Questions about fighter replacement loom large as Boeing benefits plan arrives

by Murray Brewster (feat. David Perry)

CBC News
August 8, 2017

A proposal outlining the industrial benefits Boeing is prepared to deliver to Canadian companies in exchange for a sole-source interim fighter jet contract will land on desks at Innovation, Science and Economic Development Canada on Wednesday.

The pitch is being made even though the Liberal government has suspended discussions with the U.S. aerospace giant over a separate trade complaint and is reviewing the military purchase, which Defence Minister Harjit Sajjan has claimed is urgent.

The proposal deadline renews concerns about the Liberal government's plan to replace the air force's aging fleet of CF-18s on both an interim basis and a long-term plan.

Buying 18 advanced Super Hornet fighters was described as necessary last fall in order for the air force to meet all of its obligations under both Norad and NATO simultaneously.

The government told Boeing last fall that it wanted delivery of the first jet by 2019.

"If that is the case, the clock is ticking mighty fast," said Dave Perry, a Canadian Global Affairs Institute analyst who tracks defence procurements.​

The government intended to purchase the Super Hornets as a stopgap until it could organize a full-blown competition to buy 88 advanced jet fighters on a permanent basis.

Perry said the falling out with Boeing has broader implications than just the interim purchase.

"I cannot see how this is not negatively impacting progress on the competition," he said.

Unfolding commercial battle

Boeing's commercial division has been engaged in a public battle with Canadian aerospace company Bombardier. The U.S. aircraft maker accuses Quebec-based Bombardier of being subsidized by the government, allowing it to sell its CSeries aircraft at well below cost.

In Washington, the U.S. Commerce Department is weighing whether to impose tariffs on Bombardier — a decision is expected at the end of September.

The Liberals, in a series of public rebukes, have called on Boeing to withdraw the complaint, saying the fighter jet deal requires "a trusted partner." Talks over technical issues and benefits were suspended.

The government also made a show of snubbing Boeing officials at the recent Paris air show.

Despite that, defence industry sources say, the company is expected to deliver its proposal on time.

Federal officials have been tight-lipped about whether the interim purchase will proceed, bouncing questions from CBC News between different departments.

"Our government has been clear that Boeing has not been behaving like a trusted partner, and that we are reviewing current military procurements that relate to Boeing," Karl Sasseville, a spokesperson for the innovation minister said in an email to CBC.

"No decisions have been made at this time with regard to the potential purchase of an interim fleet of Super Hornet jets."

Benefits to Canadian companies

Since Canada had planned to buy the aircraft directly from the Pentagon through a government-to-government sale, there are no guaranteed benefits for Canadian companies.

Any benefits forthcoming would depend on what the federal government manages to negotiate with Boeing.

Documents obtained under federal Access to Information legislation show the federal government requested a benefits proposal on March 20, and officials had high expectations.

"The potential procurement is a unique opportunity to seek high value economic benefits for Canadian industry," says a March 15, 2017, briefing note for Innovation Minister Navdeep Bains. "As such, an ambitious negotiating strategy has been prepared that relates to … supplier development, innovation and aerospace global value chains."

High hopes

Officials said they believed their goals were "targeted and realistic," and informed by an analysis of what Boeing and other contractors could bring to Canada.

The government intended to "seek a high ratio of [research and development] projects."

Heavily censored background papers attached to the briefing notes seem to suggest the government saw the in-service support contracts, rather than the actual purchase of the fighter jets, as having the larger economic opportunity for Canada.

All of those high hopes were set out before the dispute over Bombardier subsidies.