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Amanda Connolly GlobalNews.ca WATCH: Canadian fighter jets intercepted two Russian bombers travelling near the North American coastline. While they were in international airspace they entered an area patrolled by the Canadians. The two American aerospace firms that want the Canadian government to buy their fighter jets say they did not request an extension on the deadline for bids. At the same time, defence experts say the decision to grant the extension reflects the bigger challenge facing a government that has repeatedly insisted a competition is the only way to move forward with the $19-billion procurement, despite there being a limited pool of options. “The government believes it needs to run a competition, but there're many situations where, in reality, there's only one or two competitors that can actually meet the needs of the Canadian Forces,” said Richard Shimooka, a senior fellow at the Macdonald-Laurier Institute and an expert on defence. “So the government's put in a bit of a pickle by its rhetoric where it wants to portray that ‘yeah, we're having a competition or we're providing value for money and all these kind of important things for Canada', but in fact knows there's really only one competitor.” On Tuesday, the government announcement that the March 30 deadline will be pushed back three months, to June 30 instead. READ MORE: Canadian fighter jet replacement project hit with another delay In a press release on the decision earlier in the week, the government had said this extension was being granted “at the request of industry.” “Procurements of this magnitude are complex, and submission of a good proposal is important for suppliers and for Canada,” the government said in the press release. “This extension allows eligible suppliers to address recent feedback on their security offers, ensuring that Canada receives competitive proposals that meet its technical, cost and economic benefits requirements.” Global News has since been told that feedback included specific assessments about whether a firm would be able to meet the Canadian government's requirements for inter-operability with key allies, including the U.S. and the Five Eyes, and whether allies would be comfortable with them. Because the government is using a process known as phased bids for the fighter jet procurement, bidders get the chance to address any findings of non-compliance with those requirements before submitting their final proposals. And because of how closely Canada and the U.S. work together on issues ranging from intelligence sharing, continental defence and others, inter-operability – or the ability for jets to work seamlessly across various areas where Canadian and American systems overlap – is considered key to this contest. “We've got to buy aircraft that can be completely and seamlessly inter-operable with the U.S.,” said Dave Perry, vice president of the Canadian Global Affairs Institute and an expert on defence procurement. “They've asked the bidders to put forward a proposal on how they're going to make that work.” Perry noted that in the past, questions around how aircraft will operate between Canadian and American systems hasn't been relevant because Canadian fighter jets have always been American. Now, with foreign bidders like Sweden's Saab, the onus is on them to demonstrate their jets can actually do the work. “Saab is the only competitor that is not part of either Five Eyes or Two Eyes and as a result, it would have the greatest amount of work in order to meet the requirements of the Royal Canadian Airforce,” said Shimooka. “Right off the bat, it requires the greatest amount of work for this.” While the government wouldn't say which firm asked for the deadline extension, both Lockheed Martin and Boeing offered statements saying it wasn't them. “We did not request the extension,” said Boeing spokesperson Stephanie Townend. A spokesperson for Lockheed Martin offered a similar response. “We have not requested an extension of delivery for the FFCP preliminary proposal,” said Amanda Hauck, strategic communications lead for the firm. A spokesperson for Saab was less clear. “While Canada's FFCP competition prohibits bidders from commenting publicly on confidential elements of the RFP process, Saab was prepared, and remains prepared, to submit a bid based on the Government of Canada's schedule,” said Patrick Palmer, executive vice president of sales and marketing for Saab Canada. “Saab will continue to finalize its response to all stated requirements of the RFP and can confirm that we will submit a fully compliant response to the Future Fighter Capability Program RFP. We are confident that our offer will provide the best value and best solution for Canada, industry and Canadians for generations to come.” Global News followed up with a request for Palmer to clarify whether the bid Saab said it was prepared to submit by the March 30 deadline would have been a fully compliant one. The company has not yet clarified its response. Saab is offering its Gripen fighter jet in the contest while Lockheed Martin is offering its controversial F-35 and Boeing is offering its Super Hornet. Two other European firms – Airbus and Dassault – dropped out of the contest over the past year-and-a-half, citing security requirements and associated extra costs for the suppliers if chosen. The competition is complicated though by questions and past concerns about both of the American offerings. Boeing brought a trade tribunal complaint against the Canadian aerospace firm Bombardier in 2018 which resulted in Bombardier being forced to pay steep duties on imports of its C-Series plane to the United States. Innovation Minister Navdeep Bains said shortly afterward that the government would weigh a company's “economic behaviour” and that those who had caused economic harm to Canada would be at a disadvantage in the fighter jet competition. That clause still exists in the criteria being used to assess the projects. But Prime Minister Justin Trudeau also promised during the 2015 election campaign not to buy the F-35, the planned procurement of which under the previous Conservative government had been dogged with accusations of hidden costs and sole-sourcing. Since the launch of the competition, the F-35 has become widely-viewed by military experts as a frontrunner in the contest. A government source speaking on background insisted the extension will not impact the expected decision date. The result of the contest are due in 2022 with expected delivery of whichever jet is chosen beginning in 2025. https://q107.com/news/6600416/canada-fighter-jet-competition/

