The Canadian government is launching a competition to buy a new fleet of 88 fighter jets and officials confirmed Tuesday they will also be buying an interim fleet of 18 jets from Australia rather than Boeing.
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A clause in the announcement effectively suggests that if Boeing wants to bid on the competition itself, it better back down in its trade challenge of Bombardier.
The announcement, which follows up on a campaign pledge by Prime Minister Justin Trudeau to hold a competition to replace Canada’s aging CF-18 Hornets, does not exclude Lockheed Martin from submitting a bid for the government to consider its F-35 fighter jet as had also been promised in the Liberals’ 2015 campaign platform.
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Government officials speaking on background prior to the announcement on Tuesday said no potential bidders are being excluded but that any firm engaging in activities that hurt Canadian economic interests will be at a steep disadvantage.
“When bids are assessed, any bidder that is responsible for harm to Canada’s economic interests will be at a distinct disadvantage,” the press release states.
That aspect of the announcement seems specifically aimed at Boeing, the American aerospace firm that is challenging government subsidies of Bombardier at the U.S. Commerce Department.
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Boeing complained about the subsidies after it says Bombardier sold C-Series jets to Delta Airlines at a steep discount, and the U.S. Commerce Department sided with Boeing this fall when it recommended implementing a 300 per cent tariff on the sale.
That tariff will not go into place until the U.S. International Trade Tribunal rules on the decision next year.
Early in 2016, the government had announced that it would buy sole-sourced interim fighter jets from Boeing to fill what it claimed was a “capability gap” in allowing the military to meet both its NATO and NORAD commitments at the same time.
Air force officials disputed those claims, saying the military realistically did not need to be able to meet both commitments at the same time.
Officials said Tuesday buying the interim jets from Australia will fill that “capability gap” until a full fleet can be acquired, and Chief of Defence Staff Gen. Jonathan Vance said in a statement that there will no issues with buying second-hand jets from the Australians.
“This is a natural fit; the Australian jets are functionally equivalent to our own CF-18s and, once converted to Canadian specifications, will provide an easy transition for our pilots, technicians, and ground crew,” he said.
Officials said Tuesday the cost is being estimated at roughly half a billion dollars for the interim replacement, while roughly $15 billion to $19 billion will be set aside for the full competition.
A letter outlining the terms is expected to be in the government’s hands by the end of December.
What comes next?
First up in the process is inviting interested bidders to sign up for what is essentially a list of interested suppliers by February 9, 2018.
Firms that do not register by then will not be considered as the competition heads forward.
Next, bids will be evaluated on a basis of cost, whether they meet Canada’s technical requirements, and what the economic benefits are of the proposal.
As part of the latter, an assessment of whether the bidder is causing economic harm to Canada will be considered.
Consultations will run through 2018 and 2019, with formal solicitation documents expected to be made available in spring 2019.
A contract award is expected in 2022 and the government says it expects to have the first aircraft resulting from the award of the contract in its possession by 2025.
Canada launches contest for 88 new fighter aircraft
How to measure ‘economic harm?’
Government officials refused to say exactly how they plan to calculate the concept of “economic harm” when pressed by reporters on Tuesday.
A statement from Boeing last week suggested the company had made peace with the loss of the interim fighter deal but was trying to smooth out relations in the hope of keeping the option open for potential future work.
“Although we will not have the opportunity to grow our supply base, industrial partnerships and jobs in Canada the way we would if Canada purchased new Super Hornets, we will continue to look to find productive ways to work together in the future,” the company wrote.
“Boeing is fortunate to have an outstanding 100 years of partnership with Canada, which had culminated in our [$4-billion] annual economic impact in Canada, and we look forward to partnering for the next 100 years.”
Canadian officials would not say explicitly whether the clause was aimed at getting Boeing to drop its complaint against Bombardier.
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