Friday, June 2, 2017

Ottawa suspends talks with Boeing over Super Hornet jet purchase


The Trudeau government has suspended negotiations with Boeing Co. to purchase fighter planes as it continues to play hardball with the Chicago company over a U.S. trade complaint the firm lodged against Montreal aircraft maker Bombardier Inc.

Steven MacKinnon, parliamentary secretary to Public Services and Procurement Minister Judy Foote, announced Thursday that Canada has paused talks with Boeing as the dispute shows no signs of winding down.

The Liberals have long planned to buy 18 Boeing Super Hornet jet fighters to fill what they say is a gap in Royal Canadian Air Force capabilities while Ottawa deliberates on a longer-term plan to replace this country's aging CF-18 warplanes.

"We have a capability gap, we outlined a process, our partner in that process is not acting like a valued partner right now, so we've suspended discussions with that partner," Mr. MacKinnon told reporters after a speech at the CANSEC arms fair in Ottawa, sponsored by the Canadian Association of Defence and Security Industries.

There have been no meetings between the Trudeau Liberals and Boeing since the company first threatened to jettison the contract, a person familiar with the matter told The Globe and Mail.

Scott Day, a spokesman for Boeing, said direct communication is important but the company would not necessarily be communicating regularly with the Canadian government on the Super Hornet purchase in any case because it is a government-to-government transaction.

"There are different avenues to get to a foreign military sale," Mr. Day said. "Sometimes, the contractor is involved in those sale purchases and sometimes they're not."

Mr. Day said Boeing continues to work with the U.S. Navy, its American government partner, on concluding the sale to Canada. "We've not been told to stop producing materials for the Navy," Mr. Day said. "We're happy to answer questions when the government of Canada has them for us."

News of the impasse comes one day after Canada's Defence Minister doubled down on Ottawa's threat to jettison the multibillion-dollar purchase if Boeing doesn't withdraw a complaint with U.S. trade regulators that could lead to duties being slapped on Bombardier planes. Harjit Sajjan suggested in a speech Wednesday that Boeing – which has benefited from billions of dollars of sales to Canada over the decades – is not behaving like a "trusted partner" of Canada .

On Thursday, Boeing cancelled an announcement it was going to make about the Super Hornet jets at the arms fair in Ottawa. The plane maker was set to provide details about Canadian-based suppliers benefiting if the contract was finalized, but scrapped the announcement "due to the current climate," it said in a statement. Boeing has roughly 560 aerospace suppliers in Canada and says its commitment to the country remains unwavering.

In May, the U.S. Department of Commerce announced it will investigate accusations from Boeing that sales of Bombardier's new C Series jetliner constitute dumping into the U.S. market at "absurdly low prices," because the plane is subsidized by the Canadian and Quebec governments.

The Department of Commerce and the U.S. International Trade Commission are probing the allegations. A preliminary determination on Boeing's petition is expected by June 12.

In a written response to Mr. Sajjan's speech Wednesday, Boeing offered no indication that it was considering backing down on its trade complaint against Bombardier. The company said its complaint is a commercial matter that it is seeking to address through proper channels.

Canada's initial purchase of these Super Hornets could cost $2-billion, but their maintenance, support and upgrades could cost as much as $10-billion over the full period of their use. That could mean billions of dollars more in parts and support for Boeing beyond the initial capital investment.

Liberals to Award $5B Navy Maintenance Contract to Private Company

By: David Pugliese, The Ottawa Citizen 

OTTAWA — The Liberal government will soon announce a $5.2-billion plan to privatize maintenance of new navy ships despite concerns the deal puts key portions of Canada’s military capability in the hands of a private firm.

A May 29 Department of National Defence briefing document obtained by the Ottawa Citizen outlines the unprecedented extent of the in-service support contract to be awarded to the Canadian subsidiary of the French defence giant Thales. The firm will be responsible for much of the maintenance of the Royal Canadian Navy’s new Arctic Offshore Patrol Ships and the Joint Support Ships.

The company will be given significant access to Department of National Defence facilities and support equipment, as well as oversight of federal workers.

