The Company That Made the Runaway Spy Blimp Wants a $1M Apology From Canada

Raytheon Canada is filing a complaint against Ottawa over being cut from a $250 million defense project.

by Justin Ling
Nov 2 2015, 8:44pm

Photo via Flickr user Jason Knight

Raytheon had a bad week. First, its multi-billion dollar blimp project rapidly deflated (what else can I say) when it crash-landed in Pennsylvania. Now, it's crying foul over being cut out of a lucrative Canadian military procurement project.

The Massachusetts-based company is accusing the Canadian government of botching the procurement process for its next generation of high-tech wearable technology, designed to help soldiers communicate and operate more effectively in-theater—basically, like a really sturdy iPhone that lets you know where friendly and enemy troops are located.

In documents obtained by VICE News, the defense contractor—one of the largest in the world—is accusing the government of failing to follow its own procurement procedures and giving Raytheon's competitors an unfair advantage.

Raytheon has been in the news over the past few weeks because one of their multi-billion dollar surveillance blimps became untethered over Maryland and crashed a short while later. Another blimp, in Afghanistan, crashed at the end of October.

Raytheon is demanding that an independent board intervene and force the Canadian government to scrap the successful bid and start the decision process all over again. And they want at least $939,054 CAD [$716,818 USD] in compensation.

The contract is a highly sought-after project.

On paper, the pair of contracts are worth $7 million CAD [$5.3 million USD]. Yet Rheinmetall—the German company that beat out Raytheon for the job—estimates that the project could be worth upwards of $250 million CAD [$190 million USD] over the next several years. Other estimates put the lifetime cost of the upgrades at around $310 million CAD [$230 million USD].

The project, dubbed the Integrated Soldier Support Project (ISSP), will outfit Canadian Armed Forces with high-tech gear that will give soldiers a secure communications channel, let them collaboratively update their map with friendly and enemy positions, and enables them to call in geo-targeted firepower and support if needed. The information could be sent and received through a unit—basically, a heavy-duty cell phone—on the soldier's arm, or in their helmet.

The gear should be able to update soldiers on everything from a "friendly nuclear strike"—and the fallout zone, which is totally comforting—to the position and direction of enemy aircraft overhead.

But the procurement process has been troubled from the beginning. The contract was supposed to have been announced in 2012, but was rebooted in 2013.

"Industry sources say some of the bids were rejected because they did not meet technical specifications, and others were deemed non-compliant because companies failed to provide adequate information about their products," wrote David Pugliese, a journalist specializing in defense and procurement, in March of this year.

Industry sources who spoke with Pugliese said the upfront investment required to even participate in the bidding process—between $1 million [$750,000 USD] and $2 million [$1.5 million USD]—was exorbitant, and that "equipment could be potentially obsolete even before it is delivered." Again, like an iPhone.

Now that Raytheon is asking to restart the process, again, the whole procurement process appears imperiled.

The complaint was lodged in September before the Canadian International Trade Tribunal, a quasi-judicial board tasked with hearing complaints about unfair trade practices.

The process that Raytheon went through involved a full test of the equipment by a team of Canadian Forces soldiers.

After testing the gear, soldiers would rank the equipment—"1 - :( - completely unacceptable, 4 - :| - borderline, :) - completely acceptable," according to Raytheon's submission. Emoji scale is theirs, for real.

Public Works and Government Services Canada (PWGSC), the department in charge of the procurement, was tasked with taking all the bids that earned an acceptable level of performance in the tests, balancing it with other metrics, then selecting the cheapest. It completed that report in November, 2013.

In July 2015, PWGSC announced that Rheinmetall had won the contract, and informed Raytheon that its submission fell behind on the emoji test and had been disqualified.

That's where Raytheon's main grievance lies: it says that, in the nearly two-year period between the time that its bid had been eliminated and the government chose its competitor, Raytheon thought it was still in the running—and spent $939,054 CAD [$716,818 USD] to continue improving the product.

Raytheon complained and asked for a meeting, only to have the government schedule and then cancel it.

On top of taking issue with the ramshackle communications policy, Raytheon writes that one of Rheinmetall's affiliated companies "agreed to a $45 million settlement with German prosecutors to resolve allegations of bribery related to arms sales in Greece" and argues that the company, under PWGSC's rules, "ought to have been declared ineligible" for the contract.

Raytheon's complaint also says that Rheinmetall and Thales, a French firm, may have had inside knowledge of the procurement process because of their other contracts with the Canadian Forces.

The whole affair could force Ottawa to reboot the procurement once again and further delay the upgrade, which will no doubt run up the overall price tag and push the equipment further towards obsolescence.

The ISSP procurement is just one file that will be sitting on the new government's desk when it formally takes office on Wednesday.

Prime Minister-designate Justin Trudeau has already promised to scrap the troubled process to help build and acquire Lockheed Martin's F35 fighter jets. A massive $40 billion [$30.5 billion USD] shipbuilding program is still stalled at the starting gate. A program to replace Canada's 50 year-old Sea King helicopters is also frustratingly sluggish, as the behind-schedule acquisition of the CH-148 Cyclones has not gone smoothly.

Given that the government was, right up until this summer, seemingly giddy over the ISSP project—lauding the "leading-edge technology to support our troops"—another procurement blunder does not bode well for the Canadian Forces.

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