Airbus took a chance that paid off with its high bid for search and rescue planes

The aerospace company that won Canada's $4.7 billion military search-and-rescue plane contract says it took a chance in presenting a bid higher than the approved budget for the program.

'We knew that there was a risk that the bid wouldn't be accepted,' Airbus says.

The Airbus C-295 transport plane has been chosen to replace the RCAF's nearly 50-year-old C-115 Buffalo fixed-wing search-and-rescue plane. (Airbus)

The aerospace company that won Canada's $4.7 billion military search-and-rescue plane contract says it took a chance in presenting a bid that was higher than the approved budget for the program.

Airbus Defence says it simply presented its proposal and hoped for the best.

The company held a briefing Wednesday at the annual defence industry trade show in Ottawa and responded to a recent CBC News story, which highlighted complaints from the losing bidder, Leonardo S.p.A.

Last fall, the Liberal government chose to buy 16 new C-295W transports from Airbus in a two-stage procurement that exceeded the notional program budget by $1.3 billion.

Leonardo, an Italian aircraft-maker, claims it was not aware the federal government was prepared to show so much flexibility in its price tag for the program — comments which have drawn into question the exhaustive industry consultations conducted by public works.

"The issue is: We didn't know either," said Pablo Molina, Head of Airbus Defence and Space Military Aircraft Canada.

"We knew that there was a risk that the bid wouldn't be accepted because we knew we were over budget, but we think we were fair with the customer and had a reliable cost base."

Pitches above budget could be disqualified

The Liberal government has tried to explain the higher price tag by underlining the fact the budget envelope, approved by the previous Conservative government, was "notional," meaning it was a hypothetical figure prepared a few years ago when bids were first solicited.

But the request for proposals indicated 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.

There were three companies bidding on the replacement contract and 20 years of in-service support — Leonardo, Airbus Defence and Space and Embraer.

Leonardo, which recently lost a Canadian International Trade Tribunal challenge over the deal, has launched a bid before the Federal Court to overturn the contract.

Presented best possible bid

Molina noted on Wednesday that the complaints of his rival have not found their way into any of the legal submissions.

He said he's not concerned about delays at all.

"Before the court, nothing of this has been raised. This has just been issued in the media," he said.

The court filings do make reference to the budget issue, but do not specifically address the question of whether the federal government communicated the elasticity of the price tag.

"We just presented the best possible bid based upon conditions the [request for proposals] demanded, the customer demanded and the level of service demanded. That's it," said Molina.

The program was, from the beginning, intended to be different.

A hybrid procurement

It was a hybrid defence procurement, where bidders were asked to deliver not only aircraft, but recommendations on how many planes were needed and where to station them.

The companies were asked to submit prices and aircraft numbers for a fleet that would operate out of at least four main bases across the country — Winnipeg, Man., Greenwood, N.S., Trenton, Ont., and Comox, B.C. — and a separate proposal using only three airfields.

In the end, the federal government decided not to close any search and rescue bases.

But the question of why the government would accept a bid so far over the project budget is turning into a political headache.

The Conservatives called it "mismanagement" this week in the House of Commons and raised the spectre of Ottawa losing the court fight and potentially paying "millions in damages."

Steve MacKinnon, the parliamentary secretary for public works, said the government will not comment on a case that is before the courts.

About the Author

Murray Brewster

Defence and security

Murray Brewster is senior defence writer for CBC News, based in Ottawa. He has covered the Canadian military and foreign policy from Parliament Hill for over a decade. Among other assignments, he spent a total of 15 months on the ground covering the Afghan war for The Canadian Press. Prior to that, he covered defence issues and politics for CP in Nova Scotia for 11 years and was bureau chief for Standard Broadcast News in Ottawa.


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