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Canada Trading Requirements for Offsets and Time with Sikorsky

The Government of Canada contracted with Sikorsky Aircraft Corporation part of United Technologies (UTX) in 2004 to buy twenty-eight S-92 helicopters to replace the aging ship based Sea King fleet. The S-92 is an advanced, medium sized twin engined helicopter. It is a development of the UH-60 Black Hawk Sikorsky has been making for the U.S. Army and many different nations around the world.

The Canadian version of the S-92 will perform anti-submarine, search and rescue and surveillance missions. The aircraft will also do passenger and cargo transfers between ships and to the shore. The S-92 has been devlivered to the civil market to carry out passenger and executive travel. Canada is the first military customer for this aircraft although Sikorsky has bid it for the U.S. Air Force’s CSAR-X contract which was won by Boeing (BA) with the CH-47 but was ultimately canceled by the Obama Administration.

As with many such programs the contract has seen delays and cost increases. The initial planned date for entering service was in late 2008 but that slipped almost two years. The total cost has also increased to about $5 billion (CA) for the aircraft and their support.

Now in a move to speed up delivery and also settle a contract issue with Sikorsky the Canadian government has agreed to the first four aircraft being delivered with certain systems not installed and certain requirements not being met. Sikorsky will agree to drop a $100 million claim against the government and also invest a further $80 million in the country’s economy. Offsets are not unusual and Canada has been able to make them a major part of many contracts awarded for American equipment and to American contractors. This deal will increase Sikorsky’s offset requirement.

Under the terms of the agreement Sikorsky will deliver the remaining twenty-four aircraft to full standards and then retrofit the first four to bring them up to the final configuration.

The deal will accelerate the entry into service of the the new helicopter as well as settling the contract issue and invest more money with Canadian companies. Hopefully the CH-148 as the aircraft is called in Canada will have a long, useful and successful life and perform its required missions in a capable manner.

Photo from Paul Beattie’s flickr photostream.

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