After U.S. Complaint, Canada to Soften Rules for Jet Competition to Allow Lockheed Martin Bid: Source (excerpt)
(Source: Reuters; published May 10, 2019)
By David Ljunggren
OTTAWA --- Canada is softening the rules of its multibillion-dollar competition for 88 new fighter jets to allow Lockheed Martin Corp to submit a bid, following a complaint by Washington, a Canadian government source said on Thursday.

The source, who requested anonymity given the sensitivity of the situation, said Ottawa was acting after the United States told Canada the regulations would exclude Lockheed Martin’s F-35 fighter, the plane the Canadian air force wants.

The complaint was the latest challenge for a trouble-plagued process that has dragged on for more than a decade.

Canada initially said bidders for the contract - worth between C$15 billion and C$19 billion ($11.1 billion to $14.1 billion) - must commit to give Canadian businesses 100 percent of the value of the deal in economic benefits.

But that contradicts rules of the consortium that developed the F-35, a group to which Canada belongs. The U.S. military’s F-35 office wrote to Ottawa last December saying it would not bid unless changes were made.

“The U.S. government told us they were unable to offer contractual guarantees of economic benefits,” said the source.

Ottawa is therefore dropping the requirement that firms give a legally binding promise they would spend the value of the fighter contract in Canada. (end of excerpt)


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(EDITOR’S NOTE: “In a presentation to companies on Thursday, the government said it plans to allow bids missing such a commitment in the fighter-jet competition — they will be just docked points in the assessment,” The Canadian Press reported late Thursday.

“The proposed new process will see the government evaluate bids on a scale, with 60 per cent of the points based on the plane's capability, 20 per cent on its full lifetime costs and the remaining 20 per cent on industrial benefits to Canada,” it added.

“Bidders can still guarantee that they will re-invest back into Canada if their jet wins the competition and get all 20 points - which is the likely approach for Boeing's Super Hornet, Eurofighter's Typhoon and Saab's Gripen…But those that can't make such a commitment will be asked to establish ‘industrial targets,’ lay out a plan for achieving those targets and sign a non-binding agreement promising to make all efforts to achieve them,” The Canadian Press said.

So, the Canadian government has backed down, and is changing the rules of its new fighter competition to allow Lockheed Martin to compete with the F-35 – the only aircraft that Prime Minister Justin Trudeau promised that Canada would never buy.
This Canadian about-turn also confirms one of the anomalies of the F-45 Joint Strike Fighter program: partner countries -- which have paid a share of the aircraft’s $66.2 billion development – cannot benefit from the offsets that are available to countries that buy the aircraft off-the-shelf, through the Foreign Military Sales program.

In other words, Canada has accepted the risk of obtaining no offsets on its largest-ever defense purchase, so writing off a potential economic gain of C$ 15 billion to C$19 billion.)


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