Spanish shipmaker alleges feds rigged warship bids
Provision used in terrorism cases employed to block key documents
The federal government is using a legal measure usually reserved for terrorism cases to prevent lawyers from examining documents on the controversial $70-billion project to build a new fleet of warships for the Royal Canada Navy.
Lawyers for Navantia, Spain's state-owned shipbuilding company, are being blocked not only from examining records related to the Canadian Surface Combatant project, but also from obtaining information about the type of documents the federal government has in its possession.
It is believed to be the first time the Section 38 provision of the Canada Evidence Act has been used to prevent the release of records related to a government procurement.
Navantia, which had bid on the Canadian Surface Combatant program, but lost out to the U.S.-British consortium of Lockheed Martin and BAE, is currently in federal court alleging the naval procurement was rigged.
“Navantia's position is that these documents are central to allegations raised in its notices of application, including that Canada and Irving (Shipbuilding) engaged in a continuing course of bias and favouritism in favour of Lockheed and its partner BAE Systems,” lawyers acting for the company noted in a Jan. 8 court motion.
Navantia contends the BAE Type 26 ship selected for the Royal Canadian Navy's new fleet failed to meet Canada's requirements.
Irving and the federal government have maintained that the CSC competition was run properly and was fair, open and transparent. Lockheed Martin and BAE have also said the Type 26 meets all of Canada's requirements.
The federal government's move to use the Section 38 provision comes amid growing worry at national defence and in government circles that the CSC project could be seen as a money pit for taxpayers and any adverse publicity might derail the ship construction contract.
The CSC project would involve the construction of 15 warships for the Royal Canadian Navy at Irving Shipbuilding on the East Coast.
Construction of the vessels, replacements for the current Halifax-class frigate fleet, isn't expected to start until 2023, but the government wants the contract signed by the end of this year.
The project has already faced delays, however, and the price has climbed significantly from an original $14-billion estimate to around $70 billion. The parliamentary budget officer will issue a new report in late February on the latest cost estimate of the ships.
Justice Department spokesman Ian McLeod said he couldn't get into specifics, but the information being requested through the court was sensitive and “potentially injurious.” He noted the attorney general of Canada had the responsibility to protect that information from being disclosed as it might hurt national security or international relations.
Navantia declined to comment. Industry officials say that, while the documents are marked secret, they are in wide circulation already among Irving mid-level managers working on the CSC. Irving spokesman Tom Ormsby said the firm had all the authorizations it required to use the technical data it needed to work on the Type 26 design.
Section 38 is commonly used for terrorism offences and to protect classified information from national security agencies such as the Canadian Security Intelligence Service. It also can be used in situations involving war crimes, passport or citizenship forgery offences under the Criminal Code.
But the records being sought could have the potential to reinforce Navantia's allegation of a rigged procurement process, rather than spill military secrets. The company's lawyers are trying to get government records outlining why federal procurement officials changed requirements on the speed of the new warships as well as documents explaining the Liberal government's sudden reversal of its policy to accept only mature designs for the winning CSC bid. The Type 26 ship that
Canada wants to acquire didn't exist when it was selected by Irving and the federal government in 2018. The first vessel is still under construction.
With CSC under the microscope, the federal government has made a number of attempts to limit information. In the past, national defence claimed it couldn't share records on the CSC with government oversight agencies, such as the parliamentary budget officer, because the documents were sensitive. Procurement Canada has also tried to use gag orders to prevent industry from discussing CSC with the news media.
In October, industry executives were told by Jody Thomas, the top national defence bureaucrat, to stop raising concerns about CSC. Company officials have been complaining to politicians and media outlets that the project has fallen far short on its promises of creating domestic employment. Other industry executives have been warning politicians the rising price for CSC will jeopardize funding for other equally important military equipment projects.
But Thomas told executives Oct. 5 they were hindering the project and she characterized their efforts as those of sore losers.
In addition, the Department of National Defence's access to information branch has refused to release CSC records requested almost a year ago to the Citizen.
The federal government's decision to use Section 38 to block release of the records is also a reversal of previous arrangements made to allow Navantia lawyers to examine the documents. As part of that process, the lawyers applied for and received clearance to view secret documents. In addition, they signed a confidentiality agreement that they would not provide information to Navantia about what they had seen in the documents.
Plans were made to construct a special room with security features that allowed for viewing of documents classified by the Canadian government as secret. That deal was scuttled at the last minute.