Auditor General takes aim at costly chopper deal

OTTAWA — Auditor General Sheila Fraser has slammed National Defence and Public Works for huge cost overruns and delays in the purchase of new military helicopters.

OTTAWA — Auditor General Sheila Fraser has slammed National Defence and Public Works for huge cost overruns and delays in the purchase of new military helicopters.

The scathing analysis of programs to buy choppers for maritime patrol and army battlefield operations was the highlight of her fall report, released Tuesday.

Its harsh criticisms of these military procurement projects could have repercussions for the Conservative government’s plan to spend $16 billion on new stealth fighters.

Other chapters of Fraser’s report looked at the Conservative government’s stimulus program and the regulation of big banks.

But it was the combined $11-billion purchase of CH-148 Cyclones and CH-147F Chinook helicopters that drew the most fire.

Fraser said both programs are years behind schedule, far over their initial cost estimates and — in the case of the sole-sourced Chinooks — “the contract award process was not fair, open and transparent.”

In its response, Public Works Canada strongly disagreed with her findings.

The audit accused defence planners of deliberately misleading federal Treasury Board by claiming — at the beginning — that they were buying “off-the-shelf” helicopters.

After approval, the air force demanded a series of modifications to the base models that forced defence contractors, in the case of the Cyclone, to create “an aircraft that never existed before.”

And National Defence did not develop long-term-cost plans for the aircraft early enough. When they did it was presented after the fact.

“Total cost estimates were not disclosed to decision-makers at key decision points,” said Fraser’s report.

The findings are likely to stoke mounting opposition to the sole-sourced purchase of 65 F-35 Lightning II stealth fighters, which critics have deemed unnecessary and presenting even more uncertainties than the helicopters.

She said the federal government should apply lessons from the helicopter purchases to the F-35, which will be the subject of a future audit.

“There will have to be a good identification of the risks and strategies put in place to mitigate that,” the auditor said following the release of the report.

During question period, the opposition pounced on that warning.

“They didn’t start planning for additional personnel until 2009 and they’ve yet to come up with an estimated life-cycle cost of the helicopters,” said NDP defence critic Jack Harris. ”How can the Conservatives expect Canadians to trust them with $16 billion for the F-35s when they’ve made much a mess with the helicopter purchase?“

Defence Minister Peter MacKay deflected the criticism, saying the Conservatives have given the military the equipment it needs to save lives.

“There’s a big difference between the procurement of helicopters and the F-35,” he said.

Fraser’s findings on the program to purchase 15 Chinook battlefield helicopters are the most damaging.

The final bill is expected to be $4.9 billion, but she noted that operations and maintenance costs are not factored in.

The initial estimate in 2006 was $2 billion, excluding long-term maintenance.

Once approved, the air force sought design modifications including bigger fuel tanks and improved electrical systems.

Fraser estimated the one-time engineering costs for those changes to be a staggering $360 million. It increased the cost of each aircraft by 70 per cent over the initial price quoted by Boeing in 2006.

She also said defence planners deliberately misled the government.

“National Defence knew prior to seeking preliminary project approval from Treasury Board and issuing the (Advanced Contract Award Notice) that significant modifications to the basic Chinook were desired and planned,” said the report.

“It also knew that these would increase the risk to cost and schedule. However, this was not presented to the Treasury Board when seeking preliminary approval but should have been.”

She declined to say whether anyone should be fired.

Fraser’s audit found the total cost of buying 28 Cyclone helicopters to replace the antique Sea King fleet, which operate off the decks of navy frigates, will likely top $5.7 billion and come in seven years late.

National Defence did not include the cost of keeping the nearly 50-year-old Sea Kings flying in its estimates, nor the need for new hangars and buildings for the new aircraft. When those numbers are factored in, the final bill becomes an eye-popping $6.2 billion.

In 2003, Paul Martin’s Liberals pegged the program at $2.8 billion, including long-term maintenance.

Fraser’s report documented the tortured Sea King replacement process, first proposed in 1975, through the Chretien government’s cancellation of the EH-101 in 1993 to the beginning of the latest project, which will see delivery of first chopper only in 2012.

Even then, the first 19 helicopters will need to be retrofitted to meet the harsh endurance requirements of military life.

“While the interim helicopters will be suitable for testing, evaluation and training, they will not be deployed on operations,” said the audit.

It’s unclear when the modifications would be made to bring them into full service.

Equally troubling is that defence planners have yet to develop a fully costed, in-service support plan for the Cyclones — criticism that also haunts the planned stealth fighter purchase.