Ottawa — The federal government concealed the fact last week that it was forced to buy Sikorsky helicopters to replace its fleet of Sea Kings after the only other competitor in the $5-billion race had been previously disqualified on technical grounds, sources say.
Instead of saying that the contract had been awarded to the only company that was still standing, government officials made it seem as if the contract had been a two-way race to the end.
The revelation that Team Cormorant was quietly thrown out of the competition earlier this year is the latest twist in the ongoing saga that is now expected to be played out before the courts.
A government official said information about Team Cormorant's disqualification was not made public last week because the government thinks it will be a pivotal point if Team Cormorant decides to launch a lawsuit over the outcome.
Defence Minister Bill Graham, in announcing the decision to buy 28 helicopters from U.S.-based Sikorsky, said on Friday that it "represents the right helicopter for the Canadian Forces at the best price for Canadians."
Even at a thorough technical briefing that day, senior bureaucrats did not tell journalists that the contract was awarded to the only bidder still in the running.
"It gave the impression that there were two companies, and that we went for the cheapest," the government source said yesterday.
There is growing bitterness between Team Cormorant and the government over the process. A senior government official yesterday dismissed a report that there was only a 1-per-cent price difference (about $50-million) between the winning bid of Sikorsky and the disqualified bid of Team Cormorant.
The government is arguing that the difference was more in the range of 15 per cent, meaning that Team Cormorant's bid was about $750-million higher.
The fact that Team Cormorant was disqualified in recent months is surprising because the federal government adopted a complicated process two years ago to prevent such an outcome. In 2002, the government created a "prequalification" phase under which the competing helicopters would have to meet specific technical requirements before entering the final leg of the competition, which would be settled solely on the issue of price.
Team Cormorant and Sikorsky met the requirements of the prequalification process, but Team Cormorant was, nonetheless, disqualified from the competition later. The reason for Team Cormorant's disqualification is unclear, as government and industry officials remain coy about recent events.
It is a stunning twist for a company that won the first competition to replace the Sea Kings in the early 1990s under the Progressive Conservative government of Brian Mulroney. That contract was cancelled by then-prime-minister Jean Chrétien in 1993, but Team Cormorant later won a smaller competition to produce search-and-rescue helicopters for the Canadian Forces.
"It's an incredible outcome after Cormorant won in 1992, won in 1998, prequalified in 2003, to be told that their bid is not acceptable in 2004," an industry source said.
The government now expects that its decision to exclude Team Cormorant from the competition will be at the centre of a lawsuit from AgustaWestland, the Anglo-Italian consortium that builds the aircraft.
Team Cormorant has long alleged that the process to replace the Sea Kings was rigged in favour of other competitors, and has vowed to take the matter before the courts if it lost the contract.
Team Cormorant has three legal options: the Canadian International Trade Tribunal, the Federal Court and the Ontario Superior Court.
The CITT, an administrative tribunal, provides the quickest way ahead for Team Cormorant, which could challenge its disqualification as well as Sikorsky's qualification. If Team Cormorant wins its case, the CITT could order the retendering of the contract or call on the government to offer financial compensation to Team Cormorant.
Second, the Federal Court could provide a judicial review of the process, and it could eventually send the contract back to the government for retendering.
Finally, Team Cormorant could argue before the Ontario Superior Court that Sikorsky did not meet the government's requirements and did not deserve the contract. If Team Cormorant was successful, the Ontario Superior Court could order the government to offer financial compensation to Team Cormorant.
In addition, the Auditor-General is expected to review the contract and determine whether the federal government adopted the best strategy to replace the Sea Kings.
