Ottawa adjusts $60B warship process — again
The government has once again changed how it will evaluate bids on its $60-billion warship program, prompting more concerns the new process is designed to help out a company linked to Irving Shipbuilding.
The move is the latest twist in the ongoing saga of the Canadian Surface Combatant, believed to be the largest single defence purchase Canada has ever undertaken.
Companies have already provided their bids for the surface combatant project to the federal government and Irving, which will construct the vessels. The firms were expecting those to be evaluated using an established process outlined previously, which included one opportunity to fix problems with bids.
But on Aug. 13, the government informed the firms a second opportunity would be provided if the companies weren’t fully compliant in meeting Canada’s naval requirements, according to industry sources.
Jean-François Létourneau of Public Services and Procurement Canada confirmed the new process, but added, “this is an example of how the Government of Canada is developing and applying innovative approaches to improve the results for large, complex defence procurements.”
The government has told companies not to comment during the selection process. But the new change has sparked more concerns the process is rigged to favour a bid by Lockheed Martin Canada and British firm BAE, industry sources say.
Rival firms claim BAE’s Type 26 warship won’t be able to meet Canada’s needs, so the company, which has been involved in other business ventures with Irving, is being given additional chances to fix up its proposal.
BAE and Lockheed Martin have countered that the Type 26 will be more than capable of meeting Canada’s requirements.
Irving declined comment. Létourneau said fairness and transparency have been key factors in the procurement process. “Given the magnitude and importance of this project, every effort is being made to ensure that this procurement is fairly and effectively executed and that bidders have every opportunity to submit high-quality compliant bids that provide good value for money, including significant benefits for Canadian industry,” he said.
The project, estimated to cost between $55 billion and $60 billion, will see Irving build 15 warships at its Halifax Shipyard. But the project is seen as a major departure from previous purchases as Irving has a significant role in selecting the winning bidder.
That has fuelled industry concerns about favouritism since Irving has worked closely with BAE on other ventures.
Those concerns increased when the parameters of the project were changed. Federal officials originally stated Canada wanted mature, proven ship designs to cut down on risk. But the government and Irving accepted the BAE design, which at the time was still only on drawing boards. Construction began on BAE’s Type 26 frigate for Britain’s Royal Navy in the summer of 2017, but the first ship is not yet completed.
New, unproven ships can face challenges as problems are found when the vessel is in the water and operating.
Both Irving and Public Services and Procurement Canada have denied any favouritism towards BAE.
But even as Irving released the request for proposals for the surface combatant program, it was teamed with BAE to bid on a maintenance program for other new Canadian navy ships, according to federal documents. The two firms were not successful on that contract, but the government reminded Irving it had an obligation to “ensure that the Canadian Surface Combatant competition is conducted in a manner that is free from real or perceived conflicts of interest,” according to February 2017 documents prepared for Defence Minister Harjit Sajjan.
Those documents were obtained by the Conservative Party using the Access to Information law.
A number of defence industry representatives acknowledge there is the widespread belief the BAE proposal has the inside track. In addition, several European shipbuilders decided against submitting bids on the Canadian program because of concerns about the fairness of the process.
In November, a French-Italian consortium also declined to formally submit a bid and instead offered Canada a fleet of vessels at half the price. The Liberal government rejected the deal.