Backgrounders: A modern and effective search and rescue solution and The procurement process
Backgrounder / December 8, 2016
Public Services and Procurement Canada
A modern and effective search and rescue solution
The Royal Canadian Air Force works with federal, provincial, territorial and municipal governments, as well as local search and rescue organizations to respond to Canadians in distress across our vast territory of over 18 million square kilometres.
The new aircraft will be stationed at the current main operating bases in Comox, British Columbia; Winnipeg, Manitoba; Trenton, Ontario; and Greenwood, Nova Scotia. The training school will be located in Comox.
The new fleet of 16 C295W is a modern and technologically advanced solution that meets the Canadian Armed Forces’ operational requirements. The aircraft are well suited to perform in Canada’s harsh search and rescue environment, which is one of the largest, most challenging and diverse landscapes in the world. The new fleet will be equipped with advanced sensors and communications systems that provide a generational leap in technology, as compared to some of the current systems.
Overview of the contract
On December 8, 2016, Canada awarded a contract to Airbus Defence and Space to provide a new fleet to replace Canada’s Buffalo and Hercules search and rescue aircraft. The initial contract is for a period of 11 years, and includes acquisition of 16 C295W aircraft with associated training systems, construction of a new simulator-equipped training centre in Comox, British Columbia, and the first five years of maintenance and support.
The company will also complete infrastructure and set-up activities such as training and maintenance and support services programs, engineering services, as well as deliver tools and test equipment, spare parts and provide access to the necessary technical data.
The Government of Canada took great care to ensure that the contract was structured to provide highly reliable aircraft, services and parts, resulting in availability of the primary aircraft at each of the four Canadian Armed Forces base at all times, to support Canada’s critical search and rescue operations. Throughout the life of the contract, the company is incentivized to deliver on time and according to contract milestones.
The initial period of 11 years of the contract is valued at $2.4 billion (plus applicable taxes). This contract also includes options to extend the maintenance and support services by up to 15 years. Should Canada exercise all options, this would extend the contract to 26 years for a total overall value of $4.7 billion (plus applicable taxes).
Airbus Defence and Space
Airbus Defence and Space is a world-class company with a proven track record of delivering search and rescue aircraft and support with sales of 168 C295 aircraft in 23 countries. The company employs 38,000 employees and is the number one defence and space enterprise in Europe, among the top ten global defence enterprises and the second largest space business worldwide.
Full life cycle cost of Canada’s fixed-wing search and rescue fleet
The full life-cycle cost of the fleet is currently estimated at $14.7 billion. This is an all-inclusive “cradle to grave” estimated cost that covers everything required from project beginning to 2052, including:
- The new fleet of 16 C295W
- Project management costs
- Flight crew personnel costs
- Maintenance personnel costs
- Training personnel costs
- Contracted support costs, including spare parts, engineering support and maintenance instructions
- Construction of new infrastructure (buildings) and modification of existing infrastructure
- Operating and maintenance of new and existing infrastructure
- Personnel support cost, which include health services, military police, Canadian Forces Housing Agencies
- Aircraft disposal
The calculation of a full life cycle cost also includes contingency to account for risk and uncertainty in the estimate.
The first aircraft will be delivered and training will begin in early 2019. Construction of the new training centre in Comox is expected to begin shortly after the contract award. The final aircraft are expected to be delivered sometime in 2022.
Fixed-wing search and rescue aircraft procurement process
Extensive industry engagement activities were conducted as part of this procurement process. The process involved issuing 30 letters of interest over three years, with Canada receiving 176 formal responses from companies. It included two industry sessions with over 200 participants, pre-qualification of six potential bidders and conducting seven multi-day, one-on-one meetings with bidder teams. It also included organizing visits of potential bidders to the four main operating bases as well as a tour of a Joint Rescue Coordination Centre.
A capability-based approach was used to leverage industry expertise to decide on the numbers of aircraft and where the bases would be located to achieve Canada’s required search and rescue outcomes.
A request for proposals was issued on March 31, 2015, and potential bidders had until January 11, 2016, to provide their proposals (three bidders provided proposals). Bidders were offered the option to provide Canada with a submission prior to closing of the bid process, for a preliminary assessment of their proposed response to key requirements.
Proposals were analyzed using a robust evaluation process, which was reviewed by an independent third party to ensure they were consistent with the objective of promoting a best value procurement and did not inadvertently favour any aircraft or bidder. As a result, two bidder proposals were found compliant. The bid evaluation also included ground and flight testing conducted on their proposed aircraft, at the manufacturers’ facilities.
The winning company obtained the highest overall combined score for capability, cost and benefits to Canada. The proposals were evaluated on the basis of the following elements:
- Capability (worth 65 points) – search and rescue response performance, aircraft and system characteristics, in-service support program, as well as capability to deliver on potential risks, and ground and flight testing.
- Cost (worth 25 points) – detailed pricing on the cost of acquisition and option years.
- Economic Benefits to Canada (Industrial and Technological Benefits (ITB) Policy including value proposition) (worth 10 points) – commitment to undertake business activity in Canada equal to the contract value for both the acquisition and maintenance and support services.
The Government’s Industrial and Technological Benefits Policy applies to this procurement process, which requires Airbus Defence and Space to make investments in Canada equal to the value of the contract. Canada has a world-leading commercial aerospace and defence sector, which is reflected in the winning bidder’s proposal. Many of Canada’s top aerospace and defence firms will be integrated into a new global supply chain. Canadian industry will manufacture key components of the aircraft, such as the engines manufactured by Pratt & Whitney Canada and mission systems components manufactured by L-3 Communications Wescam and Lockheed Martin Canada.
Airbus has engaged in a strategic partnership with PAL Aerospace to create a joint venture, – called AirPro, that will work to manage the maintenance and support program in Canada. CAE, Canada’s leading training and simulator manufacturer, will be responsible for designing, developing and manufacturing the training solution for Canada, including simulators. Additional partners that will contribute to maintain this capability include Heroux-Devtek to repair landing gear; Hope Aero to repair propellers; Sonovision for technical publications; CLS Lexi-Tech for translation of publications; and, Precision Aero to repair component parts on the aircraft.
This is expected to create significant high-value, well-paying jobs for middle class Canadians and generate sustainability and growth for Canada’s aerospace and defence sector, including small and medium-sized companies across the country.
A fairness monitor was engaged to oversee and report on the openness and transparency of the procurement process. Throughout the procurement process, the fairness monitor was present to observe events and interactions with industry, and oversee preparation and dissemination of documentation. The fairness monitor’s report identified no fairness related issues.
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