Gilles Chartrand is trying to convince Defence Minister Peter Mac-Kay to change the rules he says prevent surplus army trucks from being put on the road.


Chartrand, who collects and restores Canadian military trucks, drives the vehicles in veterans’ parades. His latest project centres on what is known as the Medium Logistics Vehicle Wheeled, a Canadian Forces truck built in 1982 that is being sold by the government as surplus.


Chartrand has two of the trucks, built by Bombardier, but says he is not allowed to put them on the road.


The Defence Department, however, disagrees and in an e-mail stated the trucks can be made roadworthy.


“These Medium Logistics Vehicles Wheeled (MLVW) were issued for sale as ‘non-repairable, for parts only,’ without vehicle ownership papers,” the e-mail stated. “Should a buyer wish to drive the truck on the road, they must comply with their provincial regulations, as they would with any other vehicle, through their province’s normal licensing process, including safety checks and vehicle registration.”


If those provincial standards are met, then a licence to use the trucks on the road can be obtained, according to the Defence Department.


Chartrand says that is not the case. In the sale of these particular trucks, the Defence Department’s designation as “non-repairable” means that they can only be used for scrap.


“The safety inspection people will not even let us in the door as long as the trucks are deemed ‘non-repairable’,” Chartrand said. “All we’re asking from DND is to remove that designation. Let us take it to safety and we’ll pass the safety.”


Chartrand has written MacKay and his member of Parliament, Foreign Affairs Minister Lawrence Cannon, in the hopes they can reverse the Defence Department’s “non-repairable” designation on the trucks.


The two politicians have acknowledged receipt of his letter, but nothing more, he says.


A volunteer at the Canadian War Museum, Chartrand uses the restored vehicles to teach the public about the country’s military history. The former master warrant officer, who served as a mechanical engineer in the Canadian Forces, has his whole family involved in what he calls his expensive, but ultimately rewarding, hobby.


His son and his wife, Carolle, also a retired Canadian Forces member, are involved in the restorations, while another son collects military radios. “For us it’s a hobby, but it’s serious,” Chartrand said. “We’re trying to preserve some military history in the vehicles.”


Chartrand’s vehicles were in an Ottawa parade as part of the 60th anniversary celebrations for the end of the Second World War. He is also involved in a veterans breakfast at the end of May, where money raised will go to help injured Canadian soldiers who served in Afghanistan.


Chartrand said the U.S. government sells essentially the same truck on the surplus market — about 100 a day — and allows those to be driven on the road.


He said the Canadian-made version is far superior, with a different engine and extra safety features. They sell for between $5,500 and $7,500. So far, about 15 have been bought by collectors, Chartrand said. “We’re not talking about a whole lot of people here. It’s not like an army of trucks is going to be on the road.”


According to the Defence Department e-mail, before the trucks are sent to auction, the Canadian Forces strips the vehicles for any spare parts that are deemed useful for the remaining trucks in the fleet. “All vehicles are sold in an ‘as-is’ condition,” the e-mail states. “This means that there is no warranty and no guarantees associated with the sale of the vehicle.”


The army is now in the process of trying to replace the trucks. In 2004, the Defence Department warned in an internal report that the Medium Logistic Vehicle Wheeled truck could be hit by a “catastrophic” failure at any time because of poor brakes and steering systems.


But Chartrand said despite what the Defence Department claims, the vehicles are not only repairable, but in excellent condition. “Apart from a little bit of body work, these trucks are perfect,” he said of his vehicles. “You just walk in there and you hit the starter button and that engine fires right up.”





March 29, 2009




By David Pugliese, Reporter

The Ottawa Citizen


Defence deal set to bring up to 200 jobs to Ottawa; Thales Canada wins military contract worth $184 million

The Ottawa Citizen

Tuesday, March 10, 2009


Up to 200 new jobs could be created in the Ottawa area as a result of military contracts announced Monday.


