The shipbuilding procurement strategy itself was never subjected to a full ... bidding process.
Just weeks ago, Justin Trudeau’s Liberals promised to kill the F-35 jet purchase once and for all, find a less costly fighter, and plow any savings into the rusted-out Royal Canadian Navy. It was a deft political move, one that likely helped Trudeau win over the military constituency and veterans so long taken for granted by the Harper Conservatives.
All of which it makes it more than passing strange that the new Liberal government has almost immediately got itself snarled in regional procurement politics, causing it to delay or cancel — which one isn’t yet clear — a previously approved plan to provide some of the supply capacity the Navy now lacks, and absolutely must have, if it is to serve as more than a glorified coastal patrol.
The plan by Lévis, Que.-based Davie Shipyards to convert a leased commercial tanker to serve as a stopgap supply ship was green-lighted by the previous government in its waning days. That approval was no sudden thing. It followed months of behind-thescenes haggling, as Davie’s two rivals in Canadian shipbuilding — Seaspan of Vancouver and Irving Shipbuilding of Halifax — sought to either secure this work for their own yards or delay it indefinitely.
Though the process by which Davie was eventually chosen was sole-source, in that no formal request-for-proposals was issued, it does not seem accurate to say no consideration was given to competition. On the contrary, according to industry sources, all the major players were invited to offer solutions. These consultations lasted six months. A number of proposals were received and considered, after which Davie’s was selected.
Irving was and is already hard at work on the $26-billion combatship portion of the National Shipbuilding Procurement Strategy, unveiled by the Conservative government in the fall of 2011. Seaspan is beavering away with some difficulty, according to industry sources, at its $8-billion tranche of this package, which includes several small Coast Guard vessels, a large icebreaker and two new supply ships not expected to float until the early 2020s.
Davie, which got left at the altar in 2011 because it was insolvent at the time, is now a going concern. It seemed both sensible and timely, given the big orders on tap at the other yards, that it be assigned the tanker conversion, such a conversion having been judged possible, useful for the Navy and cost-effective.
Though the price estimate making the rounds is $700 million over seven years, industry sources say it’s closer to $400 million if compared on an apples-to-apples basis with the Joint Support Ships plan. The projected budget for JSS is upwards of $2 billion.
The argument that every major federal purchase should be put up for tender in a full-on, formal bidding process is certainly valid. The contradiction here lies in the double standard: The shipbuilding procurement strategy itself was never subjected to a full, formal bidding process, but merely a capability assessment. This was the costliest naval rebuild in Canadian history. It was apportioned to yards on the east and west coasts with a view, not simply to meeting naval requirements, but also regional economic benefits, jobs, the strategic effect of reconstituting a domestic shipbuilding industry and, of course, politics.
It’s more than a little rich, therefore, to now argue similar considerations should be set aside in Davie’s case, with more than 1,000 of its workers poised to begin retooling a tanker already purchased for the purpose, based on the government’s commitment.
On Friday, Quebec Premier Philippe Couillard lashed himself to the mast, telling reporters, “we will simply not accept that there’s any change in the plan.” One suspects this, combined with the weight of a new 40-strong Quebec Liberal caucus, will mitigate against the delay being made permanent. But time is of the essence. A letter of intent expires at month’s end, with a break fee of $89 million. A tab that size, accompanied by yet another delay, would be an inauspicious debut for a government that has pledged for years to make procurement more efficient.
More worrying may be the ease with which this stoppage seems to have come about. James
Quebec Premier Philippe Couillard lashed himself to the mast, telling reporters, ‘we will simply not accept that there’s any change in the plan.’ One suspects this, combined with the weight of a new 40-strong Quebec Liberal caucus, will mitigate against the delay being made permanent. — Michael Den Tandt This was the costliest naval rebuild in Canadian history.
D. Irving, co-chief executive of Irving Shipbuilding, wrote a letter to Judy Foote, the minister of Public Services and Procurement, and Harjit Sajjan, the minister of Defence, and cc’d it to Scott Brison, president of Treasury Board and a prominent Nova Scotia Liberal, and Minister of Finance Bill Morneau. The letter, obtained by the National Post, is dated Nov. 17. It asks for a pause and review. Two days later, last Thursday, cabinet ordered the pause and review.
The Liberals may of course choose to rip up their predecessors’ clunky, hugely expensive, molasses-paced shipbuilding strategy in its entirety and start over. That might not be such a bad idea. In the meantime, if the government intends to stick within the existing envelope, it should focus on getting the Navy what it needs to do its job.
Davie’s tanker project fits that bill. It should go ahead.