Canada Sea King Delay Pinches $250 Million From DND's Pocket

Sea King

First Posted: 12/01/11 04:11 PM ET Updated: 12/01/11 09:18 PM ET

OTTAWA - Delayed delivery of the air force's new maritime helicopters has cost the Defence Department $250 million in lapsed funding, senior defence officials told a Commons committee on Thursday.

The money was earmarked to pay for the new aircraft, which are over three years late.

Since no helicopters were delivered last year, the money had to be returned to the federal treasury, said Kevin Lindsey, an assistant deputy minister for finance at National Defence.

In all, he said, the department handed back $950 million which couldn't be spent because of delays and staff shortages.

Whether defence officials will be able to ask for the money in future budgets remains up in the air, especially in light of the Conservative government's efforts to trim the federal deficit.

Lindsey told the Commons defence committee the department asked for approval to spend the helicopter money in another budget year, but was denied.

"We will have to fund those liabilities when they arise," Lindsey said.

U.S. defence giant Sikorsky did deliver one test helicopter to Shearwater, N.S., last May, but earlier this week a Defence Department spokeswoman confirmed the air force has not officially accepted the aircraft, which potentially means no money has changed hands this year either.

The new aircraft, known as Cyclones, are replacements for the military's Sea Kings, which are nearly 50 years old.

In total last year, the Defence Department was unable to spend $2.4 billion of its more than $20 billion budget. Some of the money was either carried over immediately to the next budget year, or pushed further down the line into future spending plans.

What's happening with the Cyclones is the most dramatic example of a problem that has ballooned since the Harper government started rearming the military.

Defence analyst Dave Perry, who crunched the department's numbers, said in terms of lost dollars the department's inability to spend money as it is allotted is greater than it has ever been.

"It's a real question going forward about whether we're going to be able to buy the kit to equip the future Canadian Forces," Perry said in an interview. "For whatever reason, we're not moving projects forward on a schedule that would allow us to buy stuff with the funds that have been allocated.

"It's a problem when you've got certain old equipment that needs to be replaced."

It was the former Liberal government that announced the contract to acquire 28 maritime helicopters from Sikorsky seven years ago. The first aircraft was originally due in November 2008, but there have been numerous delays and cost overruns.

Last year, the auditor general said the cost of the program had grown to about $5.7 billion from $5.1 billion.

Aside from lost funding, Perry said one of the biggest problems in pushing projects forward to future years is the erosion of purchasing power. The rise in prices can make some projects unaffordable.

The worst example of that is the long-delayed plan to build replacement supply ships for the navy. The $2.6 billion project, started under the Liberals and continued under the Conservatives, was shelved when bids came in far above the government's budget.

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Filed by Christian Cotroneo  |