How Bombardier Inc suppresses information about how much government funding it receives

Bombardier Inc. has gone to great lengths to suppress the release of information concerning the government funding it receives, heading to court Ten times in nine years, often citing competitive concerns.

Court records and access-to-information documents obtained through the Financial Post show how difficult it is to glean the outcome of previous government support for the Montreal-based aerospace giant, even as Ottawa considers its request another US$1 billion (about $1.3 billion) in aid.

These records are often redacted at Bombardier’s request, or appear incomplete, even in cases when the business’s industry peers allowed exactly the same information to be sold.

Last October, Quebec agreed to invest US$1 billion in Bombardier’s CSeries commercial jet program, that has been can not generate sales amid delays and cost overruns. The company now says it needs additional federal funding to help carry it through before the CSeries starts generating positive income in 2020. That funding might be contained in the Liberal government’s budget, set to be delivered on March 22.

If you’re going to get the money, surely the price of admission is you need to be transparent about how and when you’re paying it back.

A contribution of $1.3 billion would equal all of the repayable funding Bombardier has gotten over the past Half a century, according to Industry Canada’s calculations.

But how those funds was spent, and how or even whether it was repaid is tough to discern from the documents released. While Bombardier says the information must be withheld for competitive reasons, the company has made this argument far more frequently than its industry peers. With the government considering a historically large investment in the organization, some are arguing that transparency ought to be a condition associated with a new cash injection.

“If you’ll get the cash, surely the cost of admission is that you have to be transparent about how exactly so when you’re paying it back,” said Aaron Wudrick, federal director of the Canadian Taxpayers Foundation.

The aerospace sector isn’t any stranger to government largesse. Beginning with the Defence Industry Productivity Program in 1959, Ottawa has frequently doled out grants and loans meant to support Canada’s aerospace champions, most of which are based in Quebec.

In a June 2014 analysis through the free-market-oriented Fraser Institute, a summary of the very best 10 recipients of financial assistance from Industry Canada includes eight firms that generate at least a portion of their revenue from aerospace. (Their email list doesn’t include the 2009 bailout of General Motors Canada and Chrysler Canada, that was done through the Department of Finance.)

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Pratt & Whitney Canada Corp. is first on the list with $3.3 billion in inflation-adjusted contributions between 1961 and 2013. Bombardier received $1.15 billion and De Havilland Inc., which was acquired by Bombardier in 1992, is third with $1.09 billion.

Industry Canada provides slightly different numbers, saying Bombardier has gotten $1.3 billion in repayable contributions since 1966, of which it has repaid $584.Six million up to now.

Most of this taxpayer funding is in the type of repayable or conditionally repayable loans, that are triggered when, for example, the recipient’s gross revenues are higher than a base amount specified by the contract.

However, because of Bombardier’s efforts to bar the discharge of information, it’s virtually impossible to determine if the individual contributions – and repayment of those contributions – met the objectives and forecasts of the government. It is also very difficult to discover whether government contributions have created the jobs that were promised once the funding was announced.

Bombardier is by no means the only aerospace company that seeks to restrict disclosure of their repayments to government, however it does appear to be the most aggressive. It went to the court Ten times to bar the release of knowledge, while Pratt & Whitney Canada went to court twice.

The company said hello is simply protecting its right to withhold info on competitive grounds.

“Bombardier and Industry Canada are in agreement that information relating to government contributions is proprietary and may validly remain confidential for competitive reasons,” company spokeswoman Isabelle Rondeau said within an email. “Through a legal process, i was able to confirm that we have to preserve Bombardier’s confidential information.”

The Use of Information Act permits the government to won’t disclose any record that “could reasonably be expected to prejudice the competitive position of a third party.”

The onus is on the 3rd party to prove that disclosure would hurt its competitiveness. If a dispute within the release of information causes it to be so far as the government Court, the organization is asked to justify why disclosure would place it in danger.

“The courts have been quite good about insisting that the certain evidentiary threshold be met to justify the withholding of the information,” said Teresa Scassa, who holds the Canada Research Chair in Information Law at the University of Ottawa.

Bombardier and Industry Canada are in agreement that information associated with government contributions is proprietary.

However, she pointed to 1 case where Bombardier argued that “the extreme competitive nature” of the aerospace industry resulted in it should not have to disclose information – a justification that could arguably be used in any request company data.

“I believe that turn into a justification for pretty broad withholding of knowledge,” Scassa said.

Bombardier’s legal strategy seems to be working, because it has successfully challenged several requests for information within the courts.

The result of these challenges means we get a fragmented picture of presidency support, particularly when it comes to the repayment of loans.

Here are just a few examples:

? In response to a request for all Industry Canada contributions of $5 million or even more since April 1996, the released documents incorporate a list of dozens of recipients which range from Research in motion sales Ltd. (now BlackBerry Ltd.) to Toyota Canada, but not a single reference to Bombardier.

