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Friday, July 7, 2017

Boeing to Get $200 Million Maintenance Contract Despite Bombardier Fight

By: David Pugliese, The National Post 

A $200 million deal would see Boeing maintain the military’s C-17 aircraft despite claims by the Liberal government it is getting tough on the U.S. firm for its complaint against Bombardier
Boeing C-17 Globemaster III is being assembled at the Boeing assembly facility in Long Beach, Calif. in a July 31, 2012. The Canadian government may grant Boeing a massive contract to maintain the air force's fleet of C-17s despite a trade dispute with Bombardier. Damian Dovarganes/ The Canadian Press
Canada is set to approve a $200 million deal that would see Boeing maintain the military’s C-17 aircraft despite claims by the Liberal government it is getting tough on the U.S. firm for its complaint against Bombardier.

Liberal ministers have said all military procurement with Boeing is being reviewed as a result of that company’s decision to file a complaint with the U.S. government against Bombardier. Boeing is alleging Canada is unfairly subsidizing Bombardier’s CSeries civilian transport aircraft.

The Liberal government has also threatened to back away from the proposed purchase of 18 Boeing Super Hornet fighter jets.

The Boeing F-18 Super Hornet performs during its demonstration flight. Remy De La Mauviniere/ Associated Press / The Associated Press
But the upcoming C-17 deal shows how difficult it is to use military procurements as a bargaining chip.

Boeing, which built the C-17 transports, currently helps maintain those planes for the Royal Canadian Air Force. That agreement expires on Sept. 20, according to Public Services and Procurement Canada. To walk away from a new deal would jeopardize the operation of the RCAF’s fleet of five C-17s, military officers say.

Canada purchases C-17 maintenance and support from the U.S. government through what is called a foreign military sale. Boeing, however, does most of the work. The new deal on C-17 maintenance will cost Canadian taxpayers $195 million U.S.

The U.S. Congress was informed of the Canadian deal in late April.

“The Liberals don’t have much choice on the C-17 maintenance,” said Martin Shadwick, a defence analyst who teaches strategic studies at York University in Toronto. “Boeing is the prime contractor on that aircraft and a lot of the work will be done at Boeing.”

According to the U.S. government, the work on the Canadian C-17s will be done at Boeing’s facilities at Long Beach, Calif., and in St. Louis, Missouri. Lockheed Martin will also be involved.

In addition, the U.S. government noted that there are currently 13 employees from Boeing now in Canada who provide C-17 technical support on a regular basis.

The Liberal government declined to provide a list of the Boeing contracts or procurements it is reviewing. Instead Anthony Laporte, press secretary for procurement minister Judy Foote, repeated in an email that, “Canada is reviewing current military procurement that relates to Boeing. ”

Foreign Affairs Minister Chrystia Freeland announced that review in May.

Shortly before Freeland made her statement, a Boeing-built military communications satellite, paid for by Canada and other countries, was launched in the U.S. Canada contributed $340 million to the Wideband Global satellite built by Boeing. Defence Minister Harjit Sajjan praised the project, noting that the satellite will provide key communications for the Canadian military.

Sajjan said Boeing’s complaint against Bombardier is “not the behaviour of a trusted partner.” He called on the U.S. firm to withdraw its complaint but Boeing has declined. “This is a commercial matter that Boeing is seeking to address through the normal course for resolving such issues,” the firm noted in a statement.

Sajjan said Canada has had a good relationship with Boeing over the decades but the firm’s actions have now damaged that.

The Liberals are continuing to review the Super Hornet jet proposal and whether they should continue with the purchase. But Liberal ministers acknowledge Canada continues to have discussions with the Pentagon over the acquisition of the Super Hornets. If it proceeds, the Super Hornet purchase is expected to cost between $5 billion and $7 billion.

Shadwick said the Liberals might also find it difficult to back away from the Super Hornet deal. Sajjan has stated the Canadian military faces a critical gap in that it lacks enough fighter aircraft. New jets are needed quickly, the minister added.

Other aerospace firms are in the wings ready to offer Canada new aircraft, including Lockheed Martin with its F-35 fighter jet. “The political optics on a F-35 purchase wouldn’t be too good since Justin Trudeau campaigned directly against that aircraft,” Shadwick explained. “To turn around and then purchase the planes as an interim solution may be challenging from a political point of view.”

But Shadwick pointed out that the Boeing complaint against Bombardier could hurt the U.S. firm’s chances in the future in winning new defence contracts from Canada. Canada is interested in buying new patrol aircraft and aerial refuelling planes. Boeing has indicated it is interested in both of those multi-billion dollar programs.