The agreement with Sikorsky Aircraft — a division of United Technologies Corp. (NYSE: UTX) — paves the way for the retirement next year of Canada’s outdated fleet of Sea King choppers.
United Technologies issued a brief statement saying the contract amendment clears the way for the delivery of the 28 aircraft under the $5.7-billion program, which had been stalled and appeared in jeopardy of being cancelled last fall.
It did not disclose any details of about the new agreement.
It’s the second time the government has negotiated a contract amendment with Sikorsky, which has missed previous deadlines to deliver completed helicopters, accruing more than $88 million in penalties as a result.
It's unclear how that will be resolved.
Public Works was as vague as the company on the specifics of the agreement.
"I am pleased that this contract has now been completed and that we can fulfill our government's commitment to begin to retire the Sea Kings in 2015, and deliver a new and leading maritime helicopter to the Royal Canadian Air Force, while respecting taxpayer dollars," Public Works Minister Diane Finley said in a statement.
The inability of the Conservatives to replace the anti-submarine helicopters, which are more than 50 years old and operate primarily off the decks of navy frigates, has been a huge political embarrassment.
One senior defence official said the Cyclones — a military version of Sikorsky’s S-92 helicopter — are expected to be delivered throughout 2015 and should begin flying limited operational missions from warships in early 2016.
As many as six pilots are already qualified to fly the aircraft, four of which have been parked at the military air base in Shearwater, N.S., near Halifax. Training is expected to ramp up once the new choppers are delivered.
Despite that, the Cyclones won’t be declared fully operational until 2018 when Sikorsky delivers a software package that integrates all elements of the aircraft's mission and warfighting capabilities.
"We're going to get a capable helicopter that we can grow in to," the defence source said.
The government insists no additional money will be put into the program and Sikorsky would only get paid for the delivery of capable aircraft.
The air force is prepared to take ownership of up to eight test helicopters as part of the transition and to enhance training, said a government source.
There have been myriad technical concerns and delays in converting the S-92 into a more hardened military version.
The question of whether the Harper government would stick with the Cyclone came to the forefront last fall after then-public works minister Rona Ambrose ordered a review of whether the manufacturer could deliver on the contract signed with Paul Martin's Liberals in 2004.
In addition to a report by consultants, officials also conducted an independent analysis of the financial implications of the existing program for the country’s defence industry, say documents released earlier this year under the Access to Information Act.
Rival aircraft makers were also asked what they might be able to provide if the government chose to cancel.
Internal documents showed last January that more than $1.7 billion has already been spent in preparing to receive the troubled choppers, making a political decision to stick with the program a foregone conclusion.
Public Works, which oversees the project, announced in January it would negotiate a revised agreement.
As part of the contract renegotiation, the air force was asked to revisit its list of expected capabilities, and asked to spell out clearly what aspects were essential as opposed to what they would like to see in the aircraft.
Defence officials insisted Wednesday there was absolutely no compromise on safety, especially on the issue of the engine gear box's capacity to operate even with a severe loss of fluid.
The so-called "run-dry" concern has been top of mind since it was named as a factor in the fatal crash of the Cyclone's civilian variant off Newfoundland a few years ago.
"We're happy with the safety and the airworthiness specification that the run-dry capability will meet," said the defence official. "It's going to meet the highest standards in the world."
Other changes the air force had to agree to include a raft flotation system for crash landings on water. Instead of automatically deploying, rafts would be triggered manually.
Other technical alterations involve cabin environmental controls and the use of the rear ramp during flight.