(a) The total project budget for the Canadian search and rescue helicopter, Labrador replacement, includes: a maximum of $593 million to E.H. Industries; plus approximately $200 million in government costs for project management, training, spare parts, integrated logistics support, and a small contingency allowance.
The estimated cost for the replacement of the Sea Kings will not be known until the government approves a Sea King replacement project. The final cost will be known when the government announces its decision.
(b) The annual steady state cost of supporting the Labradors is $36.4 M, current year 1997-98 dollars, and the cost of supporting the Sea Kings is $79.4 M, current year 1997-98 dollars. These costs include personnel, spares, modifications and engineering but not infrastructure costs such as base facilities and services. It should be noted that new helicopters will also have an annual steady state support cost. The delivery delay between the first delivery of a search and rescue SAR configured helicopter from the cancelled new shipborne aircraft new search and rescue helicopter project, and the first delivery of a helicopter from the current Canadian SAR helicopter project is approximately 12 months. The delay associated with the delivery of the new maritime helicopter is unknown since the project has not been approved.
(c) The total compensation paid to suppliers of the EH-101 is detailed in the Public Works and Government Services Canada and E.H. Industries Limited joint news released dated January 23, 1996 which follows.
(d) The cost to the Department of National Defence to operate the project management office during the implementation phase for the procurement of the EH-101 helicopters was $15.5M in 1993-94 dollars.
Public Works and Government Services Canada and E.H. Industries Ltd.
For immediate release
Date: January 23, 1996.
Settlement reached with E.H. Industries for EH-101 helicopter program.
Ottawa—The Government of Canada and E.H. Industries Ltd., a company jointly, owned by Westland Helicopters Ltd. and Agusta Spa, have negotiated a settlement agreement for E.H. Industries' claim arising from the cancellation of the $5.8 billion EH-101 helicopter program.
The details of the agreement, reached in October 1995, were announced jointly today by the Honourable David Dingwall, Minister of Public Works and Government Services and Enrico Striano, Managing Director, E.H. Industries Ltd.
“Negotiating this settlement has been a long process and I am pleased that the Crown and E.H. Industries have reached this mutually satisfactory agreement,” the Minister said. “It is fair to say that the Government of Canada has closed the books on the EH-101 helicopter program.”
The announcement of this agreement was delayed pending the conclusion of negotiations between E.H. Industries and its subcontractors.
Following a promise outlined in the Government's Red Book, the contract with E.H. Industries for the supply of helicopters, valued at $1.45 billion (1992 dollars) was terminated in November 1993.
The settlement agreement with E.H. Industries totals $157.8 million. This includes $136.6 million for the cost of work completed prior to termination and work in progress at the time of termination, and $21.2 million for termination costs.
The total termination costs include a $68 million settlement reached earlier with Loral, the project's other prime contractor and the $21.2 million settlement with E.H. Industries.
The Government allocated $250 million in 1994-95 Main Estimates for termination costs of which only $89.2 million has been required.
To ensure that the approach to settlement was undertaken in a fair and reasonable manner and to provide an independent and commercial perspective on various issues, the Crown enlisted the services of an independent consulting firm, Lindquist, Avey, Macdonald, Baskerville Inc.
Funding for this consulting contract was provided in the February 1995 federal budget and is therefore built into the existing fiscal framework.
Mr. Striano, expressing satisfaction with the final settlement stated, “Although we regret the loss of this contract, I am pleased we have been able to close the matter with the Crown to our mutual satisfaction and now look forward to future opportunities for our products in Canada.”
Franca Gatto Communications Public Works and Government Services Canada (819) 997-5421
Andy Moorhead Deputy Managing Director E.H. Industries 011 44 125 238 6404
For immediate release
Date: January 23, 1996
The english version of the news release issued by PWGSC this morning concerning the settlement with E.H. Industries did not include a paragraph that was included in the French version.
“The total termination costs include a $68 million settlement reached earlier with Loral, the project's other prime contractor, and the $21.2 million settlement with E.H. Industries.”
The following information provides further clarification:
EH-101 total project costs
Work related on the project that included project definition, research and development and project implementation:
Costs of work completed prior to termination and work in progress at the time of termination. These monies were paid out prior to termination of the contract in November 1993:
E.H. Idustries—$136.6 million Loral—$98.4 million
Cost of contract termination:
E.H. Industries—$21.2 million (announced today) Loral—$67.5 million (announced March 31, 1996)
PWGSC regrets the inconvenience and any confusion this may have caused. The English and French releases will be re-issued.