Canadian Manufacturing

Ottawa shoots down controversial warship proposal that could have saved $20B

by Lee Berthiaume, The Canadian Press   

Canadian Manufacturing
Procurement Public Sector Transportation

Canada is staying the course on its $60 billion shipbuilding plan led by Halifax-based Irving, rejecting a new proposal from two of the world's largest shipbuilders

OTTAWA—The federal government sought to keep its multibillion-dollar plan to build new warships for the navy from capsizing Dec. 5 by shooting down a joint proposal from two of the world’s largest shipbuilders.

The companies, Paris-based Naval Group and Italian firm Fincantieri, came out last week with claims they could replace the navy’s frigates and destroyers with 15 new ships faster and for much less than anyone else.

The Trudeau government has previously said it expects the new ships to cost between $56 billion and $60 billion, and construction by Irving Shipbuilding in Halifax isn’t expected to start until 2021—at the earliest.

But the French-Italian consortium says it could start construction as early as 2019 and that building the ships in Europe would cost $20 billion.


It says the full cost to build in Canada would depend on talks with Irving.

The French-Italian proposal has caused waves inside the defence and shipbuilding community, which has been seized with the warship project, given that it represents the largest single military purchase in Canadian history.

But in a strongly worded and highly unusual statement Tuesday, the federal procurement department said it would not consider the companies’ offer because they did not follow the proper process for submitting proposals.

The government launched a competition last year in which defence and shipbuilding firms were asked to design potential replacements for the navy’s frigates and destroyers.

Sources say the government received three submissions before the deadline for that competition expired last Thursday and officials are now sitting down to start looking at thousands of pages of technical documents.

But Naval Group and Fincantieri did not submit a formal proposal. Instead, the companies appear to be using a lobbying campaign to sell their proposal, including a direct pitch to Defence Minister Harjit Sajjan last month.

In its statement on Tuesday, Public Services and Procurement Canada stated categorically that proposals outside the established competition would not be considered.

“The submission of an unsolicited proposal at the final hour undermines the fair and competitive nature of this procurement,” the unsigned statement said.

“Acceptance of such a proposal would break faith with the bidders who invested time and effort to participate in the competitive process, put at risk the government’s ability to properly equip the Royal Canadian Navy and would establish a harmful precedent for future competitive procurements.”

The department also said claims the French-Italian proposal would save money were “far from evident,” adding: “Any prices without the context of applicable terms and conditions … are effectively meaningless.”

A Naval Group spokesman declined to comment on Tuesday.

Yet it seems unlikely that the companies will give up at this stage, given the stakes involved. Instead, it is likely that they will seek to put more pressure on the government by highlighting potential cost savings.

The Naval Group-Fincantieri proposal is only the latest wrinkle in the shipbuilding project, which is not expected to get any ships in the water until the mid-2020s.

The previous Conservative government budgeted $26 billion for 15 warships, but that figure has since more than doubled to the current estimate as a result of various delays and cost overruns.

The government is also struggling to close a looming gap between when construction on a new fleet of Arctic patrol vessels is expected to end in Halifax and the start of construction on the warships.

That gap is currently estimated at between 18 months and two years and Irving Shipbuilding has warned that it could be forced to lay off hundreds of workers if it isn’t closed.


Stories continue below