Thales Canada, which has about 190 employees in Ottawa, will receive a $184-million contract to develop software for the army’s command and control system. The contract runs for five years, but there is an option to continue such work for an additional five years.


Thales spokesman Conrad Bellehumeur said the contract will sustain 60 jobs at its Ottawa facility. Those employees had already been working on earlier versions of the software for the army’s command and control systems.


The new contract would also create 30 new jobs at the firm’s offices in Ottawa and Quebec City, he said.


With subcontracts and spinoff work going to other high-tech companies, there is the potential for another 170 new jobs in Ottawa because of the Defence Department contract, according to Bellehumeur.


The battle management system being developed by Thales is based on original software that the firm created for the French army.


Bellehumeur said the firm sees a growing market for such software for civilian agencies, such as for police forces and those who deal with large-scale security operations, such as the Olympics.


He declined for security reasons to get into specifics about what the firm is doing for the Defence Department. But Bellehumeur said it involves integrating the flow of information from various sources on the battlefield.


“Thales’s strength is systems integration, so it’s taking all of the components of the system, whether it’s a handheld (device) for a soldier on the ground or computer imagery and integrating all of that,” he said.


There is also great potential to export such software to other countries, Bellehumeur added.


Thales Canada has 1,350 employees in Montreal, Quebec City, Ottawa and Toronto.


The Ottawa branch handles the defence portion of the company’s work, said Bellehueur. The bulk of the firm’s employees are in Toronto and work on systems for urban rail such as subways. The company’s parent firm is based in France.


The second contract announced Monday was awarded to General Dynamics Canada of Ottawa, but the bulk of the work will be done in the firm’s Calgary facilities.


General Dynamics Canada was awarded the long-term support contract for the Canadian army’s land command support system. The contract is valued at $341 million and runs for five years.


General Dynamics Canada spokeswoman Amy MacLeod said the contract will sustain 250 existing jobs at the company’s Calgary location.


General Dynamics has been providing support for the army’s digital communications systems since 2003.




March 8, 2009




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.




January 18, 2009


 The Ottawa Citizen

Monday, October 29, 2007

By David Pugliese

Source: The Ottawa Citizen


Twelve military equipment projects totalling $7.3 billion are considered “high risk,” have gone over budget and are at least two years behind schedule, according to a Defence Department review.



Taxpayers, however, will remain in the dark on exactly which programs have run into difficulty. The department has declined to release details. So far, $600 million has been spent on the programs in question.


Other equipment projects could also face cost overruns, but the department would not provide further details.


The analysis of capital equipment projects was done to identify higher-risk programs that warrant an audit, according to the study by the department’s chief of review services. It was produced in April and released recently.


“For the 12 higher-risk projects, project cost (or forecast) increased by 9 per cent on average and was behind schedule by 2.2 years,” the analysis said.


It added that those projects had not changed in terms of numbers, or type of equipment or capability to eventually be delivered .


The report also determined that non-competitive contracts could cost taxpayers extra, but it did not get into details about how much. “Sole-source acquisition can result in higher costs to the Crown, especially with amendments to the contract,” it pointed out. “Projects with competitively tendered contracts were considered lower risk,” the analysis said.


The analysis recommended the chief of review services conduct audits into five higher-risk projects. Because the department has limited auditing services available, it recommended that assistant deputy ministers conduct examinations into another six equipment programs.


The report says 64 per cent of 25 higher-risk projects have fallen behind schedule. That includes the 12 already identified to be in the most difficulty.


Such slippage is a strong indicator of the potential for delayed acquisition of the equipment or a capability as well as an increase in project management costs, according to the review.


The department recently put the document up on its website, but censored details about which projects have run into trouble as well as specifics about costs.


Defence officials declined to be interviewed about the review.


But in an e-mail to the Citizen, the department cited a provision under the access to information law that allows it to censor the report. It claims that the names of the equipment programs and other related details constitute advice to the department or to the defence minister, and thus cannot be seen by the public.


