Fixed-cost competitions better for ship procurement: report
Claims billions could be saved buying off shelf
Canada should scuttle its problem-plagued shipbuilding program and instead launch a series of fixed-cost competitions to ensure it quickly obtains icebreakers, supply ships and frigates, a new report argues.
The study, published Thursday by the University of British Columbia, warns that the federal government’s efforts to build new ships are years behind schedule and billions of dollars over budget. The report’s author, Prof. Michael Byers, recommends dumping the current process and relaunching an expedited procurement that would save money by using only fixedprice competitions and offthe-shelf ship designs.
As an example, Byers pointed to the last month’s fixed-cost proposal from an Italian-French shipbuilding consortium to construct 15 new frigates at Halifax’s Irving Shipyard, which the shipbuilders said would save the government $30 billion. The Liberal government rejected that proposal, arguing it would have unfairly circumvented the established national shipbuilding strategy.
“Not seizing upon the significant cost savings made available by Fincantieri and Naval Group is both irrational and irresponsible,” Byers writes in the report. “$30 billion is a staggering amount of money — more, indeed, than the original budget for the entire National Shipbuilding Procurement Strategy.”
Byers, an expert on Canadian foreign and defence policy and international law and author of the book Who Owns The Arctic?, suggests the government could also have other firms submit competitive bids for the frigate replacement, dubbed the Canadian Surface Combatant, as long as they were at a fixed price and used off-theshelf designs.
He also recommends launching a fixed-price competition to immediately convert a second container ship into a supply vessel, similar to the conversion Quebec shipbuilding firm Davie undertook over the last 18 months for the Royal Canadian Navy. That would mean the end of the Joint Support Ship program, which was to provide the navy with two supply vessels but which is still years from the actual beginning construction on the ships.
In addition, the report proposes shelving the plan to build a heavy polar icebreaker in Vancouver, recommending instead an expedited fixed-price competition for the conversion or construction of four to five medium icebreakers. With climate change reducing the severity of ice conditions in the north, Byers argues, the project to build a ship of the size and ice-breaking capacity of the planned polar icebreaker is excessive and overly expensive.
The report questions particular aspects of the national shipbuilding program. For one, Byers points to the federal government’s decision to allow “non-proven designs — namely BAE’s Type 26 frigate — into a competition that it had previously indicated were limited to ‘off the shelf’ designs.”
He also questions why the federal government awarded a $5 billion in-service support contract for the Joint Support Ships to French defence giant Thales in August, at least two years before the construction contract for the same vessels is likely to be signed with Seaspan shipyards in Vancouver. “Apart from putting the cart before the proverbial horse, this sequencing failure prematurely limited the government’s flexibility,” Byers writes. “If the government decides to change its plans concerning the support ships, it will now have to renegotiate or cancel the contract with Thales — at some unnecessary cost to taxpayers.”
The report is a followup to a 2014 examination of the national shipbuilding program, which warned about problems and a lack of oversight on the multi-billiondollar strategy.
Federal officials have said that the national shipbuilding program is proceeding as planned, pointing out that bids are in for the Canadian Surface Combatant and one coast guard ship has now been launched.
But the government also says it can’t provide parliament with a schedule for the delivery of the navy’s new supply ships or the coast guard’s Polar-class icebreaker because it deems such information secret. The schedule “is subject to commercial confidence restrictions and cannot be shared,” the government has said. That has prompted concern from parliamentarians such as Todd Doherty, Conservative critic for oceans, fisheries and the coast guard, that both programs have fallen significantly behind schedule.
NOT SEIZING UPON THE SIGNIFICANT COST SAVINGS ... IS BOTH IRRATIONAL AND IRRESPONSIBLE.