Canada said set for C$4.5 bln Boeing defense order (4 C-17)

OTTAWA (Reuters) - Canada's Conservative government is about to decide to spend a total of C$4.5 billion ($4.1 billion) on the purchase and maintenance of four giant Boeing (BA.N: Quote) C-17 transport aircraft, the opposition Liberal Party said on Monday.

Liberal defense spokesman Ujjal Dosanjh, who said the decision could be made as early as Tuesday, said Canada does not need the aircraft and should be concentrating on smaller transport planes instead.

"(We support) acquisition of the new equipment that is most urgently needed by our Forces. But we do not support the purchase of nonpriority aircraft that will result in a mixed fleet and place undue pressure on the Forces' operation and maintenance budget for years to come," he said.

Dosanjh also said Ottawa would buy the C-17s directly from the U.S. government, thereby ensuring that the maintenance of the aircraft would be done in the United States and not in Canada.

The defense ministry declined to comment. No one from Boeing or the office of Defense Minister Gordon O'Connor was immediately available for comment.

According to media reports, O'Connor is at loggerheads with Chief of Defense Staff Rick Hillier -- Canada's top soldier -- over what kind of planes are needed.

Hillier has spoken publicly about his desire to replace Canada's aging Hercules fleet of tactical strategic aircraft, which are much smaller than the C-17s. The main options are the Airbus (EAD.PA: Quote) (EAD.DE: Quote) A400M -- which is still on the design board -- and Lockheed Martin's (LMT.N: Quote) revamped C130J Hercules.

I'm nowhere near up to speed on this.
My hope would be that the politicians listen to what the military says it needs to complete the goals set out for it by the government....
and that we're getting the most bang for the buck.
FWIW in surfing around I found this contrary opinion piece posted on the Canadian American Strategic Review CASR

According to news reports, DND is about to purchase four (4) Boeing C-17s for 300 million each, plus sign a 20 year maintenance contact for 2 billion dollars.

I will try to be short and simple in my arguments.

Four aircraft at $ 300 million = $ 1.2 billion – add to that $ 2.0 billion in contracts,
and it adds up to a total of $ 3.2 billion.

Aircraft cannot fly eternally. Each has what is called a 'service life', which is the number of hours after which the airframe must be retired. The Boeing C-17s have a service life of 30,000 hours.

Since we are spending 3.2 billion dollars on 4 aircraft that each have a service life of 30,000 hours, we can divide 3.2 billion dollars by 4 aircraft, which gives us the cost per Boeing C-17 over its life, than further divide by 30,000 hours which gives us what one hour of flight will cost Canadian taxpayers.

The hourly cost will be $ 26,666.

We have not yet put any pilots or loadmasters on board, paid the mechanics, put any fuel in the aircraft, or added other costs that are not included in the maintenance and parts contracts.

If we just add fuel, these aircraft burn about 6 tons an hour, which comes out to close to $ 3000 an hour of flight. Its easy to see that these aircraft will cost the Canadian taxpayer over $30,000 per hour to fly.

The Antonov 124s we had been chartering cost about $13,000 per hour, which includes just about everything, but they carry 120 tons of cargo. The Boeing
C-17 will only take 77 tons, about half the payload.

So the hourly cost of flying our shiny C-17s will be about 2.5 times the cost of chartering Antonovs, but since the Boeing carries 1.55 times less cargo, the cost per ton carried will be about 3.9 times greater with the Boeings. That covers the cost issue.

This cost issue is the very reason that no other armed forces in any country outside the US has purchased any Boeing C-17s. In fact, the plant is about to be closed. This is also why, when Boeing attempted to market the aircraft as a civilian freighter, there was not a single order worldwide, not even in the US.

We are about to become the first suckers, thanks to Mr. Harper and his desperation at pleasing the White House. Even the UK (Mr. Blair) did not want to buy any C-17s. (The UK leased a few, waiting for the Airbus A400M).

[CASR update: In the end, both the UK and Australia decided to buy C-17s, each driven by their own particular political and military imperatives – so, Canada might not be the 'first adopter' – but we may very well be the last.]

The Boeing C-17s are going to be purchased by DND through 'sole-sourcing',
which means that no alternative bids are going to be accepted. Here's what Canadian law has to say about sole - source buying.

Exceptions to Competition ( Sole - Source Buying )

While you should strive to buy competitively, it doesn't make much sense to spend more money on a competition for the goods or services your clients need than they are worth. In fact, most of your buys will be low dollar value purchases where competition may be optional.

Keep in mind also that suppliers, vendors and contractors do not want to spend more money than absolutely necessary responding to competitive solicitations.

You may contract with a supplier without competition when:

     • There is a pressing emergency such as natural disasters
        like earthquakes or floods
     • The estimated expenditure is less than:
            · $25,000 for goods and services   (Buyers are still expected
              to solicit bids below this value whenever it is cost effective to do so.)
            · $100,000 for architectural and engineering services and other services               required in respect of the planning, design, preparation or supervision
              of the construction, repair, renovation of a work.
            · $100,000 for the Canadian International Development Agency (CIDA)
              service contracts related to international development programs
              or projects;
     • A competition is not in the public interest
     • Only one supplier is capable of performing the work, as in the case of
       a supplier who owns a copyright or software license.

DND is attempting to use the last clause, where only one supplier is capable of doing the work. They claim that only one manufacturer in the world produces such an aircraft, which is NOT TRUE. In fact, there was a Russian delegation in Ottawa this very week trying to offer their Ilyushin 76, a brand new and modern strategic aircraft, which cost around 50 million in US dollars. Yet DND claims this aircraft does not exist in order to use the 'exception to competition' clause. Why does it not exist? Because it does not come from the United States.

Are all of you going to let this happen?

Are we going to have another scandal like the submarines and the helicopters?

None of you will be able to claim that someone didn't try to blow the whistle.

Regards, [Name witheld for privacy and personal security], Laval, Quebec.
(A citizen concerned about how his tax dollars are spent.)

I'm not at all sure I would want to rely on the Russians for maintenance and spare parts if that's what the deal would entail.

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