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Aerospace firm drops lawsuit against DND as defence officials award it multibillion-dollar contract

An Italian aerospace firm dropped a lawsuit against Canada over what it claimed was a rigged aircraft purchase shortly before the federal government awarded it a new sole-source deal potentially worth billions of dollars.

But the Canadian Forces and officials with Italian defence company, Leonardo, say the ending of the legal action in May had nothing to do with the company being picked for a new project the same month.

Leonardo has been selected by the Royal Canadian Air Force to upgrade its Cormorant search-and-rescue helicopters and provide seven additional aircraft.

It is estimated the project will cost taxpayers between $1 billion and $5 billion, a price tag that includes the purchase of simulators and support equipment.

Leonardo had been fighting the Canadian government in Federal Court over its 2016 decision to award its rival, Airbus, a contract to build fixed-wing search-and-rescue planes as part of a $4.7-billion program. The company was asking the court to overturn the contract to Airbus and instead award the lucrative deal to Leonardo and its Canadian partners. It alleged the Airbus aircraft failed to meet the government’s basic criteria.

But that legal action was stopped in May just as the Canadian government was awarding Leonardo the new helicopter deal.

The Department of National Defence suggested the decision to drop the lawsuit was not related to its decision to select Leonardo for the sole-source deal. “The Government of Canada’s priority is to select a best-value package for the Cormorant Mid-Life Upgrade,” the DND noted in an email. “Decisions related to this procurement were made based on consultations with industry and our subject matter experts and follow standard procurement reviews.”

But the sole-source deal to Leonardo caught the aerospace industry by surprise. The RCAF had asked companies just last year for informal proposals on how Canada’s future search and rescue helicopter needs could be met.

One firm, Sikorsky, went as far as launching a campaign to promote its civilian S-92 helicopter as a cost-effective solution. It proposed that it was cheaper to buy new helicopters than to upgrade the older Cormorants.

The federal government acknowledged that it has now received correspondence from aerospace firms raising issues about the sole-source deal with Leonardo.

“We have received some responses,” Pierre-Alain Bujold, a spokesman for Public Services and Procurement Canada, stated in an email. “PSPC officials are currently reviewing the responses, in collaboration with the Department of National Defence and Innovation, Science and Economic Development Canada.”

“Once this review is complete, officials will determine appropriate next steps and inform respondents accordingly,” Bujold added.

But defence industry insiders say the review is simply for the sake of appearances and it is expected the deal with Leonardo will proceed.

Leonardo officials said their decision to drop the lawsuit was made in April but it took until the next month before that process could be completed.

The Cormorant fleet entered service in the year 2000 and the modernization would allow the helicopters to operate for another 25 years at least. One of Leonardo’s subsidiaries was the original manufacturer of the Cormorants.

The decision to sole-source the deal moved through the federal system quickly. On April 20, RCAF spokesman Maj. Scott Spurr stated the air force was still examining options on how to proceed and that the next phase of the project wouldn’t come until 2019.

But on May 24 the Canadian government announced it had decided to go with Leonardo on the exclusive deal.

Department of National Defence officials say it was determined that it was more cost effective to stay with the Cormorant fleet as it is a proven aircraft the RCAF knows well.

The upgrade program is expected to include the latest avionic and mission systems, advanced radars and sensors, vision enhancement and tracking systems.

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