Breaking Lockheed Martin’s inside track at DND
Michael Den Tandt | July 10, 2014 8:04 PM ET
A phalanx of major French defence firms is lining up to provide Canada with new warships and planes, in hopes of prying a share of the biggest Canadian military hardware bonanza since the Second World War away from U.S. industry heavyweight Lockheed Martin. In the process the French appear to be offering the Harper government a timely and politically saleable off-ramp from its multi-year, multi-billion-dollar procurement mess.
What remains to be seen is whether Prime Minister Stephen Harper and cabinet have the wit and wherewithal to seize the opportunity, or whether they will submit, as in the past, to the forces of inertia within the Defence department, which perennially favours Lockheed.
At issue are two massive contracts — $9-billion (or $46-billion, factoring in all life-cycle costs) to replace Canada’s aging fleet of Boeing F-18 A jet fighters, and $26-billion for the Canada Surface Combatant ships, to replace the Royal Canadian Navy’s three ancient Iroquois-class destroyers, and 12 Halifax-class frigates built in the 1980s. Together, these two contracts amount to a complete rebuild of the “sharp” edges of both the Royal Canadian Air Force and the RCN.
Throughout the Harper government’s difficulties with its F-35 purchase, announced with great fanfare in 2010 and abruptly shelved two years later, French consortium Dassault has been quietly positioning its Rafale twin-engined fighter as an alternative, while also lobbying for a competition on the contract. Recently Dassault has moved into a more aggressive phase of its lobbying, with senior company executives pitching a “Canadianized” version of the Rafale, major components of which could be built in Canada by Canadian workers.
At the same time, French naval defence giant DCNS is now campaigning for a large piece — industry sources say as much as 70%, or $18- billion worth — of the build awarded to the Irving shipyard in Halifax in the fall of 2011. At issue are hull design, weapons and communications systems. DCNS argues, in an internal document obtained by Postmedia News, that its FREMM multi-purpose frigate could be adapted to Canadian needs, at significant cost savings. In language similar to Dassault’s, DCNS also argues for a competitive bidding process.
The shipbuilder’s leading competitor for much of this work? Lockheed Martin. As with the F-35, there is a view within Canadian defence circles that the U.S. defence juggernaut has the inside track at DND, for reasons that include the long-standing close technological and tactical co-operation of the Canadian and U.S. militaries, but extend beyond that to how its new weapons systems operate.
Industry sources say Lockheed Martin’s ship systems are designed to allow what’s known as Cooperative Engagement Capability, essentially the tactical integration of sensory and weapons systems across a fleet. All Lockheed’s new weapons systems, including the F-35, effectively transform individual weapons platforms into linchpins in a far-flung sensor array. The appeal for Canadian military brass weaned on inter-operability with U.S. forces is obvious: They want to be at the table for a share of the information treasure trove these globally networked systems will yield.
The counter-argument from DCNS, and also Dassault, is simply this: French military platforms are clearly interoperable with U.S. systems, as has been proven in numerous North Atlantic Treaty Organization military engagements. And, unlike Lockheed Martin, the French are willing to share their source code, as well as allow for construction in Canada. In a speech in Ottawa last November, then-DCNS chief executive Patrick Boissier promised 10,000 jobs over 10 years, should Canada opt for its FREMM frigate design.
It’s unrealistic to imagine that, in the year before a federal election, the federal government will overturn 30 years of joined-at-the-hip Canada-U.S. military doctrine. But it’s equally unlikely now to entertain a scenario in which the Harper Conservatives can be seen to award any major sole-source contract (that is, with no open, competitive bidding process) to Lockheed Martin’s advantage.
Moreover, there are new political doctrines to bear in mind: Both the Emerson Report and the Jenkins Report that followed urged Ottawa to pay more heed to Canadian industrial benefits — in shorthand, jobs — when making procurement decisions, and the government pledged to do so.
Finally, as an outrider, there’s the stalled Keystone XL pipeline, and the developing Canada-European free trade zone. Rarely has the Canada-U.S. strategic relationship been more frayed, and rarely has there been more reason for a Canadian government to make a gesture of openness to European competition on major federal government contracts.
Taken together, it amounts to this: The weight of political pressure on the Harper PMO to force all this extraordinarily expensive, time-consuming and important work up for competition, rather than allow any of it to be sole-sourced to any one supplier, is nigh overwhelming.
DND earned itself no brownie points with the F-35 imbroglio. It will be no surprise at all if, whether on ships, planes or both, the brass is soon told to go pound salt, and a rigorously transparent, competitive bidding process is put in place, once and for all. Given the enormous sums at stake, and the political dynamic, it becomes increasingly difficult to imagine another outcome.
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