by Vern Kakoschke February 2020 Introduction Defence procurement in Canada has had some well-known challenges in recent years. Many commentators have suggested possible strategies for fixing the defence procurement system. The identified problems include overspending on defence programs, unnecessary and undue delays in re-equipping Canada's fleet of aircraft, ships and ground transport, and defence budgets that remain unspent. The problems also include procuring authorities experiencing a shortfall in manpower and expertise, the inability to execute on defence procurements, unjustified sole-sourcing without a proper competition, political interference in selection issues, and the list goes on. The proposed solutions often address process-related matters: establish a single agency responsible for defence procurement or perhaps a cabinet secretariat to manage the involvement of three of four government departments who are often not on the same page. To date, not much has been written or discussed in public policy forums on a critical question: How should the necessary capital assets be financed? At one extreme, Canada could simply write a cheque and pay for them up front, thereby placing the assets on Canada's balance sheet. At the other extreme, Canada could drop the financing obligation into the laps of private-sector bidders and let them worry about the most efficient way of raising the necessary capital. A middle-ground solution could involve a public-private partnership (P3) structure, a model which seeks to balance the interests of the public and private sectors in a manner that leads to a better solution for all parties. Any public policy discussion often begins with first principles. What is the government's policy objective? It is to procure the best available equipment, with the most benefit to the Canadian economy or local interest groups and at the lowest possible cost. All three goals must be balanced in a manner that is politically acceptable, meets budget constraints and withstands public scrutiny. In major procurements, capital can be the largest single cost of a defence procurement. Conventional wisdom is that Crown debt is by far the cheapest financing alternative for any new program that requires the acquisition of capital assets. The Crown issues Government of Canada (GoC) bonds for a term that matches the expected useful life of the capital assets and the interest rate does not include a risk premium or credit spread (often called “Canada's flat”). Canada purchases the capital assets and then, if necessary, makes them available for use by a private-sector operator under a lease or loan arrangement as government-furnished equipment (GFE). The fixed-wing search and rescue (FWSAR) program is an example of a procurement in which Canada simply paid for the aircraft up front with the related maintenance services (in-service support) for the assets being funded over a long period of time. The government ownership model is simple, straightforward and enjoys the lowest capital cost. But it has two serious drawbacks. First, the GoC bonds are consolidated on the Crown's balance sheet with other Crown debt. This brings them to the attention of the major rating agencies. If the total Crown debt increases beyond acceptable rating norms, rating agencies will typically downgrade Canada's credit rating with the result that the interest rate on future GoC bond issuances will rise. Increased Crown debt may also lead to a politically unpalatable higher budget deficit. Second, the Crown typically selects the appropriate capital assets, a decision that is fraught with risk and intense public scrutiny. Politicians likely dread having to make such decisions. In a scenario where the capital assets can be bundled with required services, the Crown may prefer to procure only the services and leave the related asset selection up to the successful proponent. If the service provider bears the debt service costs and they are simply embedded into the price for services, then the program's cost can be booked in the Crown's operating budget and not its capital budget. Capital budgeting decisions tend to receive a much higher level of public scrutiny than changes to the annual operating budget. Milestone payments made to the successful proponent that are tied to the delivery of a portion of the capital assets can be buried in operating budgets. Relatively low milestone payments may not attract public scrutiny whereas higher payments in a material amount likely would. Historical Perspective The financing for the NATO Flight Training in Canada program (NFTC) can offer some historical perspective. In 1994, Bombardier made an unsolicited proposal to provide contractor-supported jet pilot training in Canada.1 The proposal contemplated certain novel economies of scale for the high fixed cost of establishing a training program. The acquisition costs and non-recurring charges would be amortized over trainees from the Canadian air force and from the air forces of participating NATO nations, thereby resulting in a lower cost per student. Less well-known was the proposal's financing package: the program's entire capital cost would be financed in a manner that was “off-balance sheet” to Canada and to Bombardier. It became known as the Milit-Air financing as it involved the establishment of a special purpose entity (SPE) called Milit-Air Inc., a not-for-profit corporation. In 1997, the Canadian government awarded Bombardier a 20-year service contract for the NFTC program, valued at $2.85 billion. Under the service contract, Bombardier was responsible for providing fully serviced aircraft, flight simulators, training content, and airfield and site-support services to the Department of National Defence (DND). Milit-Air financed all the capital assets pursuant to a bond issue to institutional investors and then leased them to Bombardier. The Milit-Air financing was completed in two tranches: the first tranche in the amount of $720 million of amortizing secured bonds was issued in 1998 and the second tranche in the amount of $106 million was issued in 2002.2 The financings coincided with the obligations to pay equipment suppliers such as Raytheon for the T-6A aircraft and British Aerospace for the Hawk 115 aircraft that were required for the training program. The SPE purchased the capital assets and leased them to Bombardier who in turn provided services to Canada in exchange for firm fixed fees and variable fees. The fixed portion of the service contract payments were “hell-or-high-water” obligations of Canada and were assigned by way of security to the SPE so that it could service the debt on the outstanding bonds. The complex financing structure is described in detail in a 2002 decision of the Ontario Securities Commission.3 The OSC concluded that the distribution of the bonds was exempt from provincial prospectus requirements even though the financing did not fall within an exemption for government debt: “the arrangements do not constitute a direct obligation of Canada to make payments on the bonds or a collateral obligation of Canada in the nature of a guarantee.” In other words, Canada did not guarantee the payments to bondholders and hence under then-applicable accounting principles, the total debt of $826 million was not consolidated with Crown debt.4 The Milit-Air financing was widely considered in financing circles to be an innovative and cutting-edge transaction well ahead of its time. Why was it admired? Standard & Poor's (S&P) rated the Milit-Air bonds. S&P rated most financing transactions involving a service contract structure and an SPE as an accommodation party at one or more notches below the then-current rating of the sponsoring government.5 Milit-Air was a rare exception. S&P awarded the Milit-Air bonds a AAA rating, the same rating as GoC bonds.6 In other words, Canada and the procuring authority for the NFTC capital assets could have its cake and eat it too: