Nearly 4 years after the auditor general found serious deficiencies in the way the authorities props up aerospace sector, important questions remain unanswered as Ottawa weighs Bombardier’s request for another US$1 billion in support.
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Bombardier has asked the us government to match an investment it has already received from Quebec, arguing it needs the aid to enhance customer confidence and support the beleaguered CSeries jet program until it begins to generate positive cash flow in 2020.
The Liberals say they’re still evaluating the request, and maintain that Bombardier will need to make a “strong business case” before it receives any assistance.
This is a refreshing stance, even though the government will certainly support Bombardier ultimately, said Peter Hadekel, author of Silent Partners: Taxpayers and also the Bankrolling of Bombardier, an in-depth take a look at decades of presidency largesse.
“We haven’t heard that sort of language that much previously,” said Hadekel, a columnist for that Montreal Gazette. “The business case hasn’t really mattered much.”
This is evident in the shortcomings discovered by Auditor General Michael Ferguson in the fall 2012 report. Based on Ferguson, the government failed to adequately track the performance of their aerospace funding programs, including one dedicated specifically to supporting the CSeries. Even though several improvements happen to be made since 2012, the government still has not evaluated the effectiveness of vast amounts of dollars in aerospace aid.
The Canadian aerospace industry continues to be receiving government assistance in one form or any other since at least 1959, once the Cold War-era Defence Industry Productivity Program (DIPP) was created to encourage defence-related industries that may compete internationally.
DIPP was cancelled in 1995, and while it arguably succeeded in supporting Canada’s defence and aerospace companies, it was a failure when it came to repayment.
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From 1985 onwards, DIPP beneficiaries received $2 billion in government funding, 55 percent of which was repayable. Of this, only $607 million or 30 percent of the total have been returned by mid-2012.
DIPP was replaced by Technology Partnerships Canada (TPC), which ran from 1996 to 2006. From the $3.1 billion disbursed under TPC, $767 million or 25 % had been repaid by mid-2012.
Although a decade has transpired since TPC was cancelled, the government still has not completed your final assessment from the program. Consequently, its successor, the Strategic Defence and Aerospace Initiative (SADI), is missing out on information that may allow it to be more efficient, the auditor general said.
“We discovered that a final evaluation of TPC’s program effectiveness – including from the program’s longer-term technological, economic and societal outcomes – has not been done,” despite the fact that Industry Canada said it might compete the evaluation by 2011, the report says.
“This means (Industry Canada) isn’t yet in a position to integrate lessons learned from the final evaluation of TPC to potentially improve performance measurement for SADI.”
Industry Canada – renamed Innovation, Science and Economic Development Canada by the Liberals – is “progressing on and will also be finalizing a lessons-learned report,” department spokeswoman Stfanie Power said within an email. She declined to give a timeline.
Meanwhile, SADI also came under fire for many deficiencies. Among the key findings from the report was that all of the program’s funding agreements included the same monitoring and reporting requirements whatever the assessed risks. There is also no correlation between your level of funding and the reporting requirements, although the funding ranged from under $300,000 to $300 million.
The auditor general also raised concerns concerning the lack of oversight of a $350 million program focused on supporting the introduction of Bombardier’s CSeries between 2008 and 2015.
According to Ferguson, the federal government didn’t collect all of the documentation needed by the funding agreement, including annual progress reports; the progress reports it did compile “contained limited info on outcomes and benefits”; and a risk rating wasn’t assigned to the program.
Industry Canada addressed some of these concerns inside a 2013 evaluation from the CSeries funding, which thought it was created and maintained 9,608 person many years of work on the end of 2013, 24 per cent greater than expected. It also found that the CSeries “would happen to be delayed” with no government funding, which may have “limited Bombardier’s capability to satisfy the market window for the aircraft.”
Even using the funding, the CSeries is two-and-a-half years behind schedule and it is struggling to generate sales.
Before the Liberals took power, Industry Canada said hello had updated its procedures to deal with all of the auditor general’s recommendations except for the evaluations of TPC and SADI, that are underway. The SADI evaluation is going to be performed by 2017.
In total, SADI has provided the aerospace sector with nearly $1.7 billion in support since 2007, such as the $350-million contribution to the CSeries.
kowram@nationalpost.com
Twitter.com/KristineOwram