However, other documents show the company received a minimum of five contributions which range from $35 million to $190 million between 1996 and 2009, plus another $350 million through a special program established to support growth and development of the CSeries.

In releasing the data, Industry Canada said two applications had been filed using the Federal Court to block some good info from being released, but didn’t say which company had filed them.

Court records indicate that Bombardier filed two access-to-information-related applications towards the Federal Court in the summertime of 2014. Those cases are ongoing.

? Bombardier also successfully challenged a 2010 request for all conditionally repayable government contributions it had received since 1982. After reaching an out-of-court settlement with the information commissioner, Bombardier decided to release some good info how much assistance it had received, but continued to withhold repayment details. (The request also included four others, all of which disclosed their repayment information.)

By the time that information was released in June 2014, the numbers were four years out of date.

? It’s not just Bombardier asking to suppress information, obviously. A request for information on jobs created or maintained through Industry Canada contributions since 1982 was almost entirely redacted although the government will frequently claim about jobs if this announces funding.

For example, a 1996 press release announcing an $87-million contribution for Bombardier’s regional jet claimed the work “has the potential to keep and make 1,000 high-quality, long-term jobs.” It is not easy to verify this with the information released.

The insufficient disclosure appears to be getting worse. A 2002 request for repayment data on all contributions made under the Technology Partnerships Canada program was disclosed entirely. But the same request made in 2011 saw approximately three-quarters from the repayment information withheld.

This might have something related to the overlapping interests of Bombardier and also the government, said Ken Rubin, an Ottawa-based investigative researcher who’s one among Canada’s foremost access-to-information activists.

Often, disputes over use of information are settled out of court through an agreement between your company in question and the government, which can produce a potential conflict of great interest.

“Therein lies the real problem, because particularly in cases like Bombardier and it is relationship with the government – the government is party to the efforts to block details about Bombardier,” said Rubin.

“It certainly has never been within the Government of Canada’s interests to produce such information.”

Scassa, the data law expert, said openness remains “a very challenging issue” despite oversight from both the Information Commissioner and the courts.

“I do think that’s a genuine transparency challenge, that the government might be just like happy not releasing that information because the company is,” he said.

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Industry Canada (since rebranded Innovation, Science and Economic Development Canada under the Liberals) said it releases information that’s not subject to exemptions under the Use of Information Act.

“Depending around the terms of each contribution program, repayment information, specially when it concerns a specific recipient and/or project, can’t be provided publicly when the information might be commercially sensitive, could cause financial loss or gain to a 3rd party, or could prejudice the competitive position of the third party,” department spokesman Hans Parmar said within an email.

“In determining so what can be released underneath the ATI legislation, ISED considers the type of program and, with respect to the kind of information being requested, consults with organizations who may or may not accept the release of the repayment information.”

In 2009, Industry Canada began releasing twice-yearly repayment status reports for the Technology Partnerships Canada (TPC) funding program, which ran from 1996 to 2006, and it is successor, the Strategic Aerospace and Defence Initiative (SADI).

According towards the most recent updates, released Nov. 1, 2015,  TPC has disbursed $3.16 billion to date and collected $1.13 billion in repayments. SADI has disbursed $935 million and collected $35 million in repayments.



However, these reports are incomplete. The SADI report said $935 million continues to be disbursed, but if you set in the net expenditures listed for individual companies (you will find none listed for Bombardier), it only involves $696 million. Based on the fine print, “Amounts are not provided until completing the (project’s) R&D phase to protect commercial confidentiality.”

This may explain why there are no Bombardier contributions listed – the CSeries technically hasn’t finished its R&D phase.

Another hole in the government’s disclosures is when actual repayments compare against estimates. The TPC report said repayments are “in line with forecasts” and the SADI report says they’re “on track,” but those forecasts aren’t released. A current access-to-information request repayment forecasts withheld all estimates beyond the 2016-17 fiscal year.

It also appears the government has a tendency to dramatically overestimate repayments, based on a 2005 set of the need for TPC which was ready for Industry Canada by consultants Hickling Arthurs Low. The report found that current repayment estimates for the TPC program were 45-per-cent less than they were at the time the contracts were signed – a difference of nearly $2 billion.

Part of the problem is that the (Access to Information) Act allows them to get away with too much.

The insufficient transparency around previous government contributions towards the aerospace industry in general, and Bombardier in particular, should concern taxpayers and encourage stronger legislation, said Rubin, the access-to-information activist.

“Part of the issue is the (Use of Information) Act allows them to pull off too much,” he said. “You need stronger legislation if these terms are going to happen.”

Scassa argues that the balance must be struck between the rights of corporations to safeguard sensitive information and the need for transparency.

“It’s really challenging because in principle you can certainly realise why companies shouldn’t be inspired to sacrifice their competitiveness in the name of disclosure,” she said.

“Maybe there should be some kind of oversight mechanism that may be sure that the public money is being spent appropriately which there’s appropriate accountability for them. That could be the solution.”

Illustration by National Post Graphics

kowram@nationalpost.com

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