Treasury Board approved the contact on May 11, according to the briefing document.

Pierre-Alain Bujold, a spokesman for Public Services and Procurement Canada, said earlier this year the contract would be awarded in the fall of 2017.

But sources say that date has been moved up and the Liberal government now plans an announcement by the end of June.

Earlier this year leaders of 10 unions whose workers are involved in navy ship maintenance wrote Defence Minister Harjit Sajjan to ask that the contract be put on hold. The unions say they haven’t got a response yet from Sajjan.

“We’re telling them as their employees that they’re going into this with blinders on and they don’t know what the outcome of this (plan) will be,” Jerry Ryan, president of the Federal Dockyard Trades and Labour Council East, said in an interview.

“This is a significant change in how things are being done,” he added.

Unions ask Liberals to delay signing multi-billion dollar ship contract in wake of Mark Norman’s removal
Liberals select French firm for $5.2-billion ship-maintenance project. But it could cost more in long run
Government announces winner-take-all competition for $5-billion contract to maintain new navy ships

The fleet maintenance facilities in Halifax, N.S., and Esquimalt, B.C., are the largest industrial facilities owned by the DND. Staff and equipment support naval operations but have also lent their assistance to army and air force endeavours.

The unions are worried that once private contractors take on significant roles in maintaining the ships the knowledge and skills built up over the decades among the federal work force will gradually decrease. That, in turn, will prompt the government to hire more contractors.

In addition, Ryan pointed out it doesn’t make sense from a security point of view to turn over responsibility for preparing navy ships for military missions to a private firm whose main interest is making a profit.

“We’ve been the safety net for the Canadian navy and now they’re removing that,” he noted.

The unions are not alone in their concern.

The government had earlier been warned by DND that its strategy of having one firm in charge of maintenance for both fleets could cost taxpayers more money in the long run, according to documents obtained by the Ottawa Citizen.

Selecting one company for a single in-service support (ISS) contract covering two types of ships could give one firm too much control, warned an April 2012 DND briefing note for then deputy minister Robert Fonberg. “A single ISS provider may assume a ‘take it or leave it’ attitude at the time of contract option renewal, forcing prices up.”

A dispute with the contractor could also force the Royal Canadian Navy to resort to conducting maintenance and support for the ships on a piecemeal basis, a development that would affect its operations, added the briefing note.

The deal with Thales would see the firm provide in-service support for an initial period of eight years, with options to extend services up to 35 years.

John MacLennan, president of the Union of National Defence Employees, said the unions have continually warned the federal government the plan is too risky but those concerns have been ignored. He noted the government has yet to produce a business case showing turning over such maintenance to the private sector would save money or be more efficient.

The first Arctic Offshore Patrol Ship is being built by Irving on the East Coast and is expected in 2018. Construction has yet to start on the two new Joint Support Ships. The first of those supply ships, to be built by Seaspan in Vancouver, is expected in 2021.

RCN Warship Replacement plan 2.4 times over budget: PBO

OTTAWA — The federal government's multibillion-dollar effort to replace the navy's warship fleet could cost taxpayers 2.4 times more than first expected, Ottawa's budget watchdog warned Thursday in a new report.

And the longer a process tripped up by delays drags out, the more it's going to hurt the public piggy bank, the analysis found.

The parliamentary budget officer estimates Ottawa will have to spend nearly $61.8 billion to replace 15 ships — more than twice the original 2008 budget of about $26.2 billion.

Looking at a per-ship price tag, the cost is likely closer to $4.1 billion, rather than the $1.7-billion estimate released in 2008 by the then-Conservative government.

At that higher rate, the office believes the government would only have enough cash to buy six ships, if it still expects to keep the program on budget.

"There's a gap there and if the government wants to build 15 ships, then they have to, obviously, set aside more money for that," assistant parliamentary budget officer Mostafa Askari said in an interview.

"We don't really know what the original budget estimate was based on because there was no detailed costing provided... So, we don't really know on what basis they had $26 billion."

