Thursday, May 11, 2017

FWSAR Budget Jumped by $1B - but Bidders were Unaware

By: David Pugliese, The National Post 

The Canadian government made a last-minute, billion-dollar change to how much it was willing to spend on its new search-and-rescue aircraft fleet, but didn’t bother informing the bidders trying to win the contract to build the planes of the change in budget.

In December, the federal government announced it would spend $4.7 billion to buy a fleet of C-295 planes from Airbus, including long-term support for the planes. The losing bidder, Italian aerospace firm and Airbus rival Leonardo, had been under the impression Canada could only afford to spend $3.4 billion, so had tailored its bid to that amount.

Leonardo has gone to the Federal Court in Ottawa to ask a judge to overturn the contract, arguing that the C-295 aircraft cannot fulfill the search-and-rescue missions as outlined in the requirements provided to industry. But it is also angered by the last-minute budget switch.

“If we had been told that was the budget then our bid would have been much, much different,” said retired Lt.-Gen. Steve Lucas, who is a consultant for Leonardo. “We still haven’t been given a straight answer on how the budget jumped to $4.7 billion.”

The new details about the fixed-wing search-and-rescue aircraft program are emerging as the Liberal government prepares to announce its defence policy review, likely to include a plan to spend tens of billions of dollars on new equipment.

The Department of National Defence acknowledged in an email to the Ottawa Citizen that companies were provided with the $3.4 billion figure in the information they used to develop their bids. But DND now says that information was “incomplete.”

“The $3.4 billion was a notional figure based on original estimates from 2011,” the DND told the Citizen, and did not take into account the full costs.

Documents obtained by the Citizen also show that at various briefings for industry in the run-up to the bidding deadline, federal officials consistently used the $3.4-billion figure.

DND told the Citizen that the acquisition process looked at overall cost, the capability of the aircraft being offered and the economic benefits the bids offered to Canada. “The winning bidder built its strategy around this scoring system with emphasis on the capability which included the requirement for modern and effective technologically advanced systems, and a robust comprehensive in-service support program to ensure availability of aircraft when needed,” DND said.

But Leonardo representatives are questioning why they weren’t told about the change in budget and why Airbus had information that led them to submit a bid with a significantly higher pricetag.

“It’s strange that (Airbus) would bid more than $1 billion over the stated budget and not be worried about doing that,” said Lucas.

If Leonardo had been aware the Canadian government was willing to spend more than the $3.4 billion indicated, it too could have improved its bid with more capability on the aircraft and more benefits for Canadian companies, he said.

Lucas, the former head of the Royal Canadian Air Force, said it is unclear what extra capabilities and services Canada will get for the added $1.3 billion. Leonardo has asked the federal government for further details but, Lucas claims, it has not received adequate answers.

Airbus declined the Citizen’s request for comment, saying that the federal government should answer questions about the contract.

When the Liberal government awarded the contract to Airbus in December, cabinet ministers highlighted the importance of having the right aircraft for the job. “With this technology, we are giving our women and men in uniform the tools they need to continue to deliver effective and essential search-and-rescue operations,” Defence Minister Harjit Sajjan said.

The new planes will replace the RCAF’s 40-year-old Buffalo aircraft and older model C-130s currently assigned to search-and-rescue duties.

The RCAF will receive 16 C-295s. Their delivery is expected in 2019 but it is unclear what would happen were the Federal Court to find in Leonardo’s favour and overturn the government’s deal with Airbus.

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