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Ottawa was told of risks in jet deal
Deputy minister said Bombardier pact could undermine helicopter purchases
Andrew McIntosh
National Post
Wednesday, October 02, 2002
The Canadian Press
The federal government said it wanted new Challenger jets to be compatible with its existing fleet.
OTTAWA - The Prime Minister's decision in late March to award a $100-million untendered contract to Bombardier Inc. for two Challenger 604 executive jets "could seriously undermine" government efforts to buy new maritime defence helicopters and "be very difficult to defend in court."
That warning was delivered to the Liberal government in mid-March by Janice Cochrane, the deputy minister of Public Works, who expressed "serious reservations" about the proposed jet deal, adding: "DND [the Department of National Defence] shares our concerns."
In a confidential four-page memo Ms. Cochrane circulated on March 19 -- the jet contract was signed nine days later on March 28 -- the senior bureaucrat called the plan to buy new Challengers without any public tenders "a high risk initiative" that would become a communications nightmare, according to government officials familiar with the memorandum.
Ms. Cochrane also expressed concern the purchase might have damaging ramifications for the repeatedly delayed effort to buy a new fleet of military helicopters to replace the 40-year-old shipborne Sea Kings, the officials said.
When the government announced the jet contract late on a Friday before the Easter long weekend, officials repeatedly said that the purchase would not affect the government's plans to buy the new fleet of maritime helicopters.
Yet Ms. Cochrane warned the government and a select group of senior public servants that exactly the opposite could happen, the sources familiar with her memorandum said, speaking on condition they were not identified.
Last week, the Prime Minister said new jets were bought after he experienced "many" safety-related incidents while flying on the old Challengers, though National Defence log records mention only two incidents and a study by military officials said the existing fleet's reliability was excellent at 99.18%.
But before that, the government initially defended the decision to buy Bombardier jets without calling tenders by saying it wanted to maintain the "compatibility" of its new jets with its existing fleet of four older Challenger jets.
Ms. Cochrane warned that invoking the fleet commonality argument as a defence was "a high- risk strategy" because it was false.
She wrote that the new planes "are not identical to the existing fleet and we have been unsuccessful in defending the use of this clause in more compelling situations," according to the sources who have seen her memorandum.
Invoking so-called "compatibility" to defend a sole-source contract to Bombardier, which has contributed $554,211 to the Liberal party since 1996, could also have far more serious consequences, Ms. Cochrane warned.
The federal government in 1998 bought new 15 new search-and-rescue helicopters from Team Cormorant, an Italian-British consortium. National Defence will operate and maintain the fleet at bases across Canada.
Ms. Cochrane noted that since the search-and-rescue purchase, Team Cormorant has pressed the government in court and in the news media "to recognize the potential efficiencies of having one fleet of helicopters for both search-and-rescue and maritime purposes."
"We have steadily rejected this argument which would see either a sole-source contract to Cormorant on the basis of compatibility or the requirement for bidders to include these transitions costs for setting up new capacity," she wrote in her memorandum, the sources said.
"Sole-sourcing to Bombardier for these planes [the corporate jets] on the basis of compatibility could seriously undermine our MHP (Maritime Helicopter Project) procurement strategy and be very difficult to defend in court," she added.
Indeed, Public Works officials appearing before a Senate committee on Oct. 30, 2001, testified that they were prohibited from sole-sourcing large government contracts to companies simply because the government already owned similar products or machines.
Janice Billings, an assistant deputy minister of Public Works who reports to Ms. Cochrane, told Senators that the rules in the Agreement on Internal Trade "do not allow us to buy more of a major system just because we have one."
"We cannot use commonality to support buying more of a major system ... We cannot use it to justify going out for a sole source, even to expand the fleet of search-and-rescue helicopters," Ms. Billings added.
Ms. Cochrane noted that the government was so concerned about the legality of the Challenger jet deal and its impact on the helicopter procurement program that senior Justice Department lawyers had become involved, helping Public Works lawyers work on the terms of the sales agreement.