Askari said there is no detailed documentation available that breaks down the federal government's original estimate.

The PBO did acknowledge its calculations were based on assumptions it made about the specs of the future warships, which could differ from the blueprints that are ultimately selected by the government. The number-crunching models it employed also have a range that could mean the eventual price paid by taxpayers will be 20 per cent above or below the PBO estimate.

The Trudeau government launched a competition last fall asking some of the world's largest defence and shipbuilding companies to design a potential replacement for the navy's 12 frigates and three destroyers.

The chosen designs will be constructed by Irving Shipbuilding in Halifax, and delivery of the new vessels is expected to start in the mid-2020s.

The massive program has faced delays, including a recent announcement that gave competing firms another deadline extension to submit their designs.

The PBO pointed to several factors that can really drive up the price of naval vessels. They include the weight of the ships, their increasingly complex combat systems, ammunition in the form of missiles —and time.

"The more you delay, the more you have to pay," said Askari, who added that, at over a year in the making, this latest PBO report likely took longer than any other study released in the past by the office.

The costs of building sophisticated warships can increase significantly as time passes, he said.

U.S. studies have shown the rate of inflation associated with defence projects, and shipbuilding in particular, is considerably higher than the average rate of inflation for goods and services across the whole economy.

For example, Askari noted that the costs of combat systems on warships rise by 6.5 per cent per year.

The PBO model predicted the $61.8-billion price tag for the 15 ships would grow to $64.4 billion after a one-year delay and to $69.9 billion after a three-year delay.

When asked about the PBO's findings, the parliamentary secretary to Public Services Minister Judy Foote said the Liberals are aware the previous Conservative government was "low-balling" the price of replacing the warships.

Steven MacKinnon said the public will find out in the coming weeks and months whether Ottawa will stick with its plan to build 15 ships.

MacKinnon was also asked if he had concerns that a bigger price tag could leave Canadians with sticker shock.

"First of all, you have a number that extends over many years, you have a navy that has depleted hardware," MacKinnon said.

Canada and Canadians see themselves as a seafaring nation, a lot of our history is built on that. So, I think Canadians very much support the re-establishment and sustainment of a Canadian shipbuilding industry.

"I think Canadians also understand that we have some big choices to make in that area and that if we're going to have Canadian jobs, with Canadian technology, steel from Canada built by Canadians, that's going to cost money."

Tory MP Kelly McCauley said the gap between the original 2008 cost estimate made by his party and the PBO projection is likely a lot narrower than what was in Thursday's report.

For example, he said the PBO numbers accounted for development and ammunition costs, even though it's unclear whether the original estimate did the same.

"So, it may not exactly be an apples-to-apples issue," said McCauley, adding that the Conservatives are far more concerned about delays by the Liberal government that could cost the treasury several billion dollars per year just for inflation.

"All we see is delay, after delay, after delay from the current government... To me, that's taxpayers' money going out the door."

The budget office estimate included costs for development, production, spare parts, ammunition, training, government program management and upgrades to existing facilities. It did not factor in the costs for the ships' operation, maintenance and mid-life upgrades, except for spare parts that will be purchases at the time of construction.

— With files from Mike Blanchfield; follow @AndyBlatchford on Twitter

CAF Abandons Mefloquine as main drug to combat Malaria

By: David Pugliese, The Ottawa Citizen 

The Canadian military will no longer use mefloquine as its main drug to combat malaria.

The Department of National Defence and the Canadian Forces announced Thursday the release of the findings from the Surgeon General’s Review on the Operational Use of Mefloquine. The review looked at available literature on mefloquine use and how it is used in an operational setting.

“Mefloquine will now only be recommended for use if a CAF member requests it, or if there are contraindications to the member being prescribed other anti-malarials,” the DND noted in a news release.

“We are recommending mefloquine as a second line drug only, because of the unique operational environment that we work in,” Brigadier-General Colin MacKay, Surgeon General, noted in a statement. “This direction should not be applied to a non-military environment. We will continue to monitor and review all relevant scientific literature on mefloquine.”