In its e-mailed response, the department said criteria for identifying projects for review could include the presence of high-risk transactions, cost or schedule changes, the initial risk assessment of the project, the overall value and a project’s history of meeting its set timetables.


The projects examined were those already under way in May 2006. The review examined 162 capital equipment projects totalling a little more than $51 billion.


The review did not look at the $24 billion in new equipment projects announced by the Conservative government between June 2006 and July of this year. Those new projects include the purchase of heavy-lift helicopters, the acquisition of C-17 and C-130J transport planes and new fleets of tanks, army trucks and supply ships. The Harper government also announced the construction of Arctic patrol ships, the establishment of a new training centre in the North and the modernization of the navy’s frigates.


Deliveries of C-17 aircraft have started, but most of the other programs are still in early stages, with the equipment to be delivered over the next decade.


Alan Williams, the department’s former assistant deputy minister for materiel, said the projects examined by the review could include equipment purchases, upgrades to existing equipment or in-service support contracts for various systems.


Mr. Williams said he found it significant that the review raised the question about sole-sourcing of military contracts. “In contrast to what the government has been saying, they’re acknowledging that you spend more money on sole-source contracts,” said Mr. Williams, author of Reinventing Canadian Defence Procurement. “Without competition, you can waste taxpayers’ dollars.”


The Harper government has come under fire in the last year in the Commons for what critics say are a series of non-competitive contracts awarded to defence firms. MPs with the NDP, Liberals and Bloc Québécois have all warned that directing contracts to particular firms without competition costs taxpayers money and limits the involvement of domestic firms.


The government has responded numerous times that the procurement process is fair, open and transparent. The equipment is needed quickly by the military, it contends.


The chief of review services’ analysis recommends strengthening the management of capital equipment programs by conducting audits early in the acquisition process. It also pointed out that more management control should be directed to programs based on their level of risk.


Idnumber: 200710290001

Edition: Final

Story Type: Business

Length: 781 words



NDATE: 20071029

NUPDATE: 20071029

DOB: 20071029







December 29, 2008




Conservatives won’t collect $36M late fine for helicopter supplier; Sikorsky will miss Cyclone delivery date by at least two years


By David Pugliese

The Ottawa Citizen


Dec. 28, 2008



The Conservative government has decided that U.S. aerospace giant Sikorsky won’t have to pay $36 million in penalties even though the maritime helicopter it is building for the Canadian Forces is being delivered two years late.


The late penalties were put in place when the contract was signed in 2004 as a way to ensure the aircraft would arrive on time.


The original contract called for the first Sikorsky Cyclone helicopter to be delivered to Canada last month, but now that won’t happen until November 2010.


Instead, the government has cut a new deal with Sikorsky, resetting the clock on when the firm would be liable for late penalties, if at all. The company has been given another two years of grace before facing any sanctions.


Liberal and Conservative politicians, as well as Sikorsky officials, have, in the past, highlighted the penalties as evidence there were severe consequences if the firm didn’t deliver on time. The contract clause allowed the federal government to charge the company $100,000 a day for every day it was late, up to a maximum penalty of $36 million.


In January, Defence Minister Peter MacKay brought up the penalties after news reports suggested Sikorsky would not deliver the aircraft on time. “There are penalties and clauses that will kick in,” he warned.


In June, a response from Prime Minister Stephen Harper’s office to reports that there were problems with military equipment projects, including the Cyclone deal, cited the penalties.


“All companies are expected to live up to their contracted obligations and our suppliers are expected to provide what was agreed to,” Mr. Harper’s office said.


Duff Conacher, co-ordinator of Democracy Watch, said the decision by the Conservatives not to enforce the contract penalties is “practising politics as usual just like the Liberals would.”


Mr. Conacher said the announcement timing, on the night of Dec. 23, and the fact that the original press release did not mention the Conservatives were setting aside the fines, is another indication the government is trying its best to hide the deal.