the Milit-Air bonds were not shown in the consolidated accounts of Canada as Crown debt and yet the interest rate on the bonds was the same as what Canada would have paid if it had issued GoC bonds. This was an impressive result that likely resulted in interest cost savings over the full term measured in the millions of dollars. Unfortunately, the auditor general of Canada did not see it that way. In his 1999 annual report, the AG found that the decision to award a sole-sourced contract to Bombardier (which contract was assumed by CAE Inc. in 2015) “was not adequately justified”. The AG reviewed the financing arrangement and found it to be lacking, primarily due to the fact that Canada was on the hook for the debt servicing charges even if no services were being provided. The risks were not justified in the AG's view: “The main risk is that if Milit-Air Inc were ever to become insolvent, National Defence would face the drastic consequence of losing its access to the planes while continuing to pay the firm fixed fees.”7 Perhaps the AG did not appreciate that the SPE was designed to be bankruptcy-remote and that an insolvency of Milit-Air was highly remote. The AG would have much preferred if Canada had simply purchased the capital assets outright and supplied them to the contractor as GFE. The AG also failed to acknowledge that if Canada had used the GFE approach, it would have been responsible for the debt servicing charges on the GoC bonds in any event. On an incremental risk basis, it may be that the benefits of the financing in terms of lower interest costs outweighed the incremental risks. In subsequent years, the AG continued to criticize the NFTC program and its financing. In 2002, the AG concluded that the profit margin built into the NFTC contract was excessive and could not be justified. In 2006, the AG calculated that the Crown paid about $39 million for training that it could not use. In his 2006 annual report, the AG stated that the Crown was “less than successful in obtaining foreign student commitments”. The mandarins at Public Services and Procurement Canada (PSPC) likely got the message: they would probably never again attempt a highly structured financing such as Milit-Air in a defence procurement and risk incurring the AG's wrath. A chill fell on the procuring authority. In 2003, the pendulum in respect of defence procurement contracts swung in the opposite direction. Canada released a Request for Proposals (RFP) for a contract to provide long-term primary helicopter and multi-engine fixed-wing pilot training at Southport, Manitoba. The RFP incorporated the AG's recommendations that the next training contract should have payments tied to performance and value received. The AG reviewed the draft RFP for the primary training project and found that payments would be based on milestones: “If the contractor fails to achieve the milestones, this could result in payment holdbacks and forfeiture. Incentives are also in place for good performance.”8 In 2005, Canada announced that a relatively unknown Western Canada-based aerospace company was the winner and awarded the contracted flying training support (CFTS) contract, subject to confirmation that the winner (a relatively small private company) could raise the financing.9 Details of the CFTS financing are not publicly available, apart from the fact that a $137.5-million transaction was concluded at the time of contract award.10 The Enron Debacle The Enron scandal in 2001 changed the landscape for Milit-Air style financings.11 Enron filed for bankruptcy and its accounting firm, Arthur Andersen, was dissolved. The CFO of Enron went to jail. One of the causes of their downfall was Enron's use and abuse of SPEs that enabled the company to hide hundreds of millions in liabilities from its shareholders and lenders. Largely as a result of the Enron debacle, the U.S. accounting regulator (the Financial Accounting Standards Board) changed the accounting rules to make it more difficult, if not impossible, to use off balance-sheet financing structures.12 Most large Canadian corporations that had taken advantage of such financing structures promptly reversed course and consolidated their SPEs' debt. It is not clear from the public record whether the AG also responded to the change in accounting standards by adding the outstanding Milit-Air bonds to Crown debt in the Crown's audited accounts. Future Air Crew Training (FAcT) Program The competition for the next-generation training contract started in 2013. The Crown announced that it would combine the pilot training currently being provided under the NFTC program and the CFTS program together with air crew training for combat system officers and airborne electronic sensor operators into one massive procurement.13 A RFP is expected to be released in 2020 with a contract award expected in 2021. The Crown has made no mention in its public releases how the required capital assets are expected to be financed under the FAcT program. The four qualified bidders in the FAcT competition may be faced with uncertainty in bid preparation in that they may or may not be expected to provide the financing as part of the bidding process. The amount required to refresh or fund the FAcT program's capital assets will likely be significant: if the total capital cost of the two existing programs approached $1 billion over 20 years ago, the capital cost of a refresh could be well in excess of that amount. Such an onerous financing obligation could put smaller bidders at a disadvantage to larger multinational defence contractors. Public Private Partnerships (P3s) The P3 procurement model is an investor-friendly method of transferring risk for public infrastructure projects to the private sector and enabling a private-sector financing at an acceptable risk premium over GoC bonds.14 It is all about delivering value for money. Cash-strapped provinces have enthusiastically embraced the P3 model for the design, build, operation and maintenance (DBOM) of various projects in the health-care sector, social infrastructure such as hospitals, libraries and prisons, and transportation such as roads and bridges. Relatively few P3 projects have been completed at the federal level: the RCMP headquarters in Surrey, the Gordie Howe Bridge and the Communications Security Establishment Centre (CSEC) in Ottawa. It was unfortunate that the Liberal government in 2017 disbanded PPP Canada, a Conservative-created Crown corporation that encouraged P3s at the federal level. There is no reason why the P3 model could not be applied to defence projects, particularly if they involve a mix of capital assets and service delivery, as most P3s do. Security concerns can be overcome, as was evidenced in the CSEC project. There is no loss of government control over strategic assets in any P3 deal. Contracting practices for P3 deals have been well developed over the years and the investment community has accepted the risk allocation set out in commonly used P3 documentation. No need to reinvent the wheel with new and complex documentation when preparing a RFP. Other countries, such as the U.K. and Australia, have fully embraced the P3 model (known locally as PFIs or private finance initiatives) for defence procurement and yet Canada has not followed their lead, notwithstanding