$89M in late fees waived for Cyclones

Financial penalties of as much as $89 million were set aside by the Conservative government when U.S. aerospace giant Sikorsky failed to meet the delivery schedule for the military's new maritime helicopter.

The figure, contained in federal government documents released under the Access to Information law, is more than double the $36 million in fines that taxpayers had been told could have been levied against the firm.

For several years, both Liberal and Conservative politicians had pointed to the $36-million penalty for late delivery of the choppers as the government's ace-in-the-hole to make sure the company delivered the Cyclone helicopters on time.

But that fine was waived by the Harper government in December after it was determined that Sikorsky had fallen more than two years behind schedule on the project.

That penalty, however, was just for the failure to deliver the first helicopter, according to documents obtained by the Citizen. Canada could have also penalized Sikorsky another $53 million for the late delivery of the subsequent helicopters, according to January 2008 records prepared by the office of Dan Ross, the senior Defence Department official in charge of procurement.

The original plan called for the first Cyclone to be delivered in November 2008, later delayed to January 2009. After that date, one new helicopter was supposed to be delivered every month. The deliveries would have been finished by early 2011.

The penalties were put in place when the contract was originally signed in 2004.

But on the night of Dec. 23, the government issued a press release stating the helicopters would be delivered late. Under a new deal, Canadian taxpayers will now pay Sikorsky $117 million extra for improvements to be made to the Cyclone, as well as changes to the long-term in-service support package for the aircraft.

The deal also reset the clock on when the firm would be liable for late penalties. The company has been given at least another two years of grace before facing sanctions.

If Sikorsky does not meet all the delivery requirements of the new schedule this time around it could face a maximum penalty of $89 million, the same amount that could have been levied against the company in the first place.

"This is a fair deal, because at the end of the day, the Canadian Forces will receive fully compliant helicopters at a fair price -- helicopters that are state-of-the-art and meet the needs of Canada," stated an e-mail issued by Public Works on Friday.

According to Public Works, the contract with Sikorsky has a mechanism to allow for an excusable delay in delivery, one defined as being outside the control of the company.

"The government has reviewed and accepted, in part, Sikorsky's claim for excusable delays," the e-mail added.

Neither Public Works, the Defence Department nor Sikorsky have explained the specific reasons for the delay. Public Works did not explain what it meant by its statement the government has accepted "in part" the claim by Sikorsky about the delay.

All helicopters, which are to replace the aging Sea King choppers, will be delivered by the end of 2013, according to Public Works.

Under the new schedule, Public Works said a number of helicopters will be received starting in November 2010 to allow operational testing and training to begin on those aircraft. Delivery of the rest of the order will not start until 2012.