More from the DND release:

Compared to currently recommended alternatives, the body of evidence suggests mefloquine is not consistently associated with an excess overall risk of adverse effects, nor is it associated with an excess risk of not being able to perform occupational duties.

No evidence was found (that met the inclusion criteria) that would suggest potential long-term adverse effects of mefloquine on human health.

The report also recommended caution for the CAF, because the deployment of large numbers of personnel within a short period of time can pose challenges for adequately screening individuals for potential contraindications. Additionally, the dispersed deployment of personnel, limiting access to physicians on operations, may reduce opportunities to assess for adverse effects and if necessary to provide alternative medications to CAF personnel taking mefloquine. Also, the nature of the short term side effects associated with mefloquine could impact an individual’s performance and could be confused with usual responses to operational situations, which would in turn complicate the management of adverse effects.

Monday, May 29, 2017

Bercuson: Peacekeeping & Promises

By:  David Bercuson, Canadian Global Affairs Institute

The Liberal promise to re-engage Canadian troops in United Nations peacekeeping ventures seems to have gone the way of most of their defence promises – unfulfilled, delayed or just plain forgotten. And like some of the other Liberal defence promises – such as to rule out any consideration of the F-35 stealth fighter to replace the CF-18 – it was only half thought through in the first place.

In the 2015 federal election, the Liberals fought tooth and nail against the NDP for the left-centre vote in places such as the Greater Toronto Area, Quebec and British Columbia’s lower mainland. Stephen Harper’s government had already withdrawn Canada from Afghanistan – and had begun to levy deep cuts on the national defence budget – but it had thrown Canadian aircraft into the bombing campaign in Libya and committed Canadian fighter jets to the bombing of ISIS targets in Syria.

So, although the Conservatives were not doing much to follow through on major defence promises – such as the national shipbuilding program, the completion of the F-35 purchases and other necessaries – they did have the smell of war about them. Why? Because Harper had made it a point to visit Canadian troops in Kandahar on his first foreign visit, he had proclaimed that Canadians were not going to “cut and run”, and he had augmented the Canadian contingent in Kandahar with helicopters and other additional kit. Those of the public who had supported the military mission in the first place soon largely forgot why we were there, and those who had opposed the mission kept hearkening back to the good old days when “neutral” Canadian peacekeepers had tried to keep the peace in some of the world’s most difficult battlegrounds, instead of making war in Afghanistan and elsewhere.

Forgotten in all this was the crucial role the Liberals had played in the very beginning of the mission. It was then-prime minister Jean Chretien who had first deployed Canadian troops to fight under American command in Kandahar in early 2002 and who sent Canadians back to Kabul to lead ISAF in 2003. And it was again the Liberals, this time under Paul Martin, who committed Canadians to Kandahar in late 2005.

It was also former Liberal deputy leader John Manley who led a panel in 2008 that called on the Conservative government to stay in Kandahar, though with a number of important conditions, such as the procurement of helicopters and the addition of at least 1,000 troops from other NATO countries to help the Canadians in their mission.

But the Liberals began to play politics with the Kandahar mission as early as 2006 when, in the midst of the leadership race to replace Martin, many of the front bench decided to vote against the Tory motion to extend the Afghan mission. And bi-partisanship over Afghanistan broke down right there.

The NDP was never unequivocal about the mission: they were against it from the beginning and they and their supporters in the press, in academia, and in the left-wing intellectual elite of the country attacked not only Canada’s participation in the mission, but called time and again for Canada to return to good old Lester Pearson-style peacekeeping. They decried the “militarization” of Canada under the Tories and the creation of the myth of Canada as a fighting nation, rather than a nation which always stood for keeping the peace.

Thus the Liberals in 2015 had to “out-peace keep” the NDP and promise Canadians that the bad old days of Canada actually fighting in a war were going to end under a Trudeau government. Canada would withdraw from the air mission in Syria and would once again put its troops in blue helmets, just as they had been from the 1950s to the 1990s.