the demonstrable benefits that could be derived from such an approach.15 P3s are typically built on time and on budget as the risk of delays, cost overruns and non-performance are transferred to the successful proponent in the private sector. Lessons Learned When it is released, the RFP for the FAcT procurement will provide an interesting case study for whether Canada has learned any valuable lessons from the predecessor financings undertaken in the NFTC and the CFTS programs. Some shaping principles that could be helpful when designing a defence procurement involving significant capital assets (such as FAcT) include the following: Contemplate an investor-friendly financing for the capital assets. Unless Canada prefers to increase its budget deficit by a material amount, the RFP's terms should not scare off potential investors. By adopting best practices in the P3 industry, Canada could level the playing field when it comes to financing. Each bidder should have the same opportunity to raise the capital on the strength of the underlying service contract and not simply on the strength of its balance sheet. Unwind the Milit-Air financing. The Milit-Air bonds are nearing maturity but are still outstanding. The original purpose of the financing structure – off balance-sheet accounting treatment – has disappeared. The annual cost of maintaining a not-for-profit corporation cannot be insignificant. This cost could be avoided by unwinding the financing in a manner that involves Canada stepping up to assume the obligations under the bonds as a direct obligation of the Crown. This could well facilitate transition issues between the existing NFTC assets and the refreshed assets. Involve the auditor general in the RFP design process. The AG made numerous helpful recommendations in his reports regarding the NFTC program, many of which remain valid concerns today. Has the AG ever followed up and determined the current status of his recommendations? Better transparency would assist the bidders and their investors in risk assessment. Moreover, the expected accounting treatment for all parties concerned could usefully be reviewed by the AG and anticipated in the RFP. Reconsider the use of milestone payments. If Canada intends to partially contribute toward funding the capital cost in whole or in part, the contributions could take the form of progress payments rather than milestone payments. The former payments are considered to be earned when paid, whereas the latter are considered unliquidated advance payments (meaning the Crown could claw them back in certain circumstances). No investor will wish to invest in a project where the Crown has a prior claim on the same assets funded by an investor. The AG may also consider the accounting treatment of such milestone payments, as they may in some cases be treated as being on capital account rather than on income account and buried in a government department's operating budget. Provide certainty for bidders in the RFP process. Uncertainty is the enemy of a cost-effective program. If bidders are given advance notice of the essential terms of a procurement, they can plan accordingly, including preparing for a financing that will likely require substantial amounts of debt and equity from the investment community. Any necessary governmental approvals, including from Treasury Board, would be best sought at the start of a procurement process. Leaving the funding approvals to the end as an after-thought would not be helpful. Defence procurements are large and complex. Financing considerations should be taken into account as early in the procurement process as possible. The failure to consider the appropriate financing approach for major capital assets could well add millions to an already costly program. Conversely, a properly structured procurement and related financing could save the Crown many millions in terms of the cost of capital. End Notes 1 National Defence and the Canadian Armed Forces, “NATO Flying Training in Canada: An Innovative Solution for NATO Flying Training Requirements,” Sept. 7, 1998. Available at http://www.forces.gc.ca/en/news/article.page?doc=nato-flying-training-in-canada-an-innovative-solution-for-nato-flying-training-requirements/hnlhlxhd 2 Offering Memoranda dated May 5, 1998 and June 25, 2002 issued by Milit-Air Inc. and its financial advisor and underwriter, Scotia Capital Markets. 3 In the Matter of Scotia Capital Inc. and Milit-Air Inc. Available at https://www.osc.gov.on.ca/en/SecuritiesLaw_ord_200220628_2113_scotiacapital.htm 4 The auditor general concluded in his 1999 annual report that Milit-Air was an independent organization and not subject to the control of Canada or Bombardier. In the result, the debt appeared on the balance sheet of Milit-Air Inc., but not on any other party's balance sheet. 5 The reason for the lower rating is that the payment stream under the service contract could be caught up in a service provider's bankruptcy and hence the payment flows to the bondholders could theoretically be interrupted. 6 Standard & Poors Rating Direct Report (Oct. 11, 2007). 7 1999 September and November Report of the Auditor General of Canada – Case Study 27.1-NATO Flying Training in Canada. 8 May 2006 Report of the Auditor General of Canada. 9 National Defence and the Canadian Armed Forces, “Backgrounder on CFTS,” March 30, 2005. Available at www.forces.gc.ca/en/news/article.page?doc=contracted-flying-training-and-support-cfts/hnocfoke 10 McCarthy Tétrault LLP. Available at https://www.mccarthy.ca/ 11 Many corporations in capital-intensive industries were taking advantage of off balance-sheet financing structures at that time. In such financings, the debt was typically issued by a special purpose entity that was not controlled (de jure control) by the sponsoring corporation. Hence the debt that the SPE issued was not consolidated with the sponsoring corporation's debt even though the latter was indirectly responsible for the debt servicing, typically through lease payments to the SPE. As a result, the sponsoring corporation did not put any stress on its financial covenants with its lenders and it also avoided the payment of capital tax which was based on the corporation's stated liabilities. 12 In 2009, FASB issued Interpretation FIN 46(R) entitled “Consolidation of Variable Interest Entities”. If an SPE qualified as a VIE under a new substantive test (rather than control test), the VIE's debt would have to be consolidated with the debt of the primary beneficiary (i.e., the sponsoring corporation). The Canadian accounting regulator soon followed suit with the publication of Accounting Guideline AcG-15 (Consolidation of VIEs). 13 FAcT website: www.tpsgc-pwgsc.gc.ca/app-acq/amd-dp/air/snac-nfps/ffpn-fact-eng.html 14 Many P3 projects have been financed at interest rates based on the then-prevailing applicable GoC bond rate plus a credit spread of 150 -200 bps. 15 The benefits have been well documented by the Canadian Council for PPPs in numerous published studies. About the Author Vern Kakoschke is Managing Director of Gothic Strategic Solutions Inc. (www.gothicsolutions.ca). He provides consulting services in the aerospace and defence sector and advises on complex structured financings, including tax-advantaged financings. Vern has 30+ years experience practising law in Toronto and in the investment banking industry where he completed several novel financing transactions for major capital assets involving aircraft, rail, power and infrastructure assets. He retired last year from a senior management role at KF Capital (owner of KF Aerospace), including as a director of SkyAlyne Canada LP (one of the bidders for FAcT) and was formerly the finance lead on the SkyAlyne bidding team. https://www.cgai.ca/financing_capital_assets_the_missing_link_in_defence_procurement

