Ottawa helicopter order signals radical change

The federal government’s decision to order as many as 15 “off-the-shelf” search-and-rescue helicopters signals a radical departure for Canadian military purchases.

But it also means forsaking most of the lucrative industrial benefits that are traditionally spread across the country with these purchases.

Anxious to save money, the military is considering a range of options for the $600-million purchase, which barely five years ago would have been considered heresy.

For example, the government may opt to lease the helicopters instead of buying them outright. The private sector may also assume responsibility for such key functions as maintenance, engineering support and training – functions traditionally performed by defence personnel. It means that foreign companies and their employees could soon be responsible for everything from replacing parts to refuelling Canadian military aircraft.

Canadian companies stand to pocket relatively little of the $600- million spent and what they do get will likely be in maintenance and engineering support, not manufacturing or design. The Department of National Defence has said that while it welcomes Canadian content, it is not ready to inflate the price just to get it.

What’s more, Ottawa has opened the door to the possibility of buying Russian military hardware for the first time. At least one Russian drones with cameras manufacturer, Kamov, is considering throwing its hat into the ring when the government goes ahead with a request for proposals early next year.

It is all part of Defence Minister David Collenette’s promise to buy “a Chevrolet instead of a Cadillac” in the aftermath of the Liberal government’s cancellation of the $4.8-billion EH-101 helicopter contract two years ago.

But partly privatizing a major defence purchase – like the search-and- rescue helicopter – does not sit well with some critics.

Defence analyst Martin Shadwick of York University argues that handing over key responsibilities to private companies and leasing the helicopters would put Canadian sovereignty at risk and may save little money in the long run. It may even wind up costing more, he added.

“We’re breaking new ground here,” Mr. Shadwick said. “The industry has been lobbying heavily to contract out maintenance to the private sector but I’m not sure that, on business grounds, the private sector would be cheaper.”

Most of the world’s leading helicopter manufacturers are expected to express interest in bidding in what is shaping up as a wide-open contest: .From the United States: Boeing Co. of Seattle (Chinook), Sikorsky (SH- 60) and Bell Helicopter Textron Inc. of Fort Worth, Tex. .From Europe: Eurocopter (Cougar) and Agusta-Westland, the would-be maker of the EH-101, now renamed the Cormorant. .From Russia: Kamov, which has tentatively lined up MacDonald Dettwiler and Associates Ltd. of Richmond, B.C., to supply electronics and would help it set up a Canadian maintenance and parts plant if the bid was successful.

Michael Weddle, director of marketing for space and defence programs for MacDonald Dettwiler, said the Kamov what is the best quadcopter would be priced at 60 per cent of its U.S. or European rivals. He added that Kamov wants to break into the North American market and would likely build a maintenance and parts plant wherever it makes its first sale. Macdonald Dettwiler is also considering an alliance with a non-Russian airframe manufacturer.

But Mr. Shadwick said Canada’s top military brass is reluctant to buy from Russia so soon after the Cold War and because of worries about the reliability of parts and maintenance.

Still, the order for the relatively spartan search-and-rescue helicopters is not the big prize struggling Canadian defence suppliers have been waiting for.

That is why Canadian suppliers are now lining up for the next major defence contract: an expected $2-billion order for 32 shipborne helicopters designed to operate with the new fleet of Canadian patrol frigates. Mr. Collenette said a decision on whether to proceed will not be made until early 1996.

That helicopter, with its weaponry and advanced electronic guidance systems, would have a much larger Canadian component than the search-and- rescue helicopter. Companies across Canada are trying to position themselves now to be in a position to pick up some of the business.

U.S.-owned Loral Canada Inc. of Montreal, formerly known as Paramax, has been cobbling together a self-described “Team Canada” of local suppliers ready to work on the complex electronics needed for shipborne helicopter. So far, Loral is not linked up with any one helicopter manufacturer.

The EH-101 was to have performed both the shipborne and search-and- rescue roles. With yesterday’s announcement, the government has officially hived off the two projects. And Mr. Collenette told reporters yesterday that he would be “very surprised” if the same helicopter is chosen for both missions.

Even so, defence analysts said the companies that can provide one helicopter to fill both functions will be well placed to make a convincing case that buying one helicopter would significantly cut training and maintenance costs. That would make Sikorsky, Eurocopter and Agusta- Westland the leading contenders for either of the projects.

Likewise, Boeing – which has plants in Arnprior, Ont., and Winnipeg – has made the point that it employs a lot of Canadians but has not been selling many aircraft in Canada. That could give it some political leverage, even though its helicopter, the Chinook, is too small for the shipborne application, analysts said.

Meanwhile, companies in Western Canada are worried that the industrial benefits from both projects may bypass the region entirely.

“We will be making the point very strongly that British Columbia won’t be shut out of this procurement,” said MacDonald Dettwiler’s Mr. Weddle.

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