11/07/2012 05:00 EST | Updated 01/07/2013 05:12 EST

Ottawa and Boeing negotiate support deal for sole-sourced choppers

OTTAWA - Six years after announcing a sole-source deal to buy 15 battlefield helicopters and three years after signing the contract, the Harper government has finally sat down with Boeing to talk about how much it will cost to support the aircraft.

Haggling over the service price tag came as the U.S. defence giant announced it had already selected General Dynamics Canada to provide engineering support to the CH-147F heavy-lift choppers, which shuttle troops and equipment.

Internal documents show the air force was eager to see a deal cut over a year ago, in the summer of 2011, and listed the support contract as one of the major risks and uncertainties in the $4.9 billion program.

The Chinook purchase, originally intended to support troops fighting in Afghanistan, was red-flagged by former auditor general Sheila Fraser two years ago for delays and a 70 per cent spike in price between 2006 and 2010.

The officer in charge of the program, Col. Carl Doyon, says the support contract couldn't be negotiated until Boeing had fulfilled its industrial commitments to the Canadian government, which was only done recently.

The fact the government is only now at the negotiating table scares opposition MPs, who say the Harper government's sole-sourced deal has left taxpayers with very little leverage.

In a recent interview with The Canadian Press, Doyon said he's confident an agreement can be struck within the government's fiscal envelope.

"We're proceeding with the program as planned," Doyon said. "So far, this program has been on schedule and within budget, and this is good news for Canada and good news for taxpayers."

But NDP procurement critic Matthew Kellway says the last time the Harper government went down this road, it got less than it bargained for with the sole-sourced purchase of the C-130J transport planes.

Officials waited to negotiate the 20-year in-service support contract with Lockheed Martin, and negotiations turned into a drawn-out affair when the company presented a proposal that was far more expensive than expected.

"Somebody on the government side needs to take a bargaining course," Kellway said. "They keep identifying the product they want, lock it and then say how much is it going to cost, and taxpayers are getting tremendously disadvantaged."

A spokeswoman for Associate Defence Minister Bernard Valcourt said late Wednesday that the government is committed to taking care of the helicopters after they are delivered.

"We will make the necessary investments in maintenance and long-term support to ensure this new equipment lasts," said Pam O'Leary in an email.

According to the 2010 auditor general's report, just over $2.57 billion was set aside for "contacted in-service support" of the Chinooks.

The report said the delays in the program, prior to the signing of the formal contract in 2009, involved excessive demands from the air force for modifications to create a uniquely Canadian helicopter.

Fraser was also particularly critical of National Defence for not developing full life-cycle costs for both the Chinooks and the long overdue CH-148 Cyclone helicopters.

"Some costs have yet to be completely estimated and some elements needed for the capability are not in place," the auditor complained.

"Without adequate cost information, National Defence cannot plan to have sufficient funds available for long-term operation and support of the helicopters. Moreover, without sufficient funds, National Defence may have to curtail planned training and operations."

The contractor did not agree to an interview and issued only a brief statement to say it was confident of reaching a deal.

"Boeing is on track to meet all (Industrial Regional Benefit) contractual requirements and to complete all active (Industrial Regional Benefit) obligations on time or ahead of schedule," said a statement.

"Boeing is proud of its 100 per cent success rate on delivering offset around the world and stands by its commitments to Canada.

The 15 Chinooks are due to be delivered in 2013.

A series of slide deck briefings, prepared for Defence Minister Peter MacKay and the tactical aviation wing of the air force, says the anticipated 20-year contract will be based on a so-called "power by the hour" concept which sees the price tag calculated on flying time.

The air force is under obligation to purchase the engines that power the helicopters and to present them to Boeing for installation.

Last year, the engine maker warned it may not be able to meet the Canadian requirement, something that forced military planners to consider stripping four engines from older model Chinooks that were used in Afghanistan, but are no longer in service.

Doyer said the crisis abated when the U.S. company reversed itself and said it could meet the order for 36 engines, two for each helicopter and six spares.