Monday, May 09, 2016

That $353K Ontario Superior Court Judgement for Nonpayment of NEOSSAT Contractor Fees

          By Chuck Black

The general, but grudging and mostly off the record consensus, is that the near-Earth object surveillance satellite (NEOSSat), a Canadian micro-satellite funded by the Canadian Space Agency (CSA), the Defence Research and Development Canada (DRDC) and launched in 2013, functions reasonably close to what was planned when the project began in 2005.

However, as outlined in the January 12th, 2016 Ontario Superior Court of Justice judgement, "Com Dev Ltd. v Microsat Systems Canada Inc., 2016 ONSC 289 (CanLII)," there is still much acrimony swirling around a series of unpaid invoices from Ottawa, ON based Routes AstroEngineering to prime contractor, Microsat Systems Canada Inc. (MSCI) for contracted NEOSSat related work.

Those unpaid invoices drove Routes out of business, according to the court documents. And they might, just possibly have originated with cost overruns and partial payments from the CSA.

"Unusual liquidity concerns" caused COM DEV International to purchase Ottawa based Routes AstroEngineering in 2010. As outlined in the April 16th, 2010 Ottawa Business Journal article, "COM DEV buys Ottawa-based subcontractor Routes AstroEngineering for $1.7M," the company specialized "in the design and manufacture of advanced instruments for space science research applications, including microsatellite technology such as solar array power systems, detector read-out electronics and satellite mass memory units." Many, but not all, of the firms twenty employees ended up going to work for COM DEV.  Screenshot c/o Ottawa Business Journal.

According to Evert Van Woudenberg, the managing partner at the Gardiner Roberts Law firm, who represented Cambridge, ON based COM DEV International (now the Canadian subsidiary of New Jersey based Honeywell International), "it was primarily a collection issue. From our point of view (as the new owners of Routes), MSCI simply wasn't paying its bills."

As outlined in the court documents, on April 15th, 2010 COM DEV acquired all of Routes assets. COM DEV commenced legal action against MSCI on April 20th.

Woudenberg characterized the case as a "document intensive trial," focused around factual disputes related to the large amount of contracts and documents needed to build a satellite for the CSA, the legal interpretations of those documents and an assessment of the appropriate damages to award in cases where contractual obligations are ambiguous, undefined and/or have not been fulfilled.

Judgement was eventually awarded to COM DEV for nine outstanding Routes invoices totaling $336,337.00 CDN plus 5% GST for a total judgement of $353,153.85 CDN. Nine other Routes invoices, totaling approximately $260,000 CDN were dismissed for a variety of reasons relating to milestones not being met or work being invoiced for items which were considered "out of scope."

An MSCI counterclaim was dismissed.

MSCI executives, along with their lawyers, Wilson Vukelich partner Douglas D. Langley and associate Parisma Zandi, have been approached but have so far not not responded to requests for comments on the legal action. Should that change, this article will be updated to reflect their statements.

The CSA has a history of public difficulties with its NEOSSat prime contractor. As outlined in the July 27th, 2014 Ottawa Citizen article, "Satellite company blames Canadian Space Agency for some cost overruns," the CSA auditors event went on record to say that MSCI  "lacked the needed expertise for the project." MSCI president David Cooper countered with a statement that "CSA officials asked for changes to the small satellite so many times that costs escalated." The article also quoted Cooper as saying that, "unless we came to meet the requirements as they (the CSA) saw them, they weren’t going to pay us.” and added that the company lost up to $1.5Mln CDN on NEOSSat. Graphic c/o Ottawa Citizen.

The CSA has also refused to comment, except for a blanket statement delivered via e-mail which said, "this legal matter was strictly between COM DEV Ltd. and MSCI. The Canadian Space Agency does not intend to comment." Should that change, this article will also be updated to reflect the new information.

And maybe the CSA should comment on this matter. Certainly CSA representatives have felt free to comment in the past when it suited their purpose.

As outlined in the July 28th, 2014 post, "Customers vs Project Managers: The Real Truth about NEOSSat," the CSA even went so far as to release a February 2014 report, under the title, "Evaluation of the Near Earth Object Surveillance Satellite (NEOSSat) Project For the period from February 2005 to December 2013," which blamed "a lack of capacity on the part of the prime contractor (MSCI)" for cost overruns and other problems which bedeviled the project.

Of course, more recently CSA representatives have declined to comment on the April 20th, 2015 post, "Four NEOSSat Images in Search of Respect," which published a series of recently released NEOSSat images. The new images were strong indications that the difficulties which occurred during the 2013 - 2014 roll-out were finally being overcome.

