The federal government is refusing to say why it quietly canceled a contract for reconditioned military vehicles for Ukraine that the Canadian company involved says it is still “ready, willing and able to supply.”
Defense Minister David McGuinty told the House of Commons defense committee this week that his department had canceled the contract with Armatec Survivability in Dorchester, Ont., near London, to refurbish 25 light armored vehicles, but said he could not explain the reason behind the decision.
The Conservatives say canceling the contract risks making Canada appear an unreliable ally to Ukraine and undermines the Liberals’ commitment to bolstering the domestic defense industry.
“Until last week, everyone thought this project had simply been delayed, but it was still on track to be delivered, and Armatec kept saying they just needed the funds to start flowing so they could start renewing the vehicles,” defense critic James Bezan said in an interview Thursday.
“I blame the government for this.”
The Conservatives tried to get answers from Stephen Fuhr, secretary of state for defense procurement, at the House of Commons defense committee on Thursday about why the contract was cancelled, but Fuhr referred it to McGuinty and the Department of National Defense (DND).
“I don’t know” why the contract was canceled, Fuhr repeatedly said.
Conservative MP Scott Anderson asked Fuhr how much of the $250 million he said the contract was worth had been lost, and whether the money was included in Canada’s plan to reach two per cent of GDP in defense spending this fiscal year.
Fuhr said he did not know and that contracts for military assistance to Ukraine are not within the jurisdiction of the new Defense Investment Agency he has been tasked with leading.
A DND spokesperson said the department could not comment on the contract with Armatec “due to confidentiality obligations”.
The Canadian Commercial Corporation, which has provided government contracts for aid to Ukraine, referred questions to DND.
Armatec has received millions of dollars in Canadian defense contracts since 2007, according to government records. It primarily renews and upgrades military vehicles for the Canadian Armed Forces and has It also supplied parts to the US military. and other allies.
Armatec CEO Karl Pfister told Global News that his company is willing to continue doing that work, but declined to comment beyond a written statement that he said was approved by lawyers.
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“What I can say is that Armatec is ready, willing and able to supply infantry fighting vehicle upgrades and associated technology to Canada and our allies in support of self-defence efforts and the need to rearm Europe,” he said.
“I can also say that Armatec is a Canadian company that uses Canadian workers to promote Canadian innovation and technology towards the deployment of infantry fighting vehicles beyond current Canadian capabilities.”
Bezan said the company has a confidentiality agreement with the government that prevents it from saying anything more, putting Armatec in “an impossible position” as its “long-term survival” is in jeopardy.
He said this is the first time he has seen a contractor prevented from speaking after a contract is cancelled.
“I have never seen the Government of Canada muzzle a contractor trying to deliver equipment to support Canada and our allies. This is strange,” he said.
“The question is, what are liberals trying to hide?”
Why might a defense contract be terminated?
Richard Shimooka, a senior fellow at the Macdonald-Laurier Institute who studies defense policy and procurement, said there are several reasons why a contract like Armatec’s could be cancelled, but he could not discuss specific details.
He noted that most of the light armored vehicles in question had previously been deployed by the Canadian military in Afghanistan, and “probably took quite a beating” during the decades-long war there.
“These vehicles may be in much worse condition than anticipated and (Armatec) can say ‘it is no longer financially possible for us to do it under the terms of the contract,’ and the government put its foot down,” he said in an interview as an example of a factor that could spur cancellation.
“Given the Canadian tendency to operate vehicles well past their prime, so to speak, it’s worth asking what kind of material condition they were delivered in.”
Shimooka doubted the cancellation spoke to a broader cost-cutting strategy by the Liberal government or a change in its approach to helping Ukraine. Rather, he said it is more likely that the government wanted the project done “quickly” and decided it was no longer possible.
Bezan said clear answers are needed.
“Until the summer, Ukrainians were still waiting and wondering where these vehicles were, and they still wanted them,” he said. “And there is no commitment from the government to replace this with anything else.
“It just shows the hypocrisy of the government who say they support Ukraine, but don’t deliver. They say they’re going to support the defense industry and they walk away from it, costing jobs. And, you know, it’s about ensuring that we have the defense capability.”
The DND told Global News that Canada “remains unwavering in its support for Ukraine and its priority of providing military aid that is timely and immediately operational to the Armed Forces of Ukraine.”
“As part of the $2 billion in additional military assistance announced by Prime Minister Carney, Canada is also considering providing additional armor capabilities to Ukraine,” the spokesperson said.
“We are expediting other contracts through the Canadian Commercial Corporation to put effective capabilities in Ukraine’s hands as soon as possible.”
The Prime Minister’s Office says the additional $2 billion in military aid includes $835 million for armored vehicles and other critical equipment.
Canada is in the process of delivering 50 armored vehicles built by London, Ontario-based General Dynamics Land Systems-Canada under a separate $650 million contract signed in 2023.
The first vehicles were delivered to Europe in June 2024, and McGuinty said Tuesday that the remaining vehicles are on track for delivery later this year.
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