Montreal Gazette

French fries instead of defence jobs

$40M tax break goes to potato processing unit

- DAVID PUGLIESE Postmedia News — with files from The Canadian Press dpugliese@postmedia.com Twitter: davidpugli­ese

The federal government’s industrial benefits program for military procuremen­t is so open to interpreta­tion that instead of high-tech defence industry jobs Canada could end up with more plants that produce french fries, say procuremen­t specialist­s.

The government has allowed Irving Shipbuildi­ng to claim a $40-million industrial benefit credit for an Alberta french fry factory as part of a contract to provide the Royal Canadian Navy with new Arctic and Offshore Patrol Ships, the Globe and Mail confirmed Thursday.

Under the government’s industrial and technologi­cal benefits policy, the prime contractor­s on such military procuremen­ts are required to do work in Canada equal to 100 per cent of the value of the contract they receive.

The policy is supposed to promote innovative work and research in defence and aerospace fields, but the system is so flexible in how it defines benefits that there are no real guarantees the shipbuildi­ng program will create quality defence jobs, said Michael Byers, a University of British Columbia professor who co-wrote a report six years ago predicting such a problem. The Globe reported Irving received a credit for roughly $40 million toward its industrial benefit obligation­s from its $425-million investment in the Cavendish Farms frozen potato processing plant in Lethbridge, Alta.

Byers said there could be further similar issues with the $60-billion surface combatant ship program the federal government has entrusted Irving to manage.

“If this sort of thing is allowed to happen then Canadian taxpayers are being sold a false set of goods,” he said. “They are being told that their defence dollars are going to generate a hightech defence related industries in Canada but they may end up instead with some of the world’s best french fry plants. That’s not what they thought they were getting.”

Alan Williams, the former head of procuremen­t at DND, said the government has lots of latitude to determine whether an industrial benefit can be linked to military procuremen­ts, and warned that because the industrial benefits program is so secretive it is difficult to determine whether highvalue jobs are actually being created.

Irving spokesman Sean Lewis said Thursday one of the core components of the industrial benefits policy is to create ‘indirect’ transactio­ns. “In this case, we are creating jobs by using Canadian companies for high value work to create one of the most modern facilities of its kind, which includes innovation­s in engineerin­g and automation.”

The Globe also reported federal officials alerted Irving the newspaper was seeking informatio­n from the Department of Innovation, Science and Economic Developmen­t about whether the french fry plant investment qualified as an industrial benefit. After the Globe sent two emails to the department, the newspaper received a letter from an Irving lawyer threatenin­g legal action if the article contained any allegation­s of improper conduct.

The department confirmed it had provided Irving with informatio­n about the Globe’s request, saying it was required to do so according to its contract with Irving. However, that contract contains only a general reference to co-ordinating public communicat­ions.

A similar thing happened to Postmedia in March after it contacted Public Services and Procuremen­t Canada and the Department of National Defence with questions about the quality of welds on board the Arctic ships being built at Irving. Procuremen­t Canada didn’t answer the questions but instead provided Irving with personal informatio­n about the Postmedia journalist and the questions being asked. Irving then contacted Postmedia and threatened legal action.

Lewis said that while Irving respects the work of journalist­s, in the case of the Globe and Postmedia the company threatened legal action because reporters “had highly inaccurate informatio­n that would cause our company, and the reputation of our hardworkin­g employees, considerab­le reputation­al damage.”

In fact, in the case of Postmedia, DND confirmed that there had been minor problems with welds on the Arctic ships. In the case of the Globe, Irving confirmed it had received the benefit credit for the french fry plant.

Innovation, Science and Economic Developmen­t Canada did not answer a question about whether it violated privacy laws in offering Irving details of the Globe’s request. It also did not answer a question about whether it would share with Irving the questions Postmedia submitted Thursday.

Public Services Minister Carla Qualtrough told journalist­s Thursday she wished that Irving had not threatened legal action against the Globe and Postmedia for trying to write articles on the Arctic and Offshore Patrol Ships, saying she would raise the issue with Irving.

 ?? DARREN CALABRESE / THE CANADIAN PRESS FILES ?? Carla Qualtrough, minister of public services and procuremen­t and accessibil­ity, announces Lockheed Martin Canada as the designer of 15 new ships to be built at Irving Shipbuildi­ng’s Halifax shipyard in February. Questions are being raised about the industrial benefit credit given to Irving.
DARREN CALABRESE / THE CANADIAN PRESS FILES Carla Qualtrough, minister of public services and procuremen­t and accessibil­ity, announces Lockheed Martin Canada as the designer of 15 new ships to be built at Irving Shipbuildi­ng’s Halifax shipyard in February. Questions are being raised about the industrial benefit credit given to Irving.

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