Canada has joined humanity's return to the Moon – an investment in science, innovation and research to unlock new opportunities for economic growth and to help us answer important questions about our planet, universe and ourselves. The Canadian Space Agency (CSA) is presenting Canada's space community, including small and medium-sized businesses, with the opportunity to contribute technologies to national and international efforts of exploring the Moon. This is a crucial step in humanity's quest to travel further in space, onwards to Mars. The CSA is awarding 7 contracts worth a total of $4.36 million to five companies and one university to advance concepts for nano- and micro-rovers, as well as autonomous science instruments. These advancements will serve as the first steps towards landing and conducting Canadian science on the surface of the Moon. “Our Government is positioning Canada's space sector to reach for the Moon and beyond. This investment will help Canadian businesses bring their technologies to market, creating opportunities for them to join the growing space economy while supporting Canada to achieve world firsts in space science and exploration,” said Navdeep Bains, minister of Innovation, Science and Industry. The contracts being awarded are as follows: ABB (Quebec) will receive $693,193 to design, build and test the prototype for an autonomous lunar exploration infrared spectrometer that will remotely measure and study the mineralogical composition of the Moon's surface. Bubble Technology Industries Inc. (Ontario) will receive $698,321 to develop a spectrometer that will autonomously search for hydrogen to indicate the presence of water and ice near the Moon's surface. Canadensys Aerospace Corporation (Ontario) will receive two contracts worth a total of $1,099,366 to develop concept designs, technologies and prototypes for two different classes of small Canadian lunar science rovers – a nano-rover and a micro-rover. Magellan Aerospace (Manitoba) will receive $607,258 to develop a lunar impactor probe that will deliver instruments to the surface of the Moon, including sensors to detect water in the permanently shadowed regions of the Moon. Mission Control Space Services Inc. (Ontario) will receive $573,829 to advance an autonomous soil assessment system as an AI-based science support tool for rovers navigating on the Moon. Western University (Ontario) will receive $690,123 to develop an integrated vision system for surface operations that will be used for identification of the geology of the lunar surface and for rover navigation. https://www.skiesmag.com/press-releases/canada-backs-businesses-to-join-in-the-next-chapter-of-lunar-exploration

This week, approximately 350 Canadian Armed Forces (CAF) personnel will deploy to Resolute Bay and Rankin Inlet, Nunavut as part of Operation Nanook-Nunalivut 2020 (Op Na-Nu 20). From Feb. 24 to March 27, 2020, CAF personnel and international partners will work together to enhance and test their specialized Arctic skill-sets, and reaffirm their ability to operate in the High Arctic. Ranging from ground and underwater activities to complex logistical support, Op Na-Nu 20 will demonstrate the presence and capabilities of the CAF in the Arctic, and will improve our readiness to operate in the region: a key component of Canada's Defence Policy – Strong, Secure, Engaged. Operations like Op Na-Nu 20 also enhance Canada's ability to work effectively with northern partners and allies. “Each year, Operation Nanook-Nunalivut provides us with a renewed focus on our operational capabilities and effectiveness in the High Arctic. The North is a vast, harsh and unique place to operate, and because of this, careful preparations and close collaboration with our northern partners is key. Sharing knowledge with our partners and allies will allow us to be better able to adapt to new demands and challenges in the North, and address common northern defence, security and safety concerns in the High Arctic,” said BGen Patrick Carpentier, commander, Joint Task Force (North). https://www.skiesmag.com/press-releases/the-canadian-armed-forces-international-partners-nunavut

News release February 25, 2020 - Gatineau, Quebec - Government of Canada The Government of Canada is committed to providing members of the Royal Canadian Air Force with the fighter aircraft they need to do their jobs, and ensuring the best possible value for Canadians. At the request of industry, the March 30 deadline for preliminary proposals for the Future Fighter Capability Project has been extended. Eligible suppliers now have until June 30, 2020 to complete and submit their proposals. This extension supports our commitment to conduct an open, fair, and transparent competition. Procurements of this magnitude are complex, and submission of a good proposal is important for suppliers and for Canada. This extension allows eligible suppliers to address recent feedback on their security offers, ensuring that Canada receives competitive proposals that meet its technical, cost and economic benefits requirements. Quotes “The government set out an aggressive timeline to implement this very complex, high-value procurement, and while we understand the importance of this procurement for our women and men in uniform, our focus is on moving the process forward as quickly as we can, while ensuring that all bidders have the time they need to put forward their best proposal.” The Honourable Anita Anand Minister of Public Services and Procurement “Our government is making the necessary decisions to get the best aircraft for the Royal Canadian Air Force and Canada. This extension will allow the eligible suppliers to make their best possible offer to ensure that we are able to provide the equipment our members need at a fair cost to Canadians.” The Honourable Harjit S. Sajjan Minister of National Defence “Canada's Industrial Technological Benefits policy is expected to generate high-value jobs and economic growth for Canadian aerospace and defence businesses for decades. Ensuring that all suppliers have the opportunity to put their best bid forward is important to ensure strong economic benefits are secured for Canadians.” The Honourable Navdeep Bains Minister of Innovation, Science and Industry Quick facts This is the most significant investment in the Royal Canadian Air Force in more than 30 years and is essential for protecting the safety and security of Canadians and meeting international obligations. Officials conducted extensive engagement with Canadian aerospace and defence industries to ensure that they are well positioned to participate in the procurement. Canada is using a phased-bid compliance process, which is an additional measure to ensure that bidders will have an opportunity to address non-compliance