C-130J mainentance contract likely to be short term, cost lots

Further to this post from Sept. 2009,

Problems with C-130J maintenance contract

it looks like the planned long-term contract would break the budget bank and some future government will have to come up with the cash. The F-35 might also suffer in consideration for our CF-18 replacement fighter:

Military cargo plane maintenance contract sealed after bitter talks: sources

After months of haggling, Ottawa is close to a multibillion-dollar agreement to maintain a fleet of military cargo planes - but the pending contract with Lockheed Martin has left a sour taste for many in the defence industry and government.

The deal is expected to be announced in early February, say defence and industry sources who spoke to The Canadian Press on Tuesday...

Seventeen state-of-the-art C-130J Hercules transports are being acquired under a sole-source arrangement with Lockheed Martin, a deal announced almost two years ago with fanfare by Defence Minister Peter MacKay.

But unlike other big-ticket deals, the $1.4-billion purchase came without a signed long-term maintenance contract.

The Defence Department set aside an additional $1.7 billion for 20 years of in-service support, but that plan quickly went off the rails when the aircraft-maker delivered a cost-estimate that was reportedly 50 per cent higher than the budget.

A federal official played down the surprise, saying it was only a projection and original proposals "are always higher than what you initially estimate."..

Sources insist both the purchase and the service program will be delivered for less than the Conservative government's nearly $3.2-billion program budget.

But to do that the federal government may have had to drastically reduce the length of the service deal.

Sources said what was intended to be a 20-year support agreement has now shrunk to seven years, with renewal options down the road to cover the life of the aircraft.

Public Works Canada, which is in charge of contract negotiation, declined to comment Tuesday on the specifics of the arrangement.

Lockheed Martin will be directly in charge of the overall support deal during the first phase, with sub-contracts to Canadian companies for specific work and parts, sources said.

Defence observers are wondering what kind of deal the government has struck, given that the first seven years of an aircraft's life are the least maintenance-intensive.

"It's like a car," said Liberal Senator Colin Kenny, who chaired the Senate security and defence committee before Parliament was prorogued. "The cost of maintenance rises over time. The government seems to have a deal that covers the cheapest time frame."

He said the big cost of maintaining the planes is being pushed off on future governments...

At first, the federal government demanded the U.S. corporation deliver direct, industrial participation with Canadian companies either building parts or contributing to the maintenance.

But last year the government quietly dropped its direct benefit demand and replaced it with something called a "near-direct benefit" up to 75 per cent of the contract value...

The aircraft-maker is hoping to sell its highly advanced F-35 Lightning stealth fighter to Canada's air force, starting in 2015, replacing the fleet of CF-18s [more here]. The bruising negotiations have apparently not endeared the corporation to the federal cabinet, which held a heated debate about the transport plane in early December, said one source.

Instead of spending money on the C-130J in Canada, Lockheed Martin will be required to buy equivalent defence contracts and services elsewhere in the country...