Canada to impose fines on Sikorsky for helicopter delay

Mon Feb 11, 2013 5:32pm EST
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By David Ljunggren

OTTAWA (Reuters) - Canada will impose significant additional financial penalties on United Technologies Corp's (UTX.N: Quote) Sikorsky unit for delays in delivering search and rescue helicopters, Public Works Minister Rona Ambrose said on Monday.

Canada signed a C$5 billion ($5 billion) deal with Sikorsky in 2004 for 28 Cylcone helicopters, the first of which was supposed to be delivered by early 2009.

But the project has been plagued with delays, some of which Sikorsky blamed on major modifications requested by Canada. In December 2008, the deal was renegotiated to push back delivery of the first helicopter to June 2012, but Canada is still waiting.

"Our government expects Sikorsky's obligations under this contact to be met and to date they have not been met. In fact they have missed every deadline and every timeline," Ambrose told the House of Commons.

"We have already applied millions of dollars in liquidated damages and we are going to be applying significant additional charges that will begin to accrue against this company for failure to deliver. We continue to aggressively insist that Sikorsky meet its obligations."

The affair is the latest in a string of military procurement problems for Canada's Conservative government. Last December, Ottawa scrapped a sole-source plan to buy F-35 jets from Lockheed Martin Corp (LMT.N: Quote) after cost estimates ballooned.

The Sikorsky contract allows Canada to impose escalating penalties the longer the company takes to deliver the first aircraft. The charge could hit C$80.6 million if that helicopter is not formally handed over by June 2013.

Sikorsky has already provided four helicopters for training purposes, but the company said they remain on the firm's books because Ottawa has yet to officially sign for them.   Continued...