in their proposals related to mandatory criteria. Following evaluation of preliminary proposals, a dialogue phase may be conducted with one or more compliant bidders to reduce the risk that a proposal is eliminated due to an error or omission. Proposals will be rigorously assessed on elements of capability (60%), cost (20%) and economic benefits (20%). All proposals will be evaluated according to the same evaluation criteria. Canada's Industrial and Technological Benefits Policy, including a Value Proposition applies to this procurement. This is expected to generate high-value jobs and economic growth for Canadian aerospace and defence businesses for decades. Associated links Future Fighter Capability Project National Defence: Fighter jets Integrating Australian jets into the current Royal Canadian Air Force fighter fleet Contacts Cecely Roy Press Secretary Office of the Honourable Anita Anand 343-549-7293 Media Relations Public Services and Procurement Canada 819-420-5501 media@pwgsc-tpsgc.gc.ca Follow us on Twitter Follow us on Facebook https://www.canada.ca/en/public-services-procurement/news/2020/02/canada-grants-extension-to-the-deadline-for-preliminary-responses-to-the-future-fighter-capability-project-request-for-proposals.html

By PAUL MCLEARY PENTAGON: Close to 300 companies logged on to a “virtual industry day” with Pentagon leadership last week as the military scrambles to build its own 5G networks. The challenge: moving fast enough to keep up with commercial innovation — but cautiously enough to keep China out. The event, led by DoD's technical director for 5G, Dr. Joe Evans, marked a starting point for shaping a forthcoming Request for Prototype Proposals planned in the coming weeks. The companies selected will then start work later this year on a series of 5G experiments at four bases across the United States. Those experiments are intended to help the individual armed services to refine what it is they need, and what they need to ask from industry, as the Pentagon pumps hundreds of millions of new funding into 5G programs across the department. The experiments run the gamut from logistics to sharing information between radar systems, and each service will play a role in testing out what industry offers. Hill Air Force Base in Utah will develop 5G dynamic spectrum sharing capabilities between airborne radar systems and 5G cellular systems. The Marine Corps Logistics Base Albany, Georgia and Naval Base San Diego will test out a smart warehouse concept, while virtual reality training systems will be tested at Joint Base Lewis-McChord, Washington. The RPP will be issued through the National Spectrum Consortium, an industry group established under a five-year, $1.25 billion Other Transaction Authority contract with the Deputy Assistant Secretary of Defense, Emerging Capabilities and Prototyping. Only vetted companies who belong to the consortium will be considered for the work. The effort is part of a wider push within the government to develop homegrown tech, and quickly. President Trump's top economic advisor, Larry Kudlow, told reporters Friday the White House is planning a 5G meeting in April with top technology companies in an effort to ensure Huawei does not cornere the global market on the technology. “We're going to have a lot of them in the White House to have a discussion,” Kudlow said, though the event hasn't been officially announced. The Pentagon fiscal year 2021 budget requests $449 million in research and development for the 5G next generation information communications technology program, $249 million more than provided by Congress last year. While the Pentagon is paying to run these initial tests, the individual services will ultimately be responsible for paying to 5G technologies once they're matured, adding another budget line at a time when no one expects defense accounts to rise for the foreseeable future. When that happens, 5G will compete “with all other infrastructure upgrades that the services already have planned for their installations and for the systems that operate on them,” said Morgan Dwyer, a former Pentagon official now at the Center for Strategic and International Studies. “So, how quickly DoD can deploy 5G is really a function of how much utility the technology provides to the services and how willing they are to trade-off other capabilities in order to prioritize 5G instead.” https://breakingdefense.com/2020/02/pentagon-briefs-industry-on-5g-experiments

Federal government tables figures showing what it's spent on the projects to date Murray Brewster The federal government has spent slightly more than $1.01 billion over the last seven years on design and preparatory contracts for the navy's new frigates and supply ships — and the projects still haven't bought anything that floats. The figures, tabled recently in Parliament, represent the first comprehensive snapshot of what has been spent thus far on the frequently-delayed project to build replacement warships. It's an enormous amount of money for two programs that have been operating for more than a decade with little to show for their efforts to date. It will be years before the Canadian Surface Combatant project — which aims to replace the navy's frontline frigates with 15 state-of-the-art vessels — and the Joint Support Ship program for two replenishment vessels actually deliver warships. The numbers and details for each advance contract were produced in the House of Commons in response to written questions from the Conservative opposition. The money was divided almost evenly between the federal government's two go-to shipyards: Irving Shipbuilding in Halifax, the prime contractor for the new frigates, and Seaspan of Vancouver, the builder of the supply ships. The breakdown raises critical questions about at least one of the programs, said a defence analyst, but it also shines a light on promises made by both Liberal and Conservative governments to keep spending under control for both of these projects — which could end up costing more than $64 billion. "I think there should be a level of concern [among the public] about whether or not what's being delivered in practice is what was advertised at the outset," said Dave Perry, a procurement expert and vice president of the Canadian Global Affairs Institute. A design still in flux Most of his concerns revolve around the new support ships, which the Liberal government says are in the process of being built now. The written responses, tabled in Parliament, note that the projected cost for the two supply ships — $3.4 billion — remains under review "as the design effort finalizes." Perry said he was astonished to learn that, "seven years and half-a-billion dollars into design work on an off-the-shelf design," the navy doesn't have the support ships, even though "the middle third of the ship is built" — and officials now say "the design effort isn't finished." Usually, he said, ships are designed before they're built. The head of the Department of National Defence's materiel branch said most of the preparatory contracts were needed to re-establish a Canadian shipbuilding industry that had been allowed to wither. 