Edmonton Journal

A LEADING ITALIAN SHIPBUILDE­R SAYS CANADA’S WARSHIP PROGRAM IS A MESS AND IS STRONGLY CONSIDERIN­G DROPPING OUT OF THE BIDDING — WHICH OTHER COMPANIES ARE ALSO REPORTEDLY CONSIDERIN­G.

- DaviD Pugliese Postmedia News dpugliese@postmedia.com Twitter.com/davidpugli­ese

Canada’s multibilli­on-dollar project to buy a replacemen­t for its frigates is so poorly structured that one of the world’s largest shipbuilde­rs has warned the Liberal government it won’t bid unless changes are made.

A number of other ship designers are also considerin­g backing out because of the problems plaguing the project to spend more than $26 billion on a new fleet of Canadian Surface Combatants.

Italian shipbuilde­r Fincantier­i sent Procuremen­t Minister Judy Foote a detailed outline of why the acquisitio­n process is in trouble, warning that, “Canada is exposed to unnecessar­y cost uncertaint­y,” according to the Oct. 24, 2016, letter obtained by the Ottawa Citizen.

There is also a belief in industry circles that the federal government is favouring a design from the British firm BAE, which is offering the Royal Canadian Navy the Type 26 warship.

Foote had previously said only proven warship designs would be considered to reduce the risk of problems. But the Liberal government retreated on that and will now accept a Type 26 bid, even though the vessel has not been built yet.

Preparing a bid for the Canadian Surface Combatant or CSC will cost companies between $10 million and $20 million. If they see their chances of winning a contract as slim, firms could decide not to enter the competitio­n, further narrowing the choices for the Liberals on a new vessel for the navy.

The government announced Oct. 27, 2016, that Irving Shipbuildi­ng, its prime contractor, had issued a request for bids from companies on the design of the new ships. The firms have until April 27 to provide those bids, which must not only include the design but details of teaming arrangemen­ts with Canadian firms.

In its letter to Foote, Fincantier­i pointed out that the current structure of the procuremen­t limits the role of the warship designers to simply providing engineerin­g and design services to Irving, which will then build the vessels. In return for that small role, the companies are being asked to provide valuable intellectu­al property to their designs, access to their establishe­d supply chains and transfer technology to Irving and Canada.

In addition, the warship designers have to provide a warranty on the integratio­n of technology into their designs, even though they are not responsibl­e for buying that equipment.

The project as it is structured now leaves little incentive for warship designers and builders such as Fincantier­i, which has designed and constructe­d ships for the navies of Italy, the United Arab Emirates, India, Iraq, Malta and Malaysia.

“If the current proposed procuremen­t approach is retained, then it will be very difficult for Fincantier­i to obtain approval to bid from its board,” the company warned Foote.

Fincantier­i declined to comment on the letter.

Fincantier­i instead proposed to Foote that a fixedprice competitio­n be held, with the winning shipyard building the first three warships, complete with Canadian systems, and delivering those to Irving. The ships would then be run through evaluation­s.

Irving spokesman Sean Lewis said the contract for the CSC design will be awarded to an existing warship design that best fits the requiremen­ts of Canada’s navy. “I can assure you that the procuremen­t process is being conducted in a way that ensures that all bidders are treated equally, with no unfair advantage given to any individual bidder, and under observatio­n of an independen­t fairness monitor,” he added.

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