In The Media

Federal government to link ‘economic interests’ to bids for fighter jets

by Daniel Leblanc (feat. Dave Perry)

The Globe and Mail
December 12, 2017

The federal government is vowing to make it harder for companies that harm Canada's "economic interests" to win major contracts, starting with the $26-billion competition to provide 88 new fighter jets to the Canadian Armed Forces.

The new requirement will be fleshed out in coming months, with Procurement Minister Carla Qualtrough acknowledging that it will include a mix of "objective and subjective elements." Officially, the new "economic impact test" will apply to all bidders in major competitions, with Ms. Qualtrough and Innovation Minister Navdeep Bains insisting the requirement complies with Canadian and international law.

Still, the new test was quickly dubbed the "Boeing clause" as it comes in response to U.S.-based Boeing Co.'s unresolved trade dispute with Canada's Bombardier Inc. Boeing said last April that the Canadian plane maker used unfair government subsidies to clinch an important contract for 75 CS 100 planes to Atlanta-based Delta Air Lines at "absurdly low" sale prices.

Prime Minister Justin Trudeau has said the trade dispute will affect Boeing's future dealings with the government, which is now giving itself leverage to fight back in disputes with foreign companies.

"Anyone can apply, but we've been very clear with this new policy: If there is economic harm to Canada, if there's an impact on Canadian jobs, if there's an impact to some of the key sectors in the Canadian economy, you will be at a distinct disadvantage," Mr. Bains said at a news conference.

The new test was announced as the federal government confirmed it has cancelled plans to buy 18 new Super Hornet fighter jets from Boeing. The government is buying second-hand Australian fighter jets as an "interim" measure to help Canada's fleet of CF-18s to meet the country's international obligations.

Defence analyst David Perry said the new economic impact test stands to create a new layer of complexity in military procurements that are already beset by delays.

"If this is not a superficial, political assessment about whether or not the government of Canada likes this company or not, this will require bureaucratic time and effort to come up with a detailed assessment that will pass legal review," Mr. Perry said.

Mr. Perry, a senior analyst at the Canadian Global Affairs Institute, added that companies such as Boeing, which do billions of dollars of business and provide thousands of jobs in Canada, will be hard to box in specific categories.

"Just coming down with some neat, clean assessment that says, on balance, this company is providing economic harm to Canada will be really difficult," Mr. Perry said.

Boeing said that it is awaiting further details on the new economic impact test before deciding how to proceed on the upcoming competition for new jets. "We will review the Future Fighter Capability Project requirements for 88 jets, including the 'Boeing Clause,' and make a decision at the appropriate time," company spokesman Scott Day said.

The federal government announced new details on the competition to replace Canada's fleet of CF-18s on Tuesday.

A formal request for proposals is scheduled to be unveiled in spring, 2019, with a winning bidder announced in 2022. In addition to Boeing, other potential bidders include Lockheed Martin (F-35), Saab (Gripen), Dassault (Rafale) and Eurofighter (Typhoon).

The opposition focused its attacks on the fact the government will be buying second-hand planes at an unspecified price instead of quickly launching a competition for new fighter jets.

"We know these eighties-era jets are rusted out because a 2012 Australian report said corrosion was so bad that the number of active flying days had to be cut. This is not a bucket of bolts; this is a bucket of rusted-out bolts," Conservative MP Tony Clement said during Question Period.

The government responded by blaming the Harper government for its failed attempt to buy F-35s without going to tenders.

General Jonathan Vance, the Chief of the Defence Staff, said the requirements for the full fleet of new fighter jets have been redrawn since the days in which only the F-35 could qualify.

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