2010 too late for new planes, DND contends
Contract to be awarded in 2007, file says
By MICHAEL DEN TANDT
Tuesday, December 20, 2005 Posted at 4:05 AM EST
From Tuesday's Globe and Mail
Ottawa â †The first of 16 new military transport planes is not scheduled for delivery until 2010, two years after the Department of National Defence says its aging Hercules fleet will be inoperable, an internal government document obtained by The Globe and Mail shows.
The document, which the Defence Department submitted to the Treasury Board last month, raises fresh questions about the federal government's approval in the last days of its mandate of the $4.6-billion aircraft purchase.
DND officials for weeks have insisted that the procurement had to be completed urgently because the Hercules fleet must be replaced in about 36 months, or the lives of pilots and crew will be at undue risk.
"We know that three years and a little bit more than that, the fleet starts to become almost completely inoperational," General Rick Hillier, Chief of Defence Staff, said last month.
He added that Canadian troops need new planes "not another 15 years from now, not 10 years from now and actually not even five years from now."
Gen. Hillier reiterated the statement in a private briefing several weeks ago with the Bloc Québécois and New Democratic Party defence critics.
"They're trying to explain to us that if nothing is done today, the whole fleet will fall apart in three years," Bloc MP Claude Bachand said at the time.
The Treasury Board document thus raises new questions about DND's bidding process, which until now has effectively shut out competitors other than Lockheed Martin.
Asked about the document, the Defence Department said it has no comment. Defence Minister Bill Graham also declined to comment.
The accelerated process and in particular the contract specifications have been widely understood in the defence industry to favour Lockheed Martin over other potential contenders such as Airbus and Boeing.
Gen. Hillier and Mr. Graham have insisted that DND's conditions for the contract do not make the process uncompetitive, because the necessity for speedy delivery is incontrovertible.
They say any company is free to satisfy those conditions, if it can.
But according to a secret DND timetable and cost projection to the Treasury Board, dated Nov. 21 and signed by Mr. Graham, the timing of the delivery of the first aircraft is not three years out, but nearly five, in May, 2010. A copy of the document was obtained by The Globe and Mail.
A detailed table in the document sets out a schedule that would deliver four aircraft a year in each of 2010, 2011, 2012 and 2013, for a total of 16.
A table, entitled Project Milestones, says that, given "preliminary project approval" in November of this year, the contract will be awarded in May, 2007.
The apparent two-year delay is significant. The Defence Department has been told by Airbus that the company can deliver two A400M transports by 2010, and the balance by 2014, as well as provide refurbished Hercules transports in the interim, should that be necessary.
"That is guaranteed," said Martin Sefzig, director of programs at EADS-Casa, Airbus's major shareholder.
"The production line has been designed to accommodate extra orders."
Although it remains unclear which aircraft bests suits DND's needs, this casts into doubt the most compelling argument against the Airbus craft, which is that it could not be available in time to meet DND's schedule.
Last month, after a plan to buy $12.2-billion worth of 50 military aircraft was criticized by industry insiders and opposition politicians for perceived unfairness of the bidding process, the Defence Minister announced an abridged plan, for transport planes only. Of the total $4.6-billion cost, $3-billion is directly related to procuring the aircraft, with $1.6-billion for servicing costs over 20 years.
At a news conference on Nov. 22, Mr. Graham and Gen. Hillier dismissed allegations that contract requirements were tailored so that only one plane, Lockheed Martin's Hercules C-130J, could fulfill them.
"The procurement process will be competitive, fair and transparent," Mr. Graham said. A spokesman for Mr. Graham reiterated this recently.
Interviews with industry and government insiders -- all of whom insisted on anonymity for fear of missing out on future government work or suffering other reprisals -- confirm that the transport contract, whatever it may evolve into in future, has not been designed to produce a competition.
Defence Department officials have acknowledged that a requirement that the new transport fleet number at least 16 effectively rules out the C-17, an aircraft that carries four times the payload of a Hercules and costs twice as much, about $260-million apiece.
Buying 16 would far exceed the military's needs, and its limited budget.
DND officials have also privately conceded that a requirement that the new aircraft be "certified to aviation certification standards" by the expected contract award date effectively rules out Airbus's A400M transport.
Although far closer to DND's price range than the C17, the A400M remains in development and won't make its first flight until early 2008.
This condition on certification is a first in Canadian military procurements. In the past, the department has required certification by the delivery date.