According to this February 32rd, 2013 CSA promotional video, "the Near-Earth Object Surveillance Satellite (NEOSSat), launched February 25, 2013, is the latest in a proud family of world-leading Canadian satellites. The world's first space telescope dedicated to detecting and tracking asteroids and satellites. It circles the globe every 100 minutes, scanning space near the Sun to pinpoint asteroids that may someday pass close to Earth. NEOSSat is also sweeping the skies in search of satellites and space debris as part of Canada's commitment to keeping orbital space safe for everyone. NEOSSat applies the kind of industry-leading technology for which Canada has become known and has already demonstrated in our very successful Microvariability and Oscillations of Stars (MOST) satellite." To see the complete video, please click on this link. Screenshot c/o CSA.

Perhaps the real secret to what CSA contributed to the current legal judgement could perhaps be hinted at in line 54 of the court file. It read:
According to (MSCI president David) Cooper’s evidence at trial, only a portion of the anticipated funds from the government (through the CSA) ended up in MSCI’s bank account on February 23, 2010 (a Tuesday). Cooper testified that the amount received in its account, $227,542.05, was considerably smaller than the sum required to pay Routes because a portion of the government’s $465,000 payment, approximately $200,000 plus interest, had been taken by Dynacon, the nominal prime contractor with CSA, to pay down MSCI’s indebtedness to Dynacon.
Cooper indicated that he was surprised by the amount that was taken by Dynacon and that he was caught somewhat unawares by the shortfall.
Dynacon Enterprises was the original contractor for the Microvariability and Oscillations of Stars (MOST) telescope and was also expected to build the follow-on NEOSSat using technology developed through MOST. But by 2010, Dynacon was supposedly out of the satellite business, having sold off its space division (but evidently not its outstanding receivables) to MSCI.

Want to read the original judgement? Simply click on the graphic above, or this link. Screenshot c/o CANLII.

The Ontario Superior Court didn't delve too deeply into the discrepancy between what MSCI expected to be paid and what it received from CSA, since the case mainly focused on questions of whether MSCI owed money to Routes and not whether CSA owed money to MSCI or Dynacon.

But the existing evidence does suggest that, while MSCI has certainly failed to pay a series of outstanding invoices for work done at Routes, there might be more outstanding invoices from MSCI and others which could come to light in future cases.

At the very least, the CSA had substantial and acknowledged cost overruns on NEOSSat. It would be interesting to learn a little more about who ended up having to pay them.

Chuck Black.
Who knows.

The next court case over NEOSSat, might involve our government and its space agency.
___________________________________________________________

Chuck Black is the editor of the Commercial Space blog.

7 comments:

  1. Hopefully doesn't. However, the satellite was launched as not complete and comprehensively tested product with the intent to complete its software in Space. I'd avoid discussing the CSA role in all serious issues related to NEOSSAT. CSA and MSCI spent many very stressful days unsuccessfully trying to rescue NEOSSAT right after the launch. Both sides MSCIA and CSA consciously moved to these issues for many years. The idea to launch as NEOSSAT very successful in Space Dynacon's satellite MOST that was "almost ready" to meet new special NEOSSAT requirements proved to be false.

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  2. It's a shame you have no on-record reports or statements to back up your assertions...

    All sides agreed that there simply wasn't enough money to fund the satellite through to completion but no side claims responsibility for either the lack of funding or the increased paperwork and over-site which the government added to NEOSSat after it discovered how successful MOST turned out to be.

    For more on the design philosophies which went into MOST, check out the May 9th, 2010 post on "The Microsat Way in Canada," at http://acuriousguy.blogspot.ca/2010/05/microsat-way-in-canada-youre-no-doubt.html

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  3. I also regret. I am out from this business a long time ago and don't keep related to NEOSSAT technical materials, but would be pleased to meet with your and share some personal. The MOST heritage unquestionably would help to launch and to operate NEOSSAT within the dedicated budget, but this heritage presumed related experience or at least the ability to learn and to use it. However, the main problem is that all experienced specialists (specifically MOST ideologists and creators) were removed from both sides (MSCI and CSA). It caused many issues (finally for our taxpayers) and growing cost of the project...

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  4. I'd be happy to learn more about MOST NEOSSat and your assessments and impressions of both. If you'd like to connect, send an e-mail to mr.chuck.black@gmail.com.

    The very least I could do is buy you a coffee for your troubles.

    Chuck Black

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  5. Thank you Chuck for your interest and the coverage of NEOSSAT story for our public. The story is really sad. Most probably, I'll contact to you soon. I'm sure we will need something stronger than the coffee after our conversation, but I am ready to buy...

    Yuri

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    Replies
    1. Hello YK. I'm still waiting patiently to buy you a coffee.

      Delete

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