Wednesday, June 15, 2016

Lockheed Gets Sole-sourced Maintenance deal on CC-130 Hercules

By: Lee Berthiaume, Ottawa Citizen 

OTTAWA — Months before a mini-war of words over the F-35 stealth fighter, the federal government and Lockheed Martin quietly inked a deal for the U.S. aerospace giant to provide maintenance support and training for one of the military’s transport plane fleets.

The $500-million agreement, which extended an earlier contract to 2021, was never publicly announced or put to a competition. This was despite Defence Department auditors flagging a lack of transparency and raising questions about value for money in the original contract.

The government has cited national security to justify why other companies were not allowed to compete. It also says the new contract addresses the auditors’ concerns.

One former Defence Department official says it’s no surprise Lockheed and the government have continued to do business while wrangling over the F-35. “There are only so many big players out there,” said Alan Williams, former head of procurement at National Defence.

However, Williams said the way the deal was concluded doesn’t pass the smell test, and that it raises fresh concerns about waste.

“National security exemptions should be used in really exceptional cases where there really is a national security risk to Canada,” he said. “You shouldn’t use it to get around poor planning.”

In December 2007, the Conservative government inked a $1.45-billion deal for Lockheed to sell 17 Hercules military transport aircraft to Canada.

Two years later, the contract was amended to include seven years of maintenance support and training at a cost of $800 million. The support work was not put to a competition because National Defence had implemented a policy that year to award support contracts to the company that provided the equipment.

Then last June, Lockheed proposed extending the contract another five years. Public Procurement spokesman Pierre-Alain Bujold confirmed an extension was signed on Dec. 15 for $504.3 million. He said the contract was not put to a competition because it was “subject to a national security exemption.”

The new deal was signed the same month Defence Department auditors raised concerns with the original contract. In particular, Lockheed received full payment but only did half the work originally expected because a shortage of pilots and mechanics meant the Hercules were only flown half as much as planned.

Complicating matters, the auditors wrote, was the fact Lockheed closely guarded how much the work cost it to perform. That threatened to make negotiations difficult for government officials wanting to tailor any new contract to the air force’s needs.

Defence Department spokeswoman Ashley Lemire said Tuesday that the new contract includes enough flexibility to meet the military’s current and future needs. Williams, however, said the only way to truly ensure the government and Canadians are getting value for their money would be to run a competition.

“I don’t know if the deal with Lockheed was the best one,” he said. “I worry when you sole-source any type of contract, you’re wasting taxpayers’ money. And there may have been other players out there, equally capable, that would be in our best interest.”

In addition to the Hercules maintenance contract and the F-35, Lockheed is also hoping to secure billions of dollars of work as part of the federal national shipbuilding plan.

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