The Harper government's decision to cancel Canadian participation in two NATO surveillance programs will cost contracts in the country's aerospace industry, newly released documents show.
National Defence was hoping to save as much as $90 million per year by withdrawing from the jointly owned and operated Airborne Warning and Control System (AWACS) and the Alliance Ground Surveillance (AGS), a fairly new program meant to utilize drones to monitor the battlefield.
Yet, documents released to The Canadian Press under access to information legislation show that taking part has meant a bonanza of tens of millions of dollars worth of work annually for at least half a dozen high-tech Canadian companies.
With the Canadian military no longer part of the sharing arrangement, those companies will be shut out of further bidding and not allowed to renew their existing contracts.
"Canadian industry will be affected by our withdrawal from AWACS" operations and service agreement, said a Jan. 12, 2012 memo to former defence minister Peter MacKay.
The notice of withdrawal was penned in 2011 in a letter sent by Prime Minister Stephen Harper to NATO's secretary general.
It's a curious decision, especially in light of a blue-ribbon panel report prepared last spring for former public works minister Rona Ambrose, which essentially suggested Canada be smarter at how it leverages defence spending for the benefit of the country's industry.
The country's military representative at NATO, Vice-Admiral Bob Davidson, said the move makes strategic sense because Canada is looking to develop its own systems, especially when it comes to drones.
"Fundamentally, it is about a better way for the government to focus our defence spending," Davidson said in a recent interview from Brussels. "And we're trying to put more of our defence spending towards Canadian capabilities."
Liberal defence critic John McKay is flummoxed, especially since the Conservatives tried to sell their multi-billion-dollar plan to buy F-35s on the basis the stealth fighter meant jobs for the aerospace sector.
Between 1992 and 2010, Canada contributed $161 million towards so-called depot level maintenance of NATO's AWACS fleet, but Canadian companies received $180 million in contracts as part of the service package.
Since 2010, the country's aerospace industry has pocketed roughly $12.9 million annually in AWACS service.
Similarly, when it came time to overhaul and upgrade the giant domed-aircraft, whose powerful radar detects enemy aircraft at great distances, Canadian companies were among the first in line to benefit.
They received $146 million of the work — or a 115 per cent return on the defence department's investment.
The group representing the country's aerospace industry was reluctant to comment about the impending end of the arrangement.
"This is something our members have been aware of for quite some time," Kristen VanderHoek, of the Aerospace Industries Association of Canada, said in an email. "At this point we don't have anything new to add."
Participation in the joint program goes back over 30 years. The air force contributes pilots and maintainers to a NATO pool.
As airborne early warning and control aircraft, the E-3A AWACS were used to great effect during the Libya bombing campaign and have done long-standing service in the skies over Afghanistan, as well as on other operations.
Until recently, a Canadian headed up AWACS operations wing at the air base in Geilenkirchen, Germany. It was left to a U.S. air force general to not only sum up departing Col. John Backstrom's contribution, but the entire Canadian involvement, which has been instrumental in transforming the converted Boeing 707 fleet from a straightforward radar platform into an airborne command centre.
"It was under Canadian leadership that the Operations Wing transformed the operation of the E-3A aircraft from largely an airborne early warning and surveillance platform to a modern-day airborne (command) force equipped and ready to provide command and control to the NATO commanders of the 21st century," U.S. Maj. Gen. Andrew Mueller during a change of command in June.
The withdrawal smacks of thoughtlessness, and a desperate attempt to cut the budget without looking, said McKay.
"The way the government seems to be going about it is slap-dash, particularly when you consider it has billions of dollars in unspent budget funds, money Parliament allocated but they haven't spent," he said.
National Defence is expected to cut as much as $2.5 billion out of its annual budget by 2014.
Canada's withdrawal has been done in stages. The first step back involved not paying for the modernization the E-3A fleet last September. It was followed last winter by the pullback of most pilots and technicians, a phase-out that will take until mid-2014.
The alliance ground surveillance program is still under development and NATO members have yet to decide on a specific type of drone.
While Canada is withdrawing from purchase, it will still contribute to the operation of the program, Davidson said.
Drone surveillance is a system that National Defence wants in its own inventory, he added.