Canada

Chopper trouble

Lobbying is clouding the choice of new rescue helicopters

JOHN GEDDES December 22 1997
Canada

Chopper trouble

Lobbying is clouding the choice of new rescue helicopters

JOHN GEDDES December 22 1997

Chopper trouble

Lobbying is clouding the choice of new rescue helicopters

Canada

JOHN GEDDES

In dozens of rescue flights as a Canadian armed forces helicopter pilot, Keith Gathercole has done everything—from plucking sailors off foundering ships near New-foundland to lifting residents of a remote B.C. valley from rooftops as a swollen mountain river threatened their homes.

But when he retired earlier this year, one mission remained unfinished. As one of about two dozen veteran officers asked more than three years ago for advice on replacing the Forces’ aging Labrador search-and-rescue helicopters, Gathercole had hoped Ottawa would choose the new aircraft before he left the service. Instead, he has watched with mounting frustration as cabinet agonizes over a decision he believes should be above politics. “It’s almost unfair for politicians to be involved,” says Gathercole. “They don’t have to be out there at night doing the rescue.”

But the politicians are involved—and deeply. The issue is the main item on the agenda of a cabinet meeting scheduled for this week. The problem facing the government is that, after a year-long bid-

ding process, the department of national defence appears determined to buy the Cormorant, a renamed, somewhat scaled-down version of the EH-101—chosen by the former Tory government. After the Liberals took power in 1993, Prime Minister Jean Chrétien shot down the EH-101 deal as too costly. Seeming to reverse that call by now accepting the defence department’s recommendation would invite ridicule—although, by delaying any decision until after the House broke for its Christmas break last week, the Liberals conveniently moved the issue out of range of a Question Period harangue.

Rejecting the bureaucrats’ choice of the Cormorant, however, could be just as politically risky. It would expose the government to charges of interfering with a fair contract process to save face. And

whatever the ultimate decision, lawsuits and clashes with foreign governments could very well follow. Lobbyists for at least three helicopter companies vying for the contract left little doubt that the stakes are exceptionally high as they frantically worked the room last week at the Liberals’ annual Christmas party near Parliament Hill. All that, says Ed Healey, president of the Canadian Defence Preparedness Association, an advocacy group for a well-equipped armed forces, has left cabinet “making a calculation of political pain.”

Pain was hardly what seemed to be in store when Ottawa set out late last year to buy 15 search-and-rescue helicopters for up to $600 million. The need to replace the tired Labradors that had been filling the role for the Canadian military for 30 years was beyond doubt. The government’s announcement that it was seeking bids stressed “achieving best value for taxpayers’ money,” but still held out the prospect of some lucrative—and politically alluring—regional industrial benefits. From the outset, though, defence industry insiders saw trouble brewing for the Liberals: Britain’s GKN Westland and Italy’s Agusta SpA, makers of the controversial EH-101, were making a determined quest for the contract. What if the consortium—whose aircraft, after all, had won over the military once before—came out on top again?

Westland-Agusta’s EH-101 was selected by the Conservatives in 1992 in a $4.8-billion deal to buy 43 helicopters, both search-and-rescue aircraft and a larger fleet of shipborne naval choppers. After denouncing the EH-101 as an extravagant “Cadillac” in the 1993 election campaign, Chrétien walked away from the contract in his early days in office—at a cost of $474 million in compensation to the

companies. The government may have hoped it had heard the last of the EH-101. When it launched the formal selection process for the search-and-rescue fleet, three other credible helicopter makers entered the bidding. But by early this fall, rumors were swirling around Ottawa that Westland-Agusta was the favorite of DND bureaucrats and military experts.

