Auditor General on CH-148 and CH-47F acquisitions (plus lessons/risks for F-35?)

[MarkOttawa]

AG's very damning report is here:
http://www.oag-bvg.gc.ca/internet/English/parl_oag_201010_06_e_34289.html

Cyclone was sold by DND as off-the-shelf when in fact it was a completely new aircraft.  Won't have operational version until 2012.  Chinooks also supposedly off-the-shelf but turned, because of "Canadianization", into effectively a completely new version, won't be delivered until 2013.  Acquisition risks and capital costs of both greatly underestimated, and in-service support costs way off.

AG's summary:

...
The total project cost of 28 Cyclone helicopters, together with initial set-up, training, provision of spare parts and long-term maintenance, is now estimated at $5.7 billion. Delivery of the first fully capable Cyclone, initially expected in 2005, was delayed to 2008 and is now expected to occur in 2012. The total project cost of 15 Chinook helicopters, together with initial set-up, training, and long-term maintenance, is now estimated at more than $4.9 billion. The first fully capable helicopter is scheduled for delivery in 2013, five years later than planned...

  * National Defence underestimated and understated the complexity and developmental nature of the helicopters that it intended to buy. Both helicopters were described to internal decision makers and the Treasury Board as non-developmental, using “off the shelf” technologies. On that basis, overall project risks were assessed as low to medium. In each case, however, significant modifications were made to the basic models. For the maritime helicopter, this will result in an aircraft that never existed before. For the medium- to heavy-lift helicopter, this will result in a new variant of the Chinook. Ultimately, these modifications led to schedule delays and cost increases beyond original plans.

    * The medium- to heavy-lift helicopter acquisition was a directed procurement using an advance contract award notice (ACAN). National Defence had initially planned to proceed rapidly to contract award by spring 2007; however, its needs and priorities were not precisely defined at the outset, evolved over the course of the acquisition, and were not finalized until 2009. The manner in which Public Works and Government Services Canada used the ACAN did not comply with the letter or intent of the applicable regulations and policies and, consequently, the contract award process was not fair, open, and transparent.

    * National Defence did not develop full life-cycle plans and costs for these helicopters in a complete or timely way. In addition, total estimated costs were not disclosed to decision makers at key decision points. Some costs have yet to be completely estimated and some elements needed for the capability are not in place. Without adequate cost information, National Defence cannot plan to have sufficient funds available for long-term operation and support of the helicopters. Moreover, without sufficient funds, National Defence may have to curtail planned training and operations.

    * National Defence did not fully comply with the oversight and approval framework established in its Project Approval Guide. For the maritime helicopter project, boards provided appropriate oversight at the preliminary project and effective project approval stages. However, neither the Senior Review Board nor the Program Management Board met to challenge and approve the information in the 2008 revised effective project approval that was related to the contract amendment approval of $262 million. For the medium- to heavy-lift helicopter, there was an absence of timely meetings, challenge, and approvals by senior boards at all key decision points in the acquisition process and before seeking Treasury Board approvals.

The entities have responded. The entities agree with all of our recommendations. Their detailed responses follow the recommendations throughout the chapter.

The ACAN sole-sourcing of the Chinook Foxtrot is criticized, though not that sternly.  Mainly for technical abuse of details in the ACAN process itself.

As for the F-35, a piece by the National Post's John Ivison:

Helicopter shenanigans increase doubts on F-35 purchase
http://fullcomment.nationalpost.com/2010/10/26/john-ivison-helicopter-shenanigans-increase-doubts-on-f-35-purchase/

...
This kind of Sir Humphrey Appleton-like manipulation of the politicians by public servants still has the power to shock. Ms. Fraser called the deliberate understatement of risk as “totally inappropriate”. But amid the mendacity, there was evidence of old-fashioned incompetence...

