Thursday, May 26, 2016

Taxpayers could be on hook for bill after trade ruling questions $834M army truck contract

By: Lee Berthiaume, National Post 

OTTAWA — In a ruling that could cost taxpayers hundreds of millions of dollars, a federal trade tribunal has raised questions about the government’s handling of a military procurement project to buy desperately needed trucks for the army.

The ruling by the Canadian International Trade Tribunal represents the latest blow to Canada’s troubled military procurement system, which the Liberal government has vowed to fix without offering any details.
The vehicles were intended to replace a large part of the army’s existing truck fleet, which had been purchased during the 1980s and ’90s.
The vehicles were intended to replace a large part of the army’s existing truck fleet, which had been purchased during the 1980s and ’90s. Photo: 
In July 2015, the Conservative government announced that Pennsylvania-based Mack Defense, the military arm of the famed big-rig maker, had won a contract valued at more than $834 million to provide the Canadian Army with 1,500 specialized trucks.

The vehicles were intended to replace a large part of the army’s existing truck fleet, which had been purchased during the 1980s and ’90s. Many of those older trucks have been parked or sent to the scrap heap because of their age and to save money on maintenance and repairs.

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But Wisconsin-based Oshkosh Defense, which submitted its own truck design to the competition, challenged the government’s decision to award the contract to Mack Defense. Oshkosh alleged the department responsible for managing government purchases, Public Procurement Canada, had been unfair during design testing.

Late last week, the trade tribunal released a ruling calling on Public Works to re-evaluate Oshkosh’s design. If the results show the company should have won, the ruling says, then the government should compensate Oshkosh “for the profits it would have received had it been properly awarded the contract.”

If for some reason re-testing cannot be done, the government and Oshkosh are urged to negotiate compensation for the company’s “lost opportunity.” If they are unable to reach an agreement within 40 days, they are to go back to the tribunal.

Fortunately for the army, which is expecting the first new trucks to be delivered next year, the tribunal did not call on the government to push the reset button. “The Canadian International Trade Tribunal will not recommend that the contract awarded to Mack Defense LLC be cancelled,” the ruling reads.

Public Procurement Canada did not immediately respond to requests for comment.

Nonetheless, the ruling means taxpayers more than likely will have to foot the bill for the government’s error. It also reiterates the morass with which the entire military procurement system has been embroiled for years.

A large number of projects are facing delays, which has left the military lacking such vital equipment as resupply ships, or struggling to keep ancient equipment such as search-and-rescue planes in the air. Other projects are facing budget shortfalls that could result in fewer aircraft, ships and other pieces of equipment.

In addition, at a time of reduced military spending across the West, defence companies are fighting tooth and nail for every dollar. That includes resorting to legal challenges to try to scuttle the entire process in cases where their products lose.

The Liberal government has promised to fix the system, but has have offered few details on how that will happen. Defence Minister Harjit Sajjan has referred only to the government’s ongoing defence policy review, which isn’t expected to produce any results until next year.

Defence chief Gen. Jonathan Vance similarly dodged questions Tuesday about fixing the system, saying only that the government wants to be “innovative, both in process and in terms of where we put our efforts in the future.” He suggested that “bodes well for the country and for the armed forces.”

In the federal budget in March, the government announced it was pushing off $3.7 billion in planned equipment purchases for the foreseeable future. The government said such a “re-profiling” was necessary to ensure money was available when needed, but others such as retired general Rick Hillier said it was a budget cut.