Stephen Trimble / Washington DC

Canada is adapting to US contract practices more successfully than other JSF partners

Canadian industry is unique among JSF lower-tier partners in that it has flourished under the best-value contracting principles laid out for the programme by Lockheed Martin, Northrop Grumman and BAE Systems.

While Lockheed Martin has set up two alternative contracting strategies to boost the fortunes of lagging partners, Canada is close to recouping its investment of $175 million during the system development and demonstration (SDD) phase alone.

Canada was the second partner to join the team, with its Level 3 investment structured in two parts. A $100 million direct investment was made into the SDD programme, while a further $75 million was set aside in a technology investment fund.

The Canadian government saw early on that its national industry had the potential to secure contracts valued between $500 million and $600 million during SDD, with a possibility of between $3.8 billion and $6.3 billion over the life of the JSF production programme.

Compared to those projections, Canada's industrial payback so far might be seen as disappointing. But Canadian industry's record as of mid-October - 45 contracts valued at $150 million split between 18 companies - is in marked contrast with other JSF partner nations, including the UK, which have struggled to adapt to US-style contracting practices and work within technology transfer restrictions. In the first 18 months of SDD, Canadian companies scored 41 awards in 99 bidding attempts.

Canada's approach is distinguished by an unusually active planning and investment programme on the part of its government. Shortly after signing up to the partnership in February 2002, the Canadian Commercial Corporation organised an effort to match upcoming F-35 capabilities to SDD phase requirements. The body then acted as an intermediary between Canadian industry and F-35 primes.

A second entity, Technology Partnerships Canada, manages the $75 million investment fund created by the government. The goal is to offer an incentive for companies to invest in capital improvements to bolster their competitive position on F-35 bids. The fund provides low-interest loans with long - or even waived - payback terms, Canadian industry officials say.

The government-sponsored investment fund was crucial in attracting many Canadian aerospace companies. The industry had developed a strong position in the commercial aviation market, but had been reluctant to transfer those skills into the area of defence.

The Aerospace Industries Association of Canada (AIAC) says gaining SDD work for small companies, including some not usually linked with aerospace projects, became an important objective of a co-ordinated national JSF strategy.

Canadian government and industry leaders saw the importance of the F-35 programme as a hedge against further commercial aviation sector uncertainty. Speed was also recognised as vital, particularly with at least five more nations preparing to join SDD within the following seven months.

Canadian industry also enjoyed two other benefits. The first was geographic proximity to the USA, the second was that, until the UK secured approvals for an exemption to the US International Trafficking in Arms Regulations earlier this year, Canada was alone among the partners with such an arrangement in place.

But despite its successes, Canadian enthusiasm for the programme is being tempered by recent projections showing that the country should net $3.9 billion over the F-35 development and production period. That means that, despite the SDD success, the original government economic expectations will only be just met.

There is also concern that the USA wants to protect its industrial base at the expense of international supply chains, says Ron Kane, AIAC vice-president of policy and research. Related to this is possible reaction to Canada's opposition to US policy in Iraq, for which Kane believes the US may punish Canadian firms. Canadian companies also believe US industry has been slow to embrace the export licensing reforms enacted for the F-35 programme.

"Data exchange has been a big problem for all Canadian companies," says Dave Muir, vice-president of marketing and sales for GasTOPS, selected to provide oil debris monitors on the F135 engine. "There's a state of nervousness on the part of the US companies. They are extremely wary of the whole process," he adds.

Gas TOPS was able to leverage an existing relationship with P&W on the F119 engine. "I think without that," says Muir, "it would have been a long, hard road with no guaranteed outcome."

Source: Flight International