Ottawa Awarded $6.8M Contract to Chinese State-Owned Nuctech Despite Lower Bid from Canadian Company

August 13, 2020 Updated: August 13, 2020

The Canadian government awarded Chinese state-owned company Nuctech a deal to install X-ray security equipment in its embassies and high commissions around the world—even though Canadian companies offered lower bids on the same contract.

At least two Canadian companies had competed for the bid to supply X-ray and other scanning equipment to Canadian embassies, consulates, and high commissions around the world—170 in all, according to a report from The National Post.

Nuctech won the bid for $6.8 million even though Calgary-based KPrime Technologies offered to supply the equipment for $5.4 million.

The deal has raised security concerns in light of Nuctech’s close ties to Beijing, having been founded by the son of former CCP leader Hu Jintao, as well as being linked to the Chinese military.

In 2014, the U.S. Transportation Security Administration banned Nuctech equipment from the country’s airports due to security concerns. Officials in the EU have also raised concerns about the risks Nuctech poses to airport security.

Nuctech has been dubbed the “Huawei of airport security” in that it has provided security equipment such as X-ray machines, scanners, and explosive detection systems to airports and customs offices in over 150 countries, giving it access to the strategic infrastructure of those countries in areas as sensitive as aviation and border security.

For Western countries that enter into ventures with Chinese-state backed companies like Nuchtech or Huawei, part of their rationale has often been that these companies can bid much lower on contract tenders, allowing governments to save money.

However, the fact that a Canadian company’s bid was significantly lower—$1.4 million less—raises questions about what other factors Ottawa based the decision on.

After Canada’s deal with Nuctech was announced last month, it was met with criticism and concern from some experts who said Nuctech shouldn’t have been allowed to bid at all, given the apparent security risks and the deteriorating relationship between Ottawa and Beijing.

Canadians Michael Kovrig and Michael Spavor remain jailed in China, and last week a fourth Canadian was given the death penalty on drug charges in that country since Canada detained Huawei executive Meng Wanzhou in 2018.

Last month, Foreign Affairs Minister Francois-Phillipe Champagne said he would review the contract in light of Nuctech’s connection to the Chinese regime, saying the “standing offer is not a contract, and Global Affairs has not purchased any equipment from Nuctech at this time.”

However, since 2017, Nuctech has already been awarded four contracts valued at $6.5 million to provide scanners and lab equipment to the Canada Border Services Agency, according to procurement documents obtained by Global News.

Nuctech’s Checkered History

Nuctech has long been accused of alleged unfair business practices and corruption.

In February, the Taipei Times reported that the former head of Taiwan’s Aviation Police Bureau Sun Yi-ming was found guilty of corruption based on charges related to illicit activities he was involved in. The activities included working with Nuctech to “deceive” Taiwan’s regulators by having parts shipped to Japan for assembly and repackaging, as well as accepting kickbacks, in relation to a contract with Nuctech to procure X-ray scanners.

Experts in Taiwan said the case “reeked of a Chinese intelligence operation, with an eye to penetrating Taiwan’s airport and border security,” the Taipei Times reported.

In 2008, Nuctech was involved in a bribery scandal in Namibia relating to a $55.3 million contract it had signed with the government. Namibia’s anti-corruption commission discovered that a $12.8 million down payment had been passed to the firm Teko Trading, which suggested an attempt to bribe Namibian authorities to secure Nuctech’s access to the market and its influence in the country.

In 2010, the EU imposed a five-year tariff on Nuctech products for alleged dumping on the European market.

The company’s pending deal with Canada raises important questions about how Canada’s foreign policy should handle companies that have ties to autocratic regimes—and on what grounds Canada decided to award the contract in the first place.