By Robb M. Stewart
Unisync Corp. dropped its bid to land an operational clothing and footwear contract with the Canadian armed forces, citing global disruptions and inflation.
The uniform supplier Friday said it was forced to reassess the economic feasibility of the opportunity it had been pursuing with the Department of National Defense since the contract was firm announced more than a decade ago.
The contract is expected to be awarded in the next few months and involved an initial term of five years, with multiple renewal provisions for a potential term and 20 years and estimated gross revenue of more than 1 billion Canadian dollars, the equivalent of US9.
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7 million , Unisync said.
The company said OCFC2, the Operational Clothing and Footwear Contract for the Canadian armed forces, doesn’t provide for an appropriate return on its invested capital as it is currently constructed.
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“We were hesitant to make this critical decision as we incurred significant management time and costs in positioning Unisync to respond to this opportunity. However, we were unanimously in our conclusion that the risks associated with this contract as constructed far outweighed the benefits to be derived , Executive Chairman Douglas Good said.
He said that as prime contractor, Unisync would be locked into a fixed rate management fee for the full duration of the contract at a rate that was established two years prior to the contract’s launch and which has been significantly eroded by higher interest rates, the surging cost of wages and a reduced availability of workers, as well as major increases in transportation costs and property values.
“This challenge was further exacerbated due to the inclusion of value proposition commitments under the Industrial and Technological Benefits Policy for the life of the contract, and the lack of a foreign exchange adjustment provision,” Mr. Good said.
Write to Robb M. Stewart at [email protected]
Credit: www.marketwatch.com /