Millions wasted on Airbus upkeep, audit finds

[GAP]

Millions wasted on Airbus upkeep, audit finds
DANIEL LEBLANC From Thursday's Globe and Mail August 30, 2007 at 3:48 AM EDT
Article Link

OTTAWA — The Canadian Forces paid millions of dollars for maintenance work that was never performed on its fleet of Airbus planes over the past five years, an internal audit has found.

In 2002, the Forces signed a contract with Air Canada Technical Services to maintain its five CC-150 Polaris aircraft, based on an annual total of 6,500 flying hours.

The planes flew fewer than 5,000 hours a year on average during that period, but the Forces still paid for the full maintenance package.

"The contract does not currently allow adjustments based on the actual [yearly flying hours], which averaged only 4,753 per year in the first three years of the contract," the audit said.

The audit, which was recently posted on the website of the Department of National Defence, said that over the first three years of the contract, the Canadian Forces paid up to $4.1-million for "underutilized support capability."

The contract, which is now in its first of five option years, continues to be based on 6,500 hours of flying time a year. Auditors said changing that to an average of 5,000 flying hours a year could "achieve savings in the order of $7-million at today's labour rate."

Initially, the Forces had estimated that the 2002 maintenance contract for the planes would cost a total of $95.1-million. However, the five-year contract was amended in 2005 to increase its value to $175.6-million.

The audit said the value of the contract underwent a "significant cost escalation" of 84 per cent to pay for "engine upgrade kits, air-to-air refuelling modifications and special projects."

However, the audit said the cost increase could have been smaller had the Canadian Forces been more efficient in upgrading the engines immediately instead of buying 12 upgrade kits in a "piecemeal fashion."

The contract has been renewed for another year and could be extended for another four, and no decision has been made to determine whether the Forces will go back to tender before it expires.

The audit's four recommendations to control the "contract cost escalation" were blanked out by government censors before the document was made public.

The audit criticized the Forces' handling of the contract, saying only one full-time and two part-time officials were supervising the work.

"The monitoring capability is insufficient for a $175.6-million contract," the audit said.
More on link

 

[retiredgrunt45]

Another Liberal blunder.

 

[civmick]

Are the Polaris tankers operational?

 

[zipperhead_cop]

The Airbus aircraft can also be placed in a "VIP configuration" to carry the prime minister, the governor-general and members of the Royal Family.

Perhaps this is the thrust of the spirit in which the contract was created? 

 

[FullMetalParka]

Another Liberal blunder.

Minor correction. Another Liberal blunder that the Conservatives will get the blame for.

 

[Globesmasher]

Are the Polaris tankers operational?

Not yet - soon though.

 

[Edward Campbell]

I know this is an old topic, I read the warning, but rather than start a new one with a related item I though I would resurrect it - maybe, Mods, a retitle to just "Millions/Billions wasted, audit finds" would help.

--------------------​

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Ottawa Citizen, is an interesting article from David ********:

http://www.canada.com/ottawacitizen/news/story.html?id=0a95d3d1-156d-4e9f-adff-504a519bfcb5&k=71583

$1B in contracts 'high risk'
Defence watchdog calls for audits after 72 projects over budget

David ********
The Ottawa Citizen

Sunday, December 16, 2007



Defence Department officials are recommending audits or reviews for 52 operations and maintenance contracts totalling more than $1 billion after determining that the deals exhibited "high-risk attributes."

The Defence Department's financial watchdog, the chief of review services, looked over 347 operations and maintenance contracts, finding that 72 had gone over budget. The spending on those projects had exceeded their original budgets by more than 130 per cent.

In addition, 43 of the companies involved in operations and maintenance contracts were found to have had a history of excess profits on past government deals or a history of posting additional claims greater than $350,000 on such contracts, according to the chief of review services report. Those aspects are considered enough to raise red flags and prompt a deeper look into the deals such firms are now involved in with the Defence Department.