“I’m amazed the Conservatives rolled over on this one so easily because they had made such strong statements before about using the financial penalties,” he added.


Severe financial penalties for late delivery of military equipment are common in some other nations, but in Canada, such sanctions are not usually imposed. Some in the defence industry doubted from the beginning that Sikorsky would ever face any kind of penalty, while others stated that a maximum $36-million fine was little deterrent on a project worth $5 billion.


Under the new deal, Canadian taxpayers will now pay Sikorsky $117 million more for improvements to be made to the Cyclone, as well as changes to the long-term in-service support package for the aircraft.


The government is not discussing the exact nature of those improvements. The Defence Department and Mr. MacKay’s office declined comment, referring inquiries to Public Works and Government Services Canada.


An e-mail from Public Works notes the extra money would go for “an alternate design solution to the helicopter communication tactical data exchange and providing additional capabilities for the helicopters.”


The helicopters would be able to carry more cargo or fuel if needed, but the e-mail doesn’t explain further.


Other unspecified improvements in the design of the 28 helicopters would “provide the helicopter with growth potential for the engine, main transmission and drive system.”


When asked to further explain what changes would be made to the Cyclone’s design, Public Works re-sent the same information it provided the first time.


At one point, there was talk about installing more powerful engines than were originally offered by Sikorsky, but the government is not saying whether this will happen.


Sikorsky also declined to detail what changes will be made. But it did release a statement that it was pleased with the new deal.


“We’ve worked hard with the Canadian government to reach an agreement that will provide these highly sophisticated and capable aircraft to the Canadian Forces in the shortest amount of time possible,” said Sikorsky spokesman Paul Jackson. “We are continuing to push ahead at full speed with the program.”


The e-mail from Public Works suggested the government did not hold Sikorsky responsible for the two-year delay, but did not elaborate.


Steve Staples, president of the Rideau Institute in Ottawa, said the Conservatives should hold Sikorsky to the original terms of the contract and hit the firm with the penalties that are allowed for in the deal.


“Why have financial penalties if you’re not going to enforce them?” said Mr. Staples, whose institute has spoken out against defence spending and procurement.


“Instead of making Sikorsky pay for late delivery, the government turns around and gives them more money to do what they should have done in the first place.”


In the press release, Mr. MacKay said the Canadian military will receive a “great aircraft.”


But Mr. Staples questioned that claim. “DND and the government are being pretty secretive about all of this,” he said. “If this was truly providing taxpayers and the Canadian Forces with better value, then why are they refusing to provide details?”


Sikorsky is teamed on the contract with General Dynamics Canada of Ottawa and L-3 Communications MAS Canada Inc. of Mirabel, Que.


Agusta-Westland, Sikorsky’s rival in the original helicopter contest, predicted in 2004 that the firm would not be able to meet its timetable because the Cyclone was a developmental aircraft and not in production at the time.


Sikorsky officials dismissed such claims. In interviews in February and July 2004, they said they would have no problem meeting the deadline as the Cyclone was based on an existing civilian helicopter, the S-92.


“We are well positioned to take this aircraft, which has the latest technologies available in it, and navalize it,” said Bruce McKinney, Sikorsky’s director for the maritime helicopter project.


After a strike at the Sikorsky plant, the Canadian government allowed the firm a slight delay in delivering the aircraft. It modified the delivery date to January 2009 instead of November 2008.


Earlier this year, Mr. MacKay blamed former prime minister Jean Chrétien for the delays in the project. Mr. Chrétien cancelled the maritime helicopter program in 1993 out of concern the country couldn’t afford it at a time of a large deficit. The Liberal government paid a $500-million penalty for the cancellation and the project was restarted years later.


But Liberals have called Mr. MacKay’s claims ridiculous and point out that most of the Cyclone contract has unfolded under the Conservative government’s watch.