Ms. Cochrane feared the sole-sourced jet deal could trigger legal action against the government because rival jet makers such as Embraer, Cessna and Gulfstream were not given the chance to bid on the purchase.
She noted the contract was subject to the Agreement on Internal Trade, which requires governments to issue a public tender when it makes a major purchase except in cases where there is only one known supplier of a product.
Companies that feel their interests have been damaged by the government's failure to call for tenders can file a claim with the Canadian International Trade Tribunal, a federal agency.
Ms. Cochrane said the government could reduce the risk of being sued by a Bombardier rival by invoking a "national security exception," declaring that the planes would carry the Prime Minister, the Governor-General or ministers and thus have "sensitive" equipment on board.
But there was a risk to that strategy as well, she warned.
"It would also be difficult to explain why we invoked the national security exception for Challengers but not for the Maritime Helicopter Project," Ms. Cochrane wrote, the officials familiar with her memorandum said.
Ms. Cochrane concluded her memo by warning that the sole-source jet purchase would also be a communications disaster for the government because taxpayers and opposition MPs would ask questions "immediately."
Among them, she wrote:
- "Why could we buy Challengers for ministers in two weeks but we still have not bought helicopters to replace the Sea Kings?"
- "How is this consistent with our commitment to competitive procurement?"
- "What was the justification for sole-sourcing?"
Ms. Cochrane said the existing Challengers were to last until 2010 and she feared taxpayers would ask: "Did the Challengers need to be replaced?"
She also feared the jet purchase would be linked to health care spending.
- "If the federal government cannot afford more for funding health care, how can it afford new planes while the old ones are still operational?"
Ms. Cochrane said her department would continue to work with the Privy Council Office -- the department that serves the Prime Minister -- on the jet purchase "notwithstanding our serious reservations about the sustainability of the strategies being proposed, the implications for the Maritime Helicopter Project and the communications issues."
The government immediately took possession to the title of the unfinished aircraft and they have since been sent to a Bombardier facility in Arizona to be equipped. The aircraft should be in service this fall.
amcintosh@nationalpost.com
Deputy minister said Bombardier pact could undermine helicopter purchases
Andrew McIntosh
National Post
Wednesday, October 02, 2002
The Canadian Press
The federal government said it wanted new Challenger jets to be compatible with its existing fleet.
OTTAWA - The Prime Minister's decision in late March to award a $100-million untendered contract to Bombardier Inc. for two Challenger 604 executive jets "could seriously undermine" government efforts to buy new maritime defence helicopters and "be very difficult to defend in court."
That warning was delivered to the Liberal government in mid-March by Janice Cochrane, the deputy minister of Public Works, who expressed "serious reservations" about the proposed jet deal, adding: "DND [the Department of National Defence] shares our concerns."
In a confidential four-page memo Ms. Cochrane circulated on March 19 -- the jet contract was signed nine days later on March 28 -- the senior bureaucrat called the plan to buy new Challengers without any public tenders "a high risk initiative" that would become a communications nightmare, according to government officials familiar with the memorandum.
Ms. Cochrane also expressed concern the purchase might have damaging ramifications for the repeatedly delayed effort to buy a new fleet of military helicopters to replace the 40-year-old shipborne Sea Kings, the officials said.
When the government announced the jet contract late on a Friday before the Easter long weekend, officials repeatedly said that the purchase would not affect the government's plans to buy the new fleet of maritime helicopters.
Yet Ms. Cochrane warned the government and a select group of senior public servants that exactly the opposite could happen, the sources familiar with her memorandum said, speaking on condition they were not identified.
Last week, the Prime Minister said new jets were bought after he experienced "many" safety-related incidents while flying on the old Challengers, though National Defence log records mention only two incidents and a study by military officials said the existing fleet's reliability was excellent at 99.18%.
But before that, the government initially defended the decision to buy Bombardier jets without calling tenders by saying it wanted to maintain the "compatibility" of its new jets with its existing fleet of four older Challenger jets.
Ms. Cochrane warned that invoking the fleet commonality argument as a defence was "a high- risk strategy" because it was false.
