The federal government’s industrial benefits program for military procurement is so open to interpretation that instead of high-tech defence industry jobs Canada could end up with more plants that produce french fries, say procurement specialists.
The government has allowed Irving Shipbuilding to claim a $40-million industrial benefit credit for an Alberta french fry factory as part of a contract to provide the Royal Canadian Navy with new Arctic and Offshore Patrol Ships, the Globe and Mail confirmed Thursday.
Under the government’s industrial and technological benefits policy, the prime contractors on such military procurements are required to do work in Canada equal to 100 per cent of the value of the contract they receive.
The policy is supposed to promote innovative work and research in defence and aerospace fields, but the system is so flexible in how it defines benefits that there are no real guarantees the shipbuilding program will create quality defence jobs, said Michael Byers, a University of British Columbia professor who co-wrote a report six years ago predicting such a problem. The Globe reported Irving received a credit for roughly $40 million towards its industrial benefit obligations from its $425-million investment in the Cavendish Farms frozen potato processing plant in Lethbridge, Alta.
Canadian taxpayers are being sold a false set of goods
Byers said there could be further similar issues with the $60-billion surface combatant ship program the federal government has entrusted Irving to manage.
“If this sort of thing is allowed to happen then Canadian taxpayers are being sold a false set of goods,” he said. “They are being told that their defence dollars are going to generate a high-tech defence related industries in Canada but they may end up instead with some of the world’s best french fry plants. That’s not what they thought they were getting.”
Alan Williams, the former head of procurement at DND, said the government has lots of latitude to determine whether an industrial benefit can be linked to military procurements, and warned that because the industrial benefits program is so secretive it is difficult to determine whether high-value jobs are actually being created.
Irving spokesman Sean Lewis said Thursday one of the core components of the industrial benefits policy is to create ‘Indirect’ transactions. “In this case, we are creating jobs by using Canadian companies for high value work to create one of the most modern facilities of its kind, which includes innovations in engineering and automation,” he said in an email.
The Globe and Mail also reported federal officials alerted Irving the newspaper was seeking information from the Department of Innovation, Science and Economic Development about whether the french fry plant investment qualified as an industrial benefit for the Arctic ship project. After the Globe sent two emails to the department’s media relations branch, the newspaper received a letter from a lawyer working for Irving. The letter threatened legal action if the article contained any allegations of improper conduct.
The department confirmed it had provided Irving Shipbuilding with information about the Globe’s request, saying it was required to do so according to its contract with Irving. However, that contract contains only a general reference to coordinating public communications.
The department did not answer a question from Postmedia about whether it violated privacy laws in offering Irving details of the Globe’s request.
A similar thing happened to Postmedia in March after it contacted Public Services and Procurement Canada and the Department of National Defence with questions about the quality of welds on board the Arctic ships being built at Irving. Procurement Canada didn’t answer the questions but instead provided Irving with personal information about the Postmedia journalist and the questions being asked by the news outlet. Irving then contacted Postmedia and threatened legal action.
Lewis said Thursday that while Irving respects the work of journalists, in the case of the Globe and Postmedia the company threatened legal action because reporters “had highly inaccurate information that would cause our company, and the reputation of our hardworking employees, considerable reputational damage.”
In fact, in the case of Postmedia, DND confirmed that there had been minor problems with welds on the Arctic ships. In the case of the Globe, Irving confirmed that it had received the approximately $40 million industrial benefit credit for the french fry plant.
Innovation, Science and Economic Development Canada did not answer question from Postmedia Thursday about whether it violated privacy laws in offering Irving details of the Globe’s request. It also did not answer a question about whether it would share with Irving the questions Postmedia submitted Thursday.
But Williams said the actions of federal bureaucrats in both the Globe and Postmedia cases is a violation of the privacy law. “It is certainly unethical and immoral to do that,” he added. “From a basic integrity standpoint you just don’t do that.”
Public Services and Procurement Canada has also on two occasions turned over information about Postmedia journalists and their questions about shipbuilding to Irving or an Irving associate.
Public Services Minister Carla Qualtrough told journalists Thursday she wished that Irving had not threatened legal action against the Globe and Postmedia for trying to write articles on the Arctic and Offshore Patrol Ships, saying she would raise the issue with Irving.
While she stopped short of saying whether the company’s actions were appropriate, she said the government is reviewing its policies on divulging journalists’ names and other personal information to companies with government contracts.
“We don’t have a say in necessarily in what our suppliers message,” she said. “But our job is to make sure we can always do a better job at respecting your privacy.”
— with files from The Canadian Press