The call for various audits and reviews of the contracts follows another recommendation by the review group to conduct similar investigations into 25 military equipment projects totaling more than $7.3 billion. Details of both sets of recommendations are contained in reports produced by the chief of review services in April and recently released.

The Defence Department, however, is not releasing information on the specific projects that are in financial trouble. It has also declined to release information on the companies involved.

Department officials were asked five days ago for comment on the issue. Under a new policy, the department and Canadian Forces must receive approval from senior Harper government officials before making any statement to the media on most issues. In this case that approval has not yet come.

But officials with a citizen's advocacy group, Democracy Watch, say the chief of review services reports reveal a familiar pattern of poor management of large-scale defence programs.

"It's shocking, but at the same it seems to be the normal pattern for Department of Defence contracts," said Duff Conacher, co-ordinator of Democracy Watch.

He said it is time to take a hard line with companies that are not providing the services they were contracted to do. "If you as a company have a cost overrun then you should swallow the cost unless you can prove it's because of negligence of the department," Mr. Conacher said. "You should be forced to perform to the letter of the contract that has been signed."

It is unclear if the audits and reviews recommended by the chief of review services are actually under way. The review group recommended that its office conduct comprehensive audits into four operations and maintenance contracts that amount to $505 million. Management review teams would examine another 48 contracts worth $517 million, according to the review group recommendations.

That report pointed out that previous audits of repair and overhaul contracts consistently identified potential overcharges and poor management of Defence Department inventory by vendors, among other problems.

A number of criteria could place a contract into the high-risk category. Included among those were significant increases in the value of the contact and the involvement of high-risk vendors, including "information technology, advertising, transportation and research and development," the report said.

All the operations and maintenance contracts, as well as equipment projects that are up for audit or review, were being actively filled in 2006.

Not included is the $24 billion in new military equipment projects announced by the Conservative government between June 2006 and July of this year. Those new projects include the purchase of heavy-lift helicopters, the acquisition of C-17 and C-130J transport planes as well as new fleets of tanks, army trucks, and supply ships.

Many of those deals will come with support contracts for maintenance activities.

Auditor General Sheila Fraser has told the government that her office will be examining some of the new equipment deals.

The Harper government has come under fire in the Commons for what critics say are a series of non-competitive contracts awarded to defence firms. MPs with the NDP, Liberals and Bloc Québécois have all warned that directing contracts to particular firms without competition costs taxpayers money and limits the involvement of domestic firms.

The government has responded numerous times that the procurement process is fair, open and transparent. The equipment is needed quickly by the military, it contends.

© The Ottawa Citizen 2007​

******** is, I hear, well connected inside DND – even if not well liked by many (especially senior) people.

I suspect his information re: 130% cost overruns and 43 companies well known for excess profiteering is accurate and kudos to CRS for reporting it.

Cost overruns are nothing new and not all are particularly troublesome. DND, like all large organizatons, often enters into contracts with less than perfect planning – sometimes just because large bureaucracies are inherently inefficiency but, often, because the aim of being perfect is unattainable. Sometimes it is practically impossible to gather enough information to forecast costs with any reasonable degree of accuracy, sometimes the cost of getting the cost estimates right is just too high. Risk is part of doing business – pointing out where calculated risk doesn’t pay off is part of the auditing process. Sometimes the best response is <shrug>. I don’t want to whitewash cost overruns but please accept that not all are indicators of ineptitude or malfeasance.

The issue of companies with a history of profiteering is also troublesome but does need some discussion.

First: this (from ********’s blog) indicates part of the problem. No matter how much good or not so good work gets done by DND and PWGSC there is always opportunity for politicians to _uck things up (insert letter of your choice – m works nicely, but so do one or two others).

Second: Canada is, despite geography and a $1 Trillion + economy, a relatively small country. Government does, as it should, want to Buy Canadian! whenever it makes sense to do so – and sometimes when it doesn’t, too. Canadians are especially fond of Buy Canadian because they have no idea of the lost opportunity costs of so doing in (my SWAG*) 75% of cases. Sometimes there are no good choices and we keep going back to guys we know (I should say “they,” I suppose) are gouging us and are gonna gouge us again as soon as they get the chance.

