A new and crucial wrinkle has emerged in the Liberal government's first major military equipment purchase: the ongoing saga to replace the air force's fixed-wing search and rescue planes.
The losing bidder in the $4.7-billion program has told CBC News that it was never informed there was flexibility within the federal government's proposed acquisition budget.
Leonardo S.p.A., an Italian aircraft maker, found itself on the outside of the deal last fall when the Liberal government chose to buy 16 new C-295W transports from rival Airbus Defence and Space.
The company with the losing bid, which offered its C-27J aircraft, has launched a Federal Court challenge. It also recently lost a bid before the Canadian International Trade Tribunal to halt the project.
Central to its case is how the program budget envelope went to $4.7 billion from $3.4 billion, which was initially approved and set aside by the previous Conservative government.
The three companies bidding on the replacement contract and 20 years of in-service support — Leonardo, Airbus Defence and Space and Embraer — were told that exceeding the budget envelope could lead to disqualification.
"If the financial proposal of the winning bid is higher than the notional budget, Canada could, at its sole discretion exercise any of its rights," which includes rejection of the offer, said the request for proposals.
Federal officials, in explaining the mechanics of the decision last December, told CBC News that the contract was being broken up into two stages.
The Airbus bid came in at $2.4 billion and included only 11 years of maintenance. There would be an option to renew in-service support for up to 15 years, and, if fully extended, it would add an additional $2.3 billion to the value of the tender.
As the Canadian partner of Airbus, Provincial Aerospace in St. John's would be the main beneficiary of those contract extensions. (end of excerpt)
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