The proposal is being floated publicly by Sikorsky aircraft in the wake of a federal cabinet shuffle that has left both National Defence and Public Works with seasoned but not yet fully acclimatized ministers.
At the same time, the aircraft-maker and Defence have agreed to a separate plan that would allow flight testing to begin on four helicopters that have been delivered to the military air base in Shearwater, N.S. Twenty-eight of the aircraft have been ordered.
The evaluation, to begin in early August, inches the politically painful program ahead for the Conservative government, which has grown more impatient and vocal in its frustration over the replacement of decades-old Sea Kings.
The helicopters were first ordered in 2004 by Paul Martin's Liberal government at a cost of nearly $3.2 billion — a figure which has now ballooned to $5.7 billion — and were supposed to be in service by 2008.
The failure to deliver new aircraft — detailed a few years ago in a scathing auditor general's report — was underscored over the last few weeks with the grounding of the entire CH-124 Sea King fleet. One of the nearly 50-year-old helicopters was involved in a spectacular accident that saw the blades on one aircraft chipped away when the chopper unexpectedly careened forward.
Flight testing on the new Cyclones will begin even though the Defence Department has yet to formally accept the four aircraft that have been delivered.
Sikorsky spokesman Paul Jackson says the company is still in negotiations with the federal government on that aspect.
At the centre of the dispute is software to run the aircraft for the variety of missions it is expected to undertake.
Sikorsky has agreed to provide the basic program and upgrades every few months until the aircraft is fully "mission ready," but the government — sticking to the letter of the contract — has refused to accept the aircraft until all the proper software has been installed.
"These aircraft, which are already there, can be performing service to the government in getting the Sea King fleet retired and out of service all the quicker," Jackson said.
He said Sikorsky can foresee the Cyclone picking up some search-and-rescue duties in the meantime while it's brought on stream, and the idea of gradual upgrades is something widely accepted in the U.S. defence industry.
The proposal puts the Harper government in a difficult position because the notion of introducing the aircraft through scheduled block software upgrades was the centrepiece of its F-35 stealth fighter plan — a program which is now on hold.
It also raises a host of potential legal problems because agreeing to Sikorsky's plan could be a tacit acknowledgment that the Cyclones have been "under development," which was not how the original contract and bidding process was structured.
Defence was asked to comment but did not respond.
Just before the cabinet shuffle, former Public Works minister Rona Ambrose reportedly ordered an outside evaluation of whether Sikorsky could deliver what it had promised.
United Technologies Corp. (NYSE:UTC), the parent company of Sikorsky Aircraft, struck a very optimistic tone with market analysts last week, saying the program is "gaining momentum" and even suggested that five more helicopters — already assembled and warehoused in New York State — could be flown to Nova Scotia to add to the training pool.
Greg Hayes, UTC's chief financial officer, said two additional helicopters are being flight tested, and there is "a solid plan" to deliver eight more aircraft "going into the year," for a total of 19 machines.
The nine remaining Cyclones are still on the assembly line, he said.
Hayes told analysts that "some issues" remain to be resolved with the Canadian government.
Aside from the issue of accepting the aircraft, the federal government and the manufacturer still faces the question of fines to be levied over delivery deadlines Sikorsky has missed.
To date, the aircraft-maker owes just under $86 million in penalties.
A senior defence official, speaking on background to The Canadian Press last year, said the government planned to collect the money by deducting the fines from in-service support payments once the helicopters are in fully operational.
Whether Sikorsky agrees with the plan is unclear.