The upshot is that Lockheed Martin's C130J is the only known aircraft in the world that meets the Defence Department's current requirements for so-called tactical, short-haul transports.
DND officials have privately offered various explanations for this, including that the Hercules C130J would be easier to integrate than other types of aircraft because the military operates 31 Hercules craft now.
Another explanation is that Gen. Hillier and his senior staff, by virtue of their combat experience in places such as Afghanistan and the former Yugoslavia, simply know which equipment is best for the forces, and have decided what they need.
"Indecision only benefits lobbyists, vested interests and ex-generals," a senior Defence Department official, who supports the Hercules option, said last month.
But the C130J has neither the same engine nor avionics as the Canadian military's 31 C130H and E models, which negates many of the mechanical synergies, industry sources contend.
The C130J is not big enough to transport some versions of the military's new Stryker mobile gun system. Nor can it carry the new Multi-Mission Effects armoured anti-tank vehicle, unless it's partly disassembled. Industry sources unrelated to any of the potential bidders confirm this.
In addition, a report last year by the Pentagon's Office of the Inspector General found that the C130J "is not operationally effective or suitable," as a replacement for older Hercules transport.
Moreover, the C130J lacks the range for strategic or long-haul lift. That necessitates a continuing reliance on rented Antonov transports, which are sometimes in short supply, and cannot land on the short, rough runways typical of Afghanistan.
"The two other aircraft are dual-role," said a source familiar with the process, and unconnected to either Airbus or Boeing.
"They can do both strategic and tactical. They should be allowed to compete."
An internal air force report circulated within DND this year but never made public said there was "no rationale for CF [Canadian Forces] fixation" on replacing the old Hercules craft with a newer Hercules model.
The report, a copy of which has been obtained by The Globe, raises concerns about the availability of leased Antonovs in a crisis.
It then recommends buying six Boeing C17s, keeping the military's nine newer H model C130s, and buying a fleet of dedicated search and rescue aircraft, rather than getting new C130Js.
That report fell on deaf ears, a source familiar with the situation said, because "months ago they had already decided on Hercs."
Neither Boeing nor Airbus is complaining publicly, sources say, because both companies hope to secure future Canadian government contracts.
Boeing makes the CH-47 Chinook helicopter, of which DND hopes to buy 15 -- total cost, $4.2-billion -- should the Liberals be re-elected. Airbus is 80-per-cent owned by Netherlands-based EADS NV, which continues to hold out hope of landing a $3-billion-dollar-plus Canadian purchase of its C-295 search-and-rescue plane.
Critics of the process continue to believe it is deeply unfair, and will remain so unless DND's specifications for new transport aircraft are rewritten. Only a true competition based on new specifications, they say, will deliver the best product to the Canadian military.
"The A400 costs 15 per cent more [than the C130J], but has twice the payload and twice the range," said a source familiar with the situation, but unconnected with the Airbus bid. "So why wouldn't they allow it to compete?"
Likewise, defence experts say, there is no compelling reason a smaller number of Boeing C-17s couldn't meet all of Canada's airlift needs, were the specifications written to allow it. The stipulation for 16 aircraft, they say, is artificial, for the simple reason that one big aircraft can do the work of several small ones. A single C-17, a source familiar with Canadian military procurements said, could have airlifted all the Canadian aid that was shipped to victims of Hurricane Katrina earlier this year.
"Performance-based is you get yourself from home to work in X time," said one critic of the current process. "You're not out there deciding whether you want to drive in a Lamborghini or a Toyota Corolla."
Public Works Minister Scott Brison has promised to appoint a "fairness monitor" to examine both DND's written requirements for new transport planes and the selection process.
Officials in the Defence Department are strongly resisting an independent review of their specifications, according to sources, saying that there is no time to delay.
Shopping for planes
Canada's Defence Department is preparing to spend $4.6-billion on new military transport planes. Here are a few of the options being considered.
Lockheed Martin Hercules C130J
Payload: 19,500 kg
Range: 5,100 km
with 18,155 kg
Cost: $135-million
Boeing C-17
Payload: 76,644 kg
Range: 9,630 km with 58,967 kg,
can be refuelled
in flight
Cost: $260-million
Airbus A400M
Payload: 37,194 kg
Range: 6,950 km
with 20,000 kg,
can be refuelled in flight
Cost: $155-million