Worried rival bidders shifted to the public arena. Eurocopter, the Frenchand German-owned manufacturer of the Cougar helicopter, even took the unusual step of releasing a specially commissioned poll that suggested Canadians preferred the idea of a proven aircraft—such as the Cougar, in use as a search-andrescue craft in 17 countries— over a new model such as the Cormorant, which was only just going into production. More seriously, Eurocopter and Strat-

ford, Conn.-based Sikorsky, which is offering its Maplehawk, both say the formal bidding process was skewed in favor of the Cormorant, and could be overruled by cabinet—if, as widely believed, Westland-Agusta is the winner.

But there would be daunting international repercussions to such a move. Letters from former defence ministers David Collenette and Doug Young to Westland-Agusta’s

home governments in London and Rome, obtained by

Maclean’s, vowed that the process would be beyond reproach. They

promised the Cormorant would be “objectively reviewed” and the factors going into the final decision had “in no way been selected to advantage or disadvantage any particular company or product.”

Canada would fall into questionable international company if it failed to award a contract based on its officials’ recommendation. In that case, observers expect Westland-Agusta to launch a massive lawsuit. Beyond the potential financial price of such an action, there could also be a cost to Canada’s reputation. When Mexico recently denied a $450-million subway-car contract to Bombardier Inc. after the Montreal company seemed to have won an open bidding contest, Ottawa did not hesitate to complain loudly. Still, Peter Smith, president of the Aerospace Industries Association of Canada, says the questions raised about the fairness of the helicopter-procure-

ment process could result in the cabinet refusing to choose and starting a whole new bid selection next year.

Domestic forces—particularly from Quebec—-will press against such a postponement. All four bidders have cobbled together Canadian “teams” of potential subcontractors, and Team Cormorant includes some of the heaviest hitters in Quebec’s aerospace industry, including Bombardier, with its high-profile chief executive, Laurent Beaudoin. Liberal insiders say Westland-Agusta has the tacit support of several key Quebec cabinet ministers. And history warns that ignoring regional sensitivities in this sort of race is dangerous. The last time a government vetoed departmental advice in a big military contract was the 1986 awarding of a CF-18 jet-fighter maintenance deal to a Montreal company, even though a Winnipeg firm’s proposal had been recommended to cabinet. That decision by the Mulroney Tories stoked the fires of western alienation for years.

Westland-Agusta’s rivals are navigating well clear of regional issues, pinning their hopes on persuading cabinet that the bid-

selection process put too much weight on the wrong criteria. Eurocopter and Sikorsky both argue that it favored the larger Cormorant over their smaller aircraft. Boeing’s helicopter is even bigger than the Cormorant but reportedly carries the highest price tag, close to the $600-million limit set by Ottawa. Insiders estimate the next most expensive is WestlandAgusta at around $520 million, followed by Eurocopter at $420 million and Sikorsky at well below $400 million. But the government is not obliged to take the lowest price. The selection criteria called for the most cost-effective aircraft, not the cheapest.

All four contenders would likely be adequate to the task. Despite the technical

sophistication detailed in the government’s 1,200-page request for proposals, retired pilot Gathercole says the final pick should be largely based on a factor familiar to any car buyer who has chosen a minivan over a sedan—room in the back. “None of them are bad choices for pilots,” he says. “But when the guys in the back are working on patients, working on your hands and knees is a real negative.” The Cormorant is big enough for standing room in the rear of the cabin. The Eurocopter and Sikorsky helicopters are more cramped, a drawback in the eyes of search-and-rescue squads who can face hours in the air, sometimes moving about among accident victims.

No matter what decision cabinet makes, the government’s prolonged hangover from the EH-101 cancellation will not be over. In the works at DND is a follow-up, $2-billion-plus plan to buy about 30 naval helicopters, the remaining portion of the old Tory procurement (earlier this month, the navy was forced to ground its fleet of 30 Sea Kings because of a mechanical problem). If Westland-Agusta wins the search-and-rescue contract, it will become the clear front-runner to fill that larger order sometime in the next few years—with the prospect of restoring virtually the entire EH-101 project under the very party that came into office vowing to scrap it. And for the Liberals that means the prolonged search-and-rescue wrangle could be a mere prelude to an even bigger controversy. □