Ottawa overrides its controls on contract security
Globe and Mail
Ottawa- The Conservative government has used an extraordinary "national security" clause to take control of $8-billion in recently announced military spending, allowing it to dole out contracts to the West, Quebec and the Atlantic. The federal government lost the power to steer contract work to specific parts of the country with the 1994 signing of the Agreement on Internal Trade with the provinces. But as part of the continuing purchase of new planes and helicopters, the government has decided to invoke a national-security exception (NSE), which effectively removes these contracts from reach of the agreement.
A federal official said the net result is that Ottawa will be able to impose regional quotas on the economic benefits of the contracts.
The process provides additional powers to Industry Minister Maxime Bernier and the rest of the cabinet, which will likely face intense lobbying over the distribution of the benefits from provinces and the industry.
Mr. Bernier has already travelled to the United States to meet with officials from the firm that is most likely to receive the aircraft contracts, Boeing Co.
Before the signing of the 1994 agreement, decisions on major federal contracts were frequently criticized for the weight given to regional political considerations. Provinces and regions were often at odds over access to regional benefits — in which winning bidders are required to spend in Canada the equivalent of their total costs to fulfill the contract.
Conservative officials are well aware that they have more power over the regional benefits for the new planes and helicopters than on previous military purchases, for which the national-security exception was not applied.
"Our challenge is getting high-quality benefits" for Canada, a senior federal official said.
Donald Savoie, a professor at the University of Moncton and an expert in regional development, said the Conservative government is "going one step beyond" previous governments in its effort to oversee the distribution of benefits.
"There is no doubt that the government will be heavily lobbied. Does that provide them with new powers? Absolutely," Prof. Savoie said.
Liberal MP Ujjal Dosanjh said the government is giving itself too much power in the process.
"This could lead to the worst kind of pork-barrelling by this government, behind closed doors, without accountability to anyone in this country," he said.
Leah Clark, a director-general at Industry Canada, confirmed in an interview that the government is likely to impose quotas in the distribution of the benefits in Canada.
"It is not usually our practice to specify minimums for regions," she said, adding that the "the use of the NSE allows us to talk about minimums."
"The effort here is to make sure that competitive businesses in all parts of Canada get an opportunity to be seen and to be heard," Ms. Clark said.
Defence procurement has a history of controversy. In 1986 the Mulroney government awarded a $1.4-billion contract for maintaining CF-18 fighter jets to Canadair of Montreal despite the advice from a panel of experts that awarded a higher score to a bid from Bristol Aerospace of Winnipeg. An outcry followed in Manitoba and throughout the West.
The Department of National Defence signalled its intent in July to purchase 16 Chinook helicopters and four C-17 transport planes from Boeing at a total cost of $8-billion, including 20 years of in-service support.
Other companies are challenging the government's planned purchases, but many industry observers feel that Boeing is the only company capable of fulfilling the government's requirements for these aircraft.
Given that the Boeing aircraft are almost entirely produced in the United States, the company will be obliged, under the terms of its contract, to spend an amount equivalent to the purchase price in Canada.
"Each acquisition contract will have 100-per-cent industrial benefits right here in Canada, meaning that for every dollar the Government of Canada pays a contractor, the contractor must spend an equivalent amount inside Canada," Public Works Minister Michael Fortier said in a news release in July.
Other recent military purchases, such as the 2004 acquisitions of 28 Sikorsky helicopters to replace the Sea Kings, were not done under the national-security exception, industry experts said.
A DND spokeswoman said the government invoked the NSE because it wanted to ensure that the in-service support for the aircraft "is done within Canada."
[img height=164 alt="'This could lead to the worst kind of pork-barrelling by this government, behind closed doors, without accountability to anyone in this country.' said Liberal MP Ujjal Dosanjh." src="http://images.theglobeandmail.com/archives/RTGAM/images/20060808/defence08/0807liberal230.jpg" width=230]
'This could lead to the worst kind of pork-barrelling by this government, behind closed doors, without accountability to anyone in this country.' said Liberal MP Ujjal Dosanjh. [CITE class=source](John Lehmann/Globe and Mail)[/CITE]
[CITE class=source][/CITE]
