October 26, 2010 / 7:01 PM / 7 years ago

Watchdog praises Canada stimulus, raps chopper buy

4 Min Read

OTTAWA (Reuters) - Canada's government-spending watchdog eased political pressure on the minority Conservative government on Tuesday with a report that said a C$48 billion ($47 billion) two-year stimulus program had been well planned.

But Auditor General Sheila Fraser, who helped bring down a previous Liberal government by uncovering a spending scandal, also said Ottawa had unfairly awarded U.S. company Boeing Co a sole-source contract to upgrade Canada's helicopter fleet.

The tone of the report on stimulus could disappoint the opposition Liberal Party, which trails the Conservatives in the polls ahead of an election widely expected in the first half of 2011.

The Liberals have repeatedly condemned the way the government implemented the stimulus program, which was designed to help fend off the worst of the recession. The program is due to end in March 2011.

"We found that the government put in place appropriate practices and that it approved projects in a timely manner," wrote Fraser, noting Ottawa had been "able to pull together and react quickly to urgent and unforeseen situations such as the global economic downturn".

Fraser's report was based on an audit of 11 of almost 90 separate programs set up to stimulate the economy. A second report on how the money was spent is to be released in October 2011.

Opposition legislators complain that the Conservatives skewed the stimulus program to favor projects in parliamentary constituencies controlled by the ruling party.

Michael Ignatieff, leader of the Liberal Party, said Fraser had not been able to verify the government's claims about the numbers of jobs created.

"What exactly did Canadians get from the stimulus project? They got a C$56 billion deficit and unemployment is still two points up from what it was in 2008," he told reporters.

Fraser's reports have considerable weight. An investigation in early 2004 uncovered abuses by officials working for the then Liberal government and directly led to its election defeat in January 2006, which brought the Conservatives to power.

One section of Tuesday's audit savaged a 2006 decision to award a sole-source contract to Boeing for 15 Chinook military helicopters. Ottawa said it did without a competitive tender because only the Chinooks met its needs.

But Fraser said that argument would only have been valid for off-the-shelf craft, while defense officials had intended from the start to ask for major modifications.

"In our opinion, the contract award process was not fair, open and transparent," she wrote.

In an unusual move, the federal ministry in charge of the file disagreed with the audit.

Pressed about the government's disagreement with Fraser, Defense Minister Peter MacKay said he did "not want to try to interpret her insinuations". He declined to elaborate on why defense officials had acted the way they did.

The audit is timely, since the Conservative government has just announced plans to award a C$9 billion sole-source tender to Lockheed Martin for F-35 fighter jets.

Ignatieff said Fraser's comments on Boeing were so damning that the government should rip up the deal with Lockheed Martin and hold an open competition for the fighter jets.

Reporting by David Ljunggren; editing by Peter Galloway

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