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Sea King chopper replacement delayed again

Manufacturer could face $80M in penalties

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OTTAWA -- The manufacturer of the air force's new maritime helicopter has told National Defence it will deliver only five test aircraft this year -- opening the door to tens of millions of dollars in fines on a project the auditor general has said is late and over budget.

Sikorsky Aircraft Corp. is supposed to deliver a "fully mission capable" version of the CH-148 Cyclone helicopter by June or face a further $80 million in contract penalties on top of $8 million the federal government has already levied.

Senior defence officials said safety certification of the aircraft is ongoing and it's highly unlikely the giant U.S. aircraft-maker will meet its target, even though the program is years behind schedule.

"Sikorsky are only committing to deliver five by this year, which will be training aircraft," said a high-level defence source, who spoke to The Canadian Press on the condition of anonymity.

The Cyclones are the highly touted replacement for the CH-124 Sea Kings, which will mark a milestone 50 years in service in 2013.

Originally, the company was supposed to deliver its first chopper in 2008 and have the whole fleet of 28 on the flight line by end of last year. When it became evident a few years ago that schedule wasn't going to be met, the Harper government worked out a deal with the Stratford, Conn.-based corporation for a handful of scaled-down aircraft that would be retrofitted later.

The so-called interim helicopters, which are minus combat systems, were supposed to allow crews to train. But only one helicopter was delivered last year and it arrived late, prompting the government to impose an $8 million fine.

Sikorsky still hasn't completed certification of the training aircraft, although it is expected to happen sometime this year. But that's a long way from delivering a "fully capable (maritime helicopter), with all its mission software," which is what the contract stipulates.

When originally proposed 12 years ago, the cost was expected to be $2.8 billion, but that has ballooned to an estimated $5.7 billion, according to a 2010 report by former auditor general Sheila Fraser.

She criticized the Cyclone purchase as well as the plan to buy 15 CH-147-F helicopters, saying Defence turned what were supposed to be off-the-shelf purchases into customization nightmares.

New Democrats have slammed the Harper government for apparently not collecting the initial $8-million fine.

But senior defence officials said that penalty and the anticipated additional $80 million will be deducted from future payments the federal government will make for maintenance on the helicopter fleet.

"The $8 million comes out of reduced payments and in-service support over time, which is to our advantage," said the senior official. "If you beat them up now, you disincentive the company from giving you completed aircraft. If you take it out of in-service support costs, it's easier for them to manage and it lowers our operating costs."

Paul Jackson, a spokesman for Sikorsky, declined to say anything about either the fines or the delivery status.

"My only comment is that we do not comment on customer contractual matters," he said.

The repeated delays in the program have caused budget pain for Defence.

The department was forced last year to hand back $250 million in unspent funds related to the Cyclones. The cash had been authorized in previous budgets to pay for the aircraft that still haven't been delivered.

Defence sources confirmed that cash has been lost to the military and it will have to make up for it some other way in the future.

It is possible the shortfall could be made up in the estimated $1 billion contingency fund associated with the program, but officials say that remains to be seen.

"It's not a question of money," said the official. "It's a question of schedule."

-- The Canadian Press

Republished from the Winnipeg Free Press print edition January 27, 2012 A14

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