Feds recoil at costs of cargo plane contract

The federal government doesn’t yet have a long-term maintenance contract for its new air force transport planes because it’s balking at the high costs and arguing about benefits to Canadian industry.

OTTAWA — The federal government doesn’t yet have a long-term maintenance contract for its new air force transport planes because it’s balking at the high costs and arguing about benefits to Canadian industry.

The air force is due to take possession of the first of its new C-130J Hercules aircraft, but without a maintenance deal.

It is a recurring problem for the Conservatives.

Last year it shelved an order for three military supply ships because of higher-than-expected costs and watered down the capabilities of six planned Arctic patrol ships to keep them within budget.

A $1.4-billion contract for 17 new transports was signed with Lockheed Martin in January 2008.

But unlike past big-ticket purchases, it did not come with a long-term, in-service support contract, something the Defence Department initially pegged at $1.7 billion.

The matter was left to negotiation with Lockheed Martin.

Defence sources say the price tag for the 20-year maintenance agreement and haggling over regional benefits for Canadian companies have bogged down the talks.

Public Works and Government Services Canada, which is responsible for negotiating the arrangement, did not comment.

National Defence is scrambling to assemble a temporary service arrangement to avoid the potential embarrassment of having to park brand new aircraft on the tarmac for lack of maintenance people and resources.

“We’re working as hard as we can to get that long-term support contract in place,” said Elizabeth Hodges, a spokeswoman for the defence material section.

Much like the air force’s purchase of the mammoth C-17 Globemaster cargo planes a few years ago, the first C-130J Hercules is expected to arrive about six months ahead of schedule.

Hodges said a temporary contract for parts and maintenance had to be put in place for the C-17s, as well.

A spokesman for Lockheed Martin, Peter Simmons, confirmed that talks have started on a temporary support package, but he declined comment on the ongoing negotiations.

At first, the federal government pushed the U.S. corporation for direct, industrial participation with Canadian companies either building parts or contributing to the maintenance.

But over the last year the government quietly dropped its direct benefit demand and replaced it with a requirement for indirect industrial benefits up to 75 per cent of the contract value.

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