'A lot of patience' "I think we have to look at the totality of everything that's being accomplished under" the national shipbuilding strategy, said Troy Crosby, assistant deputy minister of materiel at DND. "Over that period of time, and with these expenditures, we've built a shipbuilding capability on two coasts, not just through National Defence but also through the coast guard, offshore fisheries science vessels. I understand it has taken a lot of patience, I suppose, and probably some uncertainty, but we're really getting to the point now where we can see delivering these capabilities to the navy." The largest cash outlays involve what's known as definition contracts, which went individually to both shipyards and were in excess of $330 million each. They're meant to cover the supervision of the projects and — more importantly — to help convert pre-existing warship designs purchased by the federal government to Canadian standards. The choices on each project were made at different times by different governments, but ministers serving both Liberal and Conservative governments decided that going with proven, off-the-shelf designs would be faster and less expensive than building from scratch. Now, after all the delays, it's still not clear that choosing off-the-shelf designs has saved any money. "I would be completely speculating on what it would cost to invest to develop the kind of expertise and capacity inside the government, inside National Defence and everybody involved, to be able to do something like that in-house," said Crosby. "The approach we've taken at this point, by basing both the Joint Support Ship and the Canadian Surface Combatant on pre-existing designs, allows us to retire a lot of risk in the way forward." When Crosby talks about "retiring risk," he's talking about the potential for further delays and cost overruns. Among the contracts, Irving Shipbuilding was given $136 million to support the drawing up of the design tender for the new frigates and to pay for the shipbuilding advice Irving was giving the federal government throughout the bidding process. Years ago, the federal government had enough in-house expertise to dispense with private sector guidance — but almost all of that expertise was lost over the past two decades as successive federal governments cut the defence and public works branches that would have done that work. The last time Canada built major warships was in the 1990s, when the current fleet of 12 patrol frigates was inaugurated. The federal government has chosen to base its new warships on the BAE Systems Type-26 design, which has been selected by the Royal Navy and the Royal Australian Navy. The hull and propulsion system on the new frigates will be "largely unchanged" from the British design, but the combat system will be different and uniquely Canadian, said Crosby. The project is still on track to start cutting steel for the new combat ships in 2023. Crosby said he would not speculate on when the navy will take delivery of the first one. Delivery of the joint support ships is expected to be staggered, with the first one due in 2024. There will be a two-year gap between ships, said Crosby, as the navy and the yard work through any technical issues arising with the first ship. If that timeline holds, the first support ship will arrive two decades after it was first proposed and announced by the Liberal government of former prime minister Paul Martin. https://www.cbc.ca/news/politics/frigates-joint-supply-ships-navy-procurement-canada-1.5474312

As part of its commitment to NATO, Canada also must be prepared for high-tech warfare in Europe. by David Axe Follow @daxe on TwitterL Key point: Canada, like Switzerland, likely can't afford to fail again to buy new planes. Canada for the third time in a decade is trying to replace its aging F/A-18A/B Hornet fighter jets. With every year the acquisition effort drags on, the condition of the Royal Canadian Air Force's fast-jet fleet grows direr. “The politically-charged competition to replace Canada's aging fleet of fighter jets will rocket forward at the end of May [2019] as the federal government releases a long-anticipated, full-fledged tender call,” Murray Brewster reported for CBC News. Four companies are vying for the multibillion-dollar contract for as many as 88 fighters that would replace the RCAF's 1980s-vintage Hornets, which in Canadian service are designated “CF-18.” Saab, Airbus, Boeing and Lockheed Martin all are in the running, respectively offering the Gripen, Eurofighter, F/A-18E/F and F-35A. The manufacturers will have until the end of 2019 to submit bids, CBC News reported. But the RCAF hardly can wait. The RCAF acquired 138 F/A-18A/Bs from McDonnell Douglas starting in 1982. In early 2019, 85 of the original Hornets, all more than 30 years old, comprise Canada's entire fighter fleet. The Canadian Hornets are unreliable and lack modern systems. In 2010, Canada's Conservative Party government announced plans to acquire 65 new F-35 stealth fighters by 2020. But the government never fairly compared the F-35 to rival fighter types such as the Eurofighter Typhoon, the Auditor General of Canada concluded in a 2018 report. "National Defense did not manage the process to replace the CF-18 fleet with due diligence." In 2015, Liberal Party candidate Justin Trudeau made the F-35 a major issue in his campaign for prime minister. Trudeau won. And in 2017, Ottawa backed off its proposal to purchase F-35s and, instead, launched a new competition to acquire 88 fighters. The aircraft would enter service in 2032, meaning the old Hornets would have to continue flying 12 years longer than the government originally planned. Ottawa briefly considered acquiring 18 F/A-18E/Fs from Boeing in order to bolster the early-model Hornets, but the government canceled the plan during a U.S.-Canada trade dispute in 2017. Canada was left with its original Hornets. In December 2017, the government announced it would spend around $500 million buying up to 25 1980s-vintage F/A-18s that Australia was declared surplus as it acquired its own fleet of new F-35s. The RCAF would add some of the Australian Hornets to the operational fleet and use others as sources of spare parts. But the government has no plan to keep its Hornets combat-ready as they enter their fourth and even fifth decade of service." We found that the CF-18 had not been significantly upgraded for combat since 2008, in part because [the Department of] National Defense expected a replacement fleet to be in place by 2020," the government auditors found. "Without these upgrades, according to the department, the CF-18 will become more vulnerable as advanced combat aircraft and air-defense systems continue to be developed and used by other nations." Against this backdrop, Brewster assessed the current fighter contenders, in particular, the Swedish Gripen and the American F-35. “There has been a rigorous political and academic debate about whether Canada should choose a legacy design from the 1990s, such as the Gripen, or the recently-introduced Lockheed Martin F-35 stealth fighter,” Brewster wrote. “The Swedish air force is about the same size as the Royal Canadian Air Force,” Brewster pointed out, adding that Sweden and Canada also share geographic concerns. “The Gripen is intended for operations in rugged environments, such as Sweden's Arctic region,” Brewster wrote. “Canada's CF-18s occasionally operate from forward bases in the