For more Canadian Forces and Defence Department news go to David Pugliese’s Defence Watch at:




Procurement problems continue; Canadian Forces truck project up in air

June 18, 2008

The Ottawa Citizen

June 17, 2008

By David Pugliese


A Defence Department project intended to be a straightforward and relatively quick purchase of commercial trucks for the army has gone off the rails after only one firm bid on the multimillion-dollar program and the government determined its proposal didn’t meet requirements.


The contract to buy 800 commercial trucks, slightly modified for military use, was originally announced in June 2006 and labelled by then-defence minister Gordon O’Connor as one of the Harper government’s top priorities.


Military officials expected the purchase to run smoothly since the vehicles would be based on a commercial design with only minor modifications needed. But vehicle firms shunned the program and only one company, International Truck of the U.S., put in a bid. That company’s bid, however, has now been deemed “non-compliant,” and it’s unclear how the Defence Department will proceed.


The truck project is the latest large-scale military procurement to run into difficulties, with firms either deciding the hassle they face in dealing with the Canadian Forces is not worth the effort, or others being disqualified or deciding not to bid because of what they say are unreasonable requirements set out by the military and Public Works.


In the last month, two companies withdrew from a $100-million project to lease aerial drones for the Afghanistan mission. Officials with both firms have said the financial risk to industry on the project was just too great to entice them to compete. The government then decided that the remaining two firms in the competition didn’t meet the requirements, so the bidding has been extended.


Around the same time, General Dynamics of Canada withdrew from the $1.1-billion project to upgrade the navy’s frigates after the firm determined the program was not commercially viable. That left only one company in the running, but Public Works and the Defence Department have extended the bidding process as they try to figure out what to do next.


Earlier this year, the $2.9-billion project to build a fleet of supply and transport ships for the navy ran aground after the industry consortiums involved informed the Defence Department that not enough money had been set aside to build the vessels. The military is now asking the government for more funding.


In addition, Defence Department and Public Works procurement officials are still trying to straighten out a $5-billion project to purchase maritime helicopters after U.S. aerospace giant Sikorsky informed them they had fallen behind schedule on delivery.


Industry officials say part of the problem is that the Canadian Forces often wants suppliers to make numerous changes to their products or deal with requirements that can’t be met without major design changes.


Since the Canadian Forces orders relatively small quantities of gear, it usually isn’t financially worthwhile for firms to make such changes. Even those companies that once would have made concessions no longer need the business, because many are working flat-out to supply the U.S. war effort in Afghanistan and Iraq.


Industry officials say four or five firms should have bid on the Defence Department truck project, but the fact that only one came forward should be seen as a signal to the government that there are problems with the procurement process.


The Defence Department did not respond to a request for comment.


Public Works spokeswoman Lucie Brosseau said a contract for the trucks is expected to be awarded in January 2009. Delivery of the first vehicles is scheduled for the summer of 2009, said Ms. Brosseau.


Roy Wiley, corporate spokesman for International Truck, declined to discuss why the firm’s bid was deemed to be non-compliant, and said what happens next will be up to the Canadian government.


“We have to wait until we get some direction from the government,” said Mr. Wiley. “Are they going after bids again? If they go after bids, I’m sure we’ll be a bidder.”


Acquiring new trucks is critical for the Canadian Forces since the existing fleet, purchased in 1982, is falling apart.


The truck replacement was to have been done in two phases. The 800 commercial vehicles were the first phase while follow-on phases included the purchase of 1,500 standard military pattern trucks with 300 trailers and 150 armour protection kits. Those vehicles would be for use on international operations such as Afghanistan. It’s expected several firms will compete when the bidding for that part of the project begins.


The total project is estimated to cost $1.1 billion, but military officials have refused to say how much the commercial truck portion is worth.


Army chief Lt.-Gen. Andrew Leslie has said the vehicle replacement should have been done five years ago.



For more Canadian Forces and Defence Department news go to David Pugliese’s Defence Watch at:



Online: Blog


What’s so secret about a new army manual that was public domain for more than a year? For all things military, check out David Pugliese’s blog Defence Watch at