She wrote that the new planes "are not identical to the existing fleet and we have been unsuccessful in defending the use of this clause in more compelling situations," according to the sources who have seen her memorandum.
Invoking so-called "compatibility" to defend a sole-source contract to Bombardier, which has contributed $554,211 to the Liberal party since 1996, could also have far more serious consequences, Ms. Cochrane warned.
The federal government in 1998 bought new 15 new search-and-rescue helicopters from Team Cormorant, an Italian-British consortium. National Defence will operate and maintain the fleet at bases across Canada.
Ms. Cochrane noted that since the search-and-rescue purchase, Team Cormorant has pressed the government in court and in the news media "to recognize the potential efficiencies of having one fleet of helicopters for both search-and-rescue and maritime purposes."
"We have steadily rejected this argument which would see either a sole-source contract to Cormorant on the basis of compatibility or the requirement for bidders to include these transitions costs for setting up new capacity," she wrote in her memorandum, the sources said.
"Sole-sourcing to Bombardier for these planes [the corporate jets] on the basis of compatibility could seriously undermine our MHP (Maritime Helicopter Project) procurement strategy and be very difficult to defend in court," she added.
Indeed, Public Works officials appearing before a Senate committee on Oct. 30, 2001, testified that they were prohibited from sole-sourcing large government contracts to companies simply because the government already owned similar products or machines.
Janice Billings, an assistant deputy minister of Public Works who reports to Ms. Cochrane, told Senators that the rules in the Agreement on Internal Trade "do not allow us to buy more of a major system just because we have one."
"We cannot use commonality to support buying more of a major system ... We cannot use it to justify going out for a sole source, even to expand the fleet of search-and-rescue helicopters," Ms. Billings added.
Ms. Cochrane noted that the government was so concerned about the legality of the Challenger jet deal and its impact on the helicopter procurement program that senior Justice Department lawyers had become involved, helping Public Works lawyers work on the terms of the sales agreement.
Ms. Cochrane feared the sole-sourced jet deal could trigger legal action against the government because rival jet makers such as Embraer, Cessna and Gulfstream were not given the chance to bid on the purchase.
She noted the contract was subject to the Agreement on Internal Trade, which requires governments to issue a public tender when it makes a major purchase except in cases where there is only one known supplier of a product.
Companies that feel their interests have been damaged by the government's failure to call for tenders can file a claim with the Canadian International Trade Tribunal, a federal agency.
Ms. Cochrane said the government could reduce the risk of being sued by a Bombardier rival by invoking a "national security exception," declaring that the planes would carry the Prime Minister, the Governor-General or ministers and thus have "sensitive" equipment on board.
But there was a risk to that strategy as well, she warned.
"It would also be difficult to explain why we invoked the national security exception for Challengers but not for the Maritime Helicopter Project," Ms. Cochrane wrote, the officials familiar with her memorandum said.
Ms. Cochrane concluded her memo by warning that the sole-source jet purchase would also be a communications disaster for the government because taxpayers and opposition MPs would ask questions "immediately."
Among them, she wrote:
- "Why could we buy Challengers for ministers in two weeks but we still have not bought helicopters to replace the Sea Kings?"
- "How is this consistent with our commitment to competitive procurement?"
- "What was the justification for sole-sourcing?"
Ms. Cochrane said the existing Challengers were to last until 2010 and she feared taxpayers would ask: "Did the Challengers need to be replaced?"
She also feared the jet purchase would be linked to health care spending.
- "If the federal government cannot afford more for funding health care, how can it afford new planes while the old ones are still operational?"
Ms. Cochrane said her department would continue to work with the Privy Council Office -- the department that serves the Prime Minister -- on the jet purchase "notwithstanding our serious reservations about the sustainability of the strategies being proposed, the implications for the Maritime Helicopter Project and the communications issues."
The government immediately took possession to the title of the unfinished aircraft and they have since been sent to a Bombardier facility in Arizona to be equipped. The aircraft should be in service this fall.
amcintosh@nationalpost.com