north, but those deployments are infrequent compared with the routine activity of the Swedes.” As part of its commitment to NATO, Canada also must be prepared for high-tech warfare in Europe. The Gripen lacks the radar-evading stealth features that in theory allow the F-35 to penetrate the most dangerous Russian-made air-defenses. But Brewster cited a March 2019 Swedish study that claimed Russian defenses are less fearsome than many observers believe. “Besides uncritically taking Russian data at face value, the three cardinal sins have been: confusing the maximal nominal range of missiles with the effective range of the systems; disregarding the inherent problems of seeing and hitting a moving target at a distance, especially targets below the horizon; and underestimating the potential for countermeasures against [anti-access area-denial]-systems,” Robert Dalsjo, Christopher Berglund and Michael Jonsson explain in their report "Bursting the Bubble." The stakes are high. If Canada fails a third time to buy a new fighter, it might find itself in the same unfortunate situation in which Switzerland has found itself. In April 2019 the Swiss air force is down to just 10 ready fighters with full-time pilots. The crisis is the result of the Swiss public's decision in a 2014 referendum to reject the air force's proposal to buy 22 new fighters to begin replacing 40-year-old F-5 Tigers. The Swiss air force in 2019 plans to remove from service 27 Tigers. The 26 Tigers that remain will perform limited duties. With the F-5 force shrinking and flying part-time, the Swiss air force increasingly relies on its 30 F/A-18C/Ds. To last that long, the F/A-18s need structural upgrades. The upgrade work has sidelined more than half of the Hornet fleet. Switzerland like Canada has relaunched its fighter competition. The same companies and designs that are competing in Canada, plus Dassault with the Rafale, are in the running in Switzerland. Intensive flight testing began in April 2019. Canada like Switzerland likely can't afford to fail again to buy new planes. The old Canadian Hornets probably won't last much longer. "The CF-18 will be disadvantaged against many potential adversaries, and its combat capability will further erode through the 2020s and into the 2030s," Ottawa's auditors warned. David Axe serves as Defense Editor of the National Interest. He is the author of the graphic novels War Fix, War Is Boring and Machete Squad. (This first appeared last year.) https://nationalinterest.org/blog/buzz/canada-needs-new-aircraft-could-f-35-fit-bill-125556

DAVID PUGLIESE, OTTAWA CITIZEN The Canadian military is investigating potential problems with brakes on its new armoured vehicle fleet which may have contributed to a number of incidents, including where one of the 18-tonne vehicles hit a car near Petawawa. There have been eight reported incidents involving problems with stopping or issues with brakes affecting the Tactical Armoured Patrol Vehicles, or TAPVs. A formal safety advisory was issued Feb. 12 to the army units using the $600-million TAPV fleet. But the use of the vehicles is not being restricted at this time. The brake issues started being reported in January 2018 and the intermittent problem has only occurred at speeds in the range of five to 15 kilometres an hour, according to the Canadian Forces. “We are working with experts to try and determine if there is a problem with the vehicles braking performance at low-speed, and if the problem is isolated to a few vehicles or the result of something that may affect the wider fleet,” noted army spokesman Lt.-Col. Doug MacNair. So far, the Canadian Forces and Department of National Defence has been unable to replicate the reported problem, nor have inspections uncovered any obvious causes. There have been no injuries as a result of the incidents. Among the eight incidents is a Feb. 3 accident during which a TAPV rolled through a red light and hit a civilian vehicle near Canadian Forces Base Petawawa. No injuries were reported, and Ontario Provincial Police issued a ticket to the TAPV driver for failing to stop at a red light. Driver error was the “apparent problem” according to the Canadian Forces. But sources point out the driver in question reported problems with the TAPV brakes. During a change of command parade in Halifax in November 2019 a TAPV hit a wall causing minor damage after the brakes failed to stop the vehicle. A soldier near the vehicle had to “take evasive action to avoid being struck,” according to the Canadian Forces. In one case the brakes on a TAPV caught fire. In the aftermath of several other incidents involving brake failure large amounts of ice were found in the brake drums. In another case a TAPV hit the side of a bridge during training. “Following each of these incidents, technicians were unable to locate a problem with the brakes after they conducted technical inspections,” the Canadian Forces added. In 2016 the TAPV fleet had brake issues. At that time it was determined the anti-lock braking system on the vehicles was engaging erratically at higher speeds. A retrofit was introduced across the entire fleet to deal with that problem. The military says there is no evidence to suggest a connection between the 2016 braking issues and these latest incidents. Last year this newspaper reported on a series of rollovers and fires affecting the TAPV fleet. Between April 2014 and January 2019 there had been 10 incidents when Tactical Armoured Patrol Vehicles have tipped on to their sides, six where they have rolled over completely, and four where they have caught fire. Pat Finn, then the assistant deputy minister in charge of procurement at the Department of National Defence, said at the time there have been no serious injuries as a result of the incidents. Finn suggested the rollovers might be caused because of the high centre of gravity the vehicles have. Training was improved to deal with the issue of rollovers. No explanation was provided at the time for the cause behind the fires. The TAPVs have also faced other problems, according to DND documents obtained by this newspaper using the Access to Information law. The TAPV program has “experienced a number of significant technical issues, particularly affecting vehicle mobility,” then-Conservative defence minister Rob Nicholson was told in August 2014. There have been problems with the suspension, steering and other items on the vehicle, according to the briefing document for Nicholson. The technical issues significantly delayed the test program for the vehicles, the document added. The Conservative government announced the TAPV contract in 2012 as part of its re-equipping of the Canadian Army. Canada bought 500 TAPVs from Textron, a U.S. defence firm, at a cost of $603 million. The TAPV is a wheeled combat vehicle that will conduct reconnaissance and surveillance, security, command and control, and armoured transport of personnel and equipment. The TAPV project cost taxpayers a total of $1.2 billion, which not only includes the vehicles but also includes the building of infrastructure to house them, as well as the purchase of ammunition and service support for the equipment. https://ottawacitizen.com/news/national/defence-watch/new-armoured-vehicle-fleet-faces-more-problems-civilian-vehicle-hit-near-petawawa