Airbus pulls out of Canada's fighter jet competition

One of the companies in the race to replace Canada's aging fleet of CF-18 jet fighters has dropped out of the competition.

Airbus Defence and Space, which was pitching the Eurofighter Typhoon, notified the Liberal government Friday that it was not going to bid.

The decision was made after a detailed review of the tender issued by the federal government in mid-July.

The move leaves only three companies in the $19 billion contest: Lockheed Martin Canada with its F-35; Boeing with the Super Hornet; and Saab, which is offering an updated version of its Gripen fighter.

Simon Jacques, president of Airbus Defence and Space Canada, made a point of saying the company appreciated the professional dealings it had with defence and procurement officials.

"Airbus Defence and Space is proud of our longstanding partnership with the Government of Canada, and of serving our fifth home country's aerospace priorities for over three decades," Jacques said in a statement. "Together we continue in our focus of supporting the men and women of the Canadian Armed Forces, growing skilled aerospace jobs across the country and spurring innovation in the Canadian aerospace sector."

In a statement, Public Services and Procurement Minister Carla Qualtrough said she accepted Airbus's decision.

"We understand that participation in this competition represents a significant commitment for suppliers, and we respect this business decision," she said. "We would like to thank the U.K. Government and Airbus Defence and Space for their participation and thoughtful feedback during this process."

Airbus decided to withdraw after looking at the NORAD intelligence security requirements and the cost it imposes on companies outside of North America.

It also said it was convinced that the industrial benefits regime, as written in the tender, "does not sufficiently value the binding commitments the Typhoon Canada package was willing to make."

A controversial evaluation process

After complaints from the Trump administration, the Liberal government revised the industrial benefits portion of the tender to make it more fair to Lockheed Martin.

The changes to the evaluation process irked some competitors.

Under long-established military procurement policy, the federal government demands companies spend the equivalent of a contract's value in Canada as a way to bolster industry in this country.

The F-35 program is not structured that way. It allows Canadian companies to bid on the aircraft's global supply chain contracts.

There is, however, no guarantee that they'll get any of those contracts.

The recent revision ensures that Lockheed Martin will not be severely penalized for having a different system.

Last spring, Boeing executives voiced their concerns publicly during a defence trade show in Ottawa.

"I was surprised by the recommended changes," said Jim Barnes, the director of business development in Canada for Boeing Defence, Space & Security. "We believe we can put a really compelling offer on the table.

"You have a policy that's been in place for decades that has been very successful. The minister has mentioned this is a once-in-a-generation opportunity, so why would you deviate from a policy that has been so successful to accommodate a competitor?"

One defence expert said few people who have been following the file are surprised by the decision. Dave Perry, a military procurement specialist at the Canadian Global Affairs Institute, said that at times Airbus appeared to be "the least enthusiastic of the remaining four" bidders.

"I do have the sense they had reservations," he said.

The company's reference in its departure statement to NORAD security issues is significant, he said.

Saab is now the only European bidder among the competitors. Sweden, where Saab is based, does not have a preferred intelligence-sharing arrangement with Canada and the U.S.

If Britain, which backed the Eurofighter bid, believes it cannot meet the stringent NORAD intelligence-sharing measures without significant cost, Perry wonders what that does to Saab's bid.

"It'll be interesting to see if they can put forward a proposal that the Canadian government thinks is workable," Perry said.

The Opposition Conservatives — who planned to buy the F-35 when they were last in power — said they're not impressed that the open competition in which the Liberals have invested so much political stock is now down to three bidders.

Defence critic James Bezan said other countries in need of warplanes had managed to get their act together in as little as two years.

"Justin Trudeau has spent the past four years delaying and dithering on new fighter jets for Canada, only to completely mismanage the competition process," Bezan said in a statement.

Qualtrough, in her statement, pushed back.

"Our predecessors made no attempt to undertake an open, transparent and fair process like the one our government is delivering on now," she said. "This investment is essential for protecting the safety and security of Canadians and meeting Canada's international obligations, and it will continue to be done right."