The only problem was – as they discovered after they had assumed office – that there simply aren’t any “neutral” peacekeeping missions out there anymore. Those soldiers engaged in blue-helmet operations were, in many cases, fighting as hard for their lives as the Canadians had done in Afghanistan.

As of this moment (end of May), the Liberals haven’t found their idyllic peacekeeping mission, and they probably won’t. The world is much different today than it was in the 1950s or 1960s and many of the blue-helmet troops out there – not all, but many – are there to earn hard currency for their national treasuries. Seeking out another war – this time wearing blue helmets – would finally shatter the peacekeeping legend in Canada once and for all. That would not serve the Liberal legend well in the next campaign in 2019.
David Bercuson is Research Director of the Canadian Global Affairs Institute.

Government Makes 2017 Payment to remain in F-35 Consortium

Lee Berthiaume, The Canadian Press

OTTAWA -- Canada has quietly paid another $30 million toward development of the F-35 -- money that could become insurance in the trade dispute between U.S. aerospace firm Boeing and Canadian rival Bombardier.

The annual payment was made to the U.S. military at the end of April, the Department of National Defence says, and will keep Canada at the table as one of nine partners in the fighter jet project for the next year.

Canada has paid US$373 million into the program since 1997, National Defence spokeswoman Jessica Lamirande said in an email.

Staying in the program has advantages, as partners can compete for billions of dollars worth of contracts associated with the building and maintaining F-35. They also get a discount when purchasing the plane.

That latter point wasn't considered much of a benefit when Canada paid its annual instalment last year, as the Liberals had promised during the 2015 election not to buy the stealth fighter.

The government instead went out of its way last July to highlight the potential benefits to Canada's aerospace industry when explaining why it had decided to stick with the program.

Those industrial benefits continue to accrue, Lamirande said, with Canadian companies having secured US$926 million in F-35-related contracts over the last 20 years -- including US$114 million in the last year alone.

But the trade dispute between Boeing, which builds Super Hornet fighter jets, the F-35's main competitor, and Montreal-based Bombardier casts the decision to stick with the stealth-fighter program in a new light.

Citing an urgent need for more fighter jets, the Liberal government announced last November plans to buy 18 "interim" Super Hornets until a competition could be held to replace Canada's entire CF-18 fleet.

But then last week, the government threatened to scrap the Super Hornet purchase after Boeing persuaded the U.S. Department of Commerce to launch an investigation against Bombardier.

Boeing alleges Bombardier sold its CSeries jets in the U.S. at an unfair discount thanks to subsidies from the Canadian government, while Bombardier says its planes never competed with Boeing.

Many defence analysts and former air force officers have questioned whether "interim" fighter jets are needed and instead want an immediate competition to replace all of the CF-18s.

But if more jets are truly needed on a short-term basis, the decision to stay at the F-35 table could be used to get a better deal on interim stealth fighters -- or even as a bargaining chip against Boeing.

"If the government is in fact serious about re-evaluating its dealings with Boeing, then this could be part of showing that," said defence analyst David Perry of the Canadian Global Affairs Institute.

"Because the F-35, at least in my mind, would be a possible alternative if the government remains committed to buying separate interim aircraft."

Three other alternatives exist -- the Saab Gripen, Eurofighter Typhoon and Dassault Rafale -- but all are made by European companies and the government has emphasized the need for a U.S. design.

Lockheed Martin, the company behind the F-35, has remained relatively quiet about the government's plan to buy interim Super Hornets, but is now chomping at the bit for a chance to fill any potential gap.

The U.S. company "would openly welcome discussions about interim fighter solutions," spokeswoman Cindy Tessier said, adding that Lockheed has partnered with Bombardier on another military project.

The government is providing little information as to what next steps it might take as the dispute between Boeing and Bombardier continues to play out.

Boeing, for its part, has emphasized its longstanding relationship with Canada, even as representatives from its defence division have scrambled to meet and smooth the edges with Canadian officials.

The U.S. International Trade Commission, which heard arguments from both aerospace companies in a hearing last week, isn't expected to issue a ruling until June 12.

The U.S. Department of Commerce would then decide whether to penalize Bombardier.