This will do nothing to improve Privy Council Clerk Kevin Lynch’s oft reported mistrust of DND’s management abilities.


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* Scientific Wild Assed Guess – the principle planning tool in much of NDHQ, especially within ADMs (Fin), (Mat) and (Pol) 

 

[MarkOttawa]

...Those new projects include the purchase of heavy-lift helicopters, the acquisition of C-17 and C-130J transport planes as well as new fleets of tanks, army trucks, and supply ships.

Many of those deals will come with support contracts for maintenance activities.

Auditor General Sheila Fraser has told the government that her office will be examining some of the new equipment deals.

The Harper government has come under fire in the Commons for what critics say are a series of non-competitive contracts awarded to defence firms. MPs with the NDP, Liberals and Bloc Québécois have all warned that directing contracts to particular firms without competition costs taxpayers money and limits the involvement of domestic firms...

Odd that the story does not mention that the only possible competitor for the C-130J and C-17 was the Airbus A400M (and was pitched as such by Airbus).

This from June 9, 2007:
http://www.canada.com/components/print.aspx?id=02378026-8bb2-4404-822c-b31fcc5a95e1

Mr. Thompson [Airbus Military's vice-president] said the company is ready to guarantee Canada delivery of the first aircraft in December 2010, and the remaining planes by February 2013. The A400M is scheduled to fly in the beginning of 2008 and first deliveries for NATO customers will start in 2009, according to Airbus officials.

But supporters of the C-130J say the A400M program has been delayed because of technical programs, and it is unclear when the aircraft will be available.

Mr. Thompson, however, said that is untrue. "Overall the program is on track," he said. "Like any program of this size and complexity there are elements of it which are slightly behind schedule, others which are slightly ahead of schedule."

As for A400M reality shortly thereafter...it appears Mr Thompson was either economical with the truth or kept well in the dark by his superiors; this from July 30:
http://forums.milnet.ca/forums/threads/53631/post-596515.html#msg596515

A400M flight test schedule delayed, says EADS

Lots more follows on the A400M's (and its engine's) travails.

Mark
Ottawa

 

[geo]

Imagine if the A400M had opted for a P&WC powerplant.......

 

[Haletown]

It was always interesting how some media types, names not to be mentioned lest they get their knickers in a twist & let their libel chill lawyers off the leash, slagged the Government for pushing for and rapidly acquiring the 17's, by filing articles that just seemed to be repeats of EADS marketing literature, that ignored or drastically down played the facts that the A400M plane hadn't been built yet, was far over budget, over weight, unproven and had a schedule with no known end date.  Some articles even allowed EADS to play fast and loose with national politics by promoting the myth that EADS & their A400M was more supportive of the Quebec aerospace industry while neglecting to remind them of how EADS selected their currently much, much troubled engine  over a better product from a Quebec based firm.

I suppose that  is what passes for fair journalism these days.  Must be tough on the MSM and their reporting staff seeing their monopoly on story telling being rapidly eroded by great websites like this one.  After all those years of being able to decide what makes the news and how the story gets spun, torqued or steered, how they could push their own "I'm so much smarter agenda" it must seem very unfair to them that the truth can now be told by non-professional journalists.  But as MSM firms see their revenues shrink and their readership decline, they need to fight back anyway they can and if that includes creating faux controversies instead of reporting facts without torque & spin, I  guess they have to do what they have to do to try and stop the $bleeding and survive.

Not that governments don't need to be slagged for wasting money, but many MSM reporters were generally very biased in their coverage of the Globemaster acquisition.  Needed kit acquired in short order is a great news story.  Creating doubt over the acquisition by flogging the A400M was a pitiful excuse for fairness.  The desire, or is it the need,  to create controversy  trumped the troops need for proper kit so they can do their jobs, do them well and do them safely, and that is just wrong.  The troops deserve better.