Ottawa has blocked $250-million in payments to Sikorsky, which is running late in its plan to deliver new military helicopters to the Canadian Forces and has just acknowledged that its first aircraft will lack maximum engine power and full mission-system software.
The development is the latest in a long list of problems that have plagued the $5-billion program to replace the old Sea King helicopters, and another stumble in a series of ongoing military purchases, which now include $16-billion in new fighter jets.
Government officials said the Canadian Forces will be able to cope when they receive six interim helicopters with "partial mission capabilities" later this year, given they will be used for training and testing ahead of the delivery of 28 fully equipped helicopters, starting in 2012.
The officials added that as part of an agreement, Sikorsky has dropped claims in an arbitration process that could have cost taxpayers up to $100-million, and the government has frozen $250-million in scheduled payments to Sikorsky.
Federal officials said the delayed payments to Sikorsky will "keep the pressure" on the manufacturer, which will only get the money when it meets production milestones.
"We want to make sure that Canada doesn't pay for equipment that it has not yet received," said Lyne Lévesque-Schou of Public Works Canada.
The Canadian government entered into a contract in 2004 with Sikorsky for 28 CH-148 Cyclone helicopters, with the first delivery originally scheduled for late 2008.
However, because of design and production delays, Sikorsky sought and obtained a new delivery schedule. In a controversial deal, Ottawa paid an extra $117-million in late 2008 to Sikorsky, which promised to deliver six partially equipped helicopters in November of this year, and fully compliant helicopters in June 2012, or four years late.
However, Sikorsky subsequently warned the government that its first six interim helicopters would not perform as expected. The government and Sikorsky entered into a new round of negotiations that culminated on June 30 with a second major contract amendment, stating the interim helicopters will fall short on four fronts:
» The mission system, which is the software used to control the equipment on the helicopter, will be a "preliminary version" instead of the final one;
» The twin engines will not be powerful enough to conduct all potential missions, such as continued operations in hot weather with a blown engine;
» The system called Tactical Data Exchange, which allows for communications between the aircraft and surrounding ships, will not be fully functional;
» And the helicopter will lack the power to meet final endurance requirements, such as the ability to conduct a series of manoeuvres with a full load.
The government explain in an briefing note that it is purchasing a "complex and sophisticated weapon system," especially in terms of the electronic equipment.
"Mission software development is one of the most challenging aspects of the Cyclone program, due to its scope, complexity and importance to the operational roles of the helicopter," the government said in the statement.
The government said the "majority" of the sensors and weapon systems will be operational, but "not in a fully integrated fashion."
The government said that as part of its latest agreement with Sikorsky, it could get credits of up to $31-million if other militaries purchase the same helicopter. In addition, Sikorsky will inject $80-million in additional regional benefits in Canada, and will pay damages of up to $89-million if it does not meet its revised delivery schedule.
The Sea-King replacement program has been beset with problems since former prime minister Jean Chrétien cancelled a helicopter contract in 1993 that had been awarded by the previous Mulroney government.