None of this inspires confidence in procurement at a department that is currently making the biggest military purchase in Canadian history. The Opposition is entitled to demand that the entire process for the new jets be laid bare before Parliament, not only to ensure that the Conservatives have been open and transparent but also to check the Department of National Defence has been giving the government the real goods this time. As Ms. Fraser said in her press conference: “Let’s hope nobody is assessing them [the F-35s] as low risk [emphasis added]...”

Mark
Ottawa

 

[The Bread Guy]

Coming up shortly - the CF's side of the story:

Following the tabling of the Auditor-General report today, media representatives are invited to a technical briefing at 4:15 p.m. (EST). Government officials from the Department of National Defence and Canadian Forces (DND/CF) and Public Works and Government Services (PWGSC) will be available to answer technical questions regarding the Maritime Helicopter and the Medium- to Heavy-Lift Helicopter projects.

Today’s technical briefing is for background information only – there are to be no recordings (audio or visual) for broadcast purposes. Quotes can be attributed to senior officials from the Department of National Defence, Canadian Forces and Public Works and Government Services Canada.

When:      October 26, 2010

Time:      4:15 p.m.

Where:    National Press Theatre
                Canadian Parliamentary Press Gallery
                Room 350-N, Centre Block
                607-150 Wellington Street
                Ottawa, Ontario

Interested media who are unable attend, but who would like to listen to the technical briefing can call: 1-877-974-0447 (toll-free for North America only) or 416-644-3416 (the local number for participants from outside North America) ....

 

[MarkOttawa]

AG on CBC video here, search under "auditor":
http://www.cbc.ca/video/#/News


Mark
Ottawa

 

[rnkelly]

The Auditor General is making DND and Air Force acquisitions look very bad here.  I can't help but see all of her points.  In this case no-one is arguing about whether we need equipment but the actual acquisition process is being scrutinized.  CF acquisitions are obviously challenging with all the red tape but the CF looks like a bunch of amateurs here!  I can't help but think some of the responsibility should rest on the bureaucrats and politicians as well though.

 

[Oh No a Canadian]

CTV: Auditor General says the government was misled on chopper purchases.
CBC: Auditor General says the government was not truthful on chopper purchases.

:

 

[PuckChaser]

CTV: Auditor General says the government was misled on chopper purchases.
CBC: Auditor General says the government was not truthful on chopper purchases.

Good catch. News is only as important as how you spin it.

 

[Wookilar]

I wish I had that kind of influence over an ACAN post. I'm having a hard time getting a $50k purchase through ACAN. PWGSC is waffling and wants it on MERX.

If $50k gets scrutinized like my stuff, how does $$millions/billions fly though PWGSC?

Wook

 

[GAP]

Firms rise, fall on chopper deals
  Article Link
A Tale Of Two Helicopter Deals
By Bert Hill, Ottawa Citizen December 22, 2010

Helicopter contracts could be a major factor in the changing fortunes of two Ottawa defence contractors.

On the decline is General Dynamics, which has cut more than 300 jobs in Ottawa operations, with no apparent end in sight as the layoffs reach deeper into ranks of long-serving staff.

The big defence contractor has disclosed that it now has 1,150 Ottawa employees, down more than 20 per cent since a major realignment started a year ago.

With a new round of cuts underway, some think the numbers could drop below 1,000. The big culprits appear to be problems with GD's piece of a major federal government search-and-rescue helicopter project and a loss to Lockheed Martin in bidding for a military frigate upgrade project.

Some employees fear that jobs are being sacrificed to pay for potential penalties in delays in delivering 28 Sikorsky Cyclone helicopters to the Canadian military. The $6-billion project was originally supposed to cost half that and start delivery two years ago.

When GD, which provides the sophisticated software and electronics in the mission-guidance systems, first ran into trouble in March 2009, it replaced the leader of the Ottawa operation and laid off 100 employees. GD Ottawa employment then exceeded 1,500.

GD diverted some work on the Cyclone project to an Arizona operation to try to catch up.

Some employees say more work is being shipped south, including some Canadian contract wins.
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