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Harper government gave Seaspan shipyard $40M contract on election day

On election day last fall, the Harper government awarded a $40-million "engineering" contract to the Seaspan shipyards, despite having pledged that needed upgrades to shipbuilding facilities would be "at no cost to Canada."

Election-day win for shipyard undercut Harper pledge that yards would pay for their own upgrades

The cross-section illustration shows a planned offshore fisheries science vessel. The North Vancouver shipyard Seaspan has begun construction of the first two of three such vessels. (Seaspan)

On the very day of its defeat last fall, the Harper government quietly awarded a $40-million "engineering" contract to the Seaspan shipyard in North Vancouver, despite having promised that the yard would prepare itself to build new ships "at no cost to Canada." 

Two months later, in December 2015, a confidential report for the new Liberal government, obtained by CBC News, found that the program remains chaotic, poorly managed and marked by "fragmentation, inefficiencies and delays."

Seaspan is one of two yards chosen by the former Conservative government to share a vast, $36-billion shipbuilding program for the navy and the coast guard. The other is the Irving shipyard in Halifax. To qualify for the work, both were required to upgrade their yards at their own expense.

Seaspan was assigned some $8 billion to build four small science vessels, two big supply ships for the navy and a polar icebreaker for the coast guard. But actual construction contracts for the large vessels have not been finalized and the contract awarded last Oct. 19 is not for building any of them.

The contract was part of a little-noticed plan to help Seaspan get ready for work on a scale it has never before attempted, even as the government of Stephen Harper insisted that these preparations would cost taxpayers nothing.

No announcement contradicting that promise was made, although, at a committee hearing in December 2014, a government official admitted to MPs that "basically, what we're doing is investing in the shipyard's capability to get itself up to capacity, to start churning out vessels."

A big win on election day

That process became a contract for $39.7 million, awarded on Oct. 19, 2015 — election day.

Seaspan's CEO, Jonathan Whitworth, said there were no politics involved and no haste to get the money out before a new government could stop it.

"That's a pretty good theory," said Whitworth, laughing, "but not one that I subscribe to."

Jonathan Whitworth, CEO of Seaspan, says the $40-million dollar election day contract was designed to create efficiencies that will save the government money down the road. (seaspan.com)

Whitworth also said the money was part of a continuing program that could go as high as $50 million. He agreed that it was not aimed at the construction of any particular ship, but was intended to create "efficiencies that would apply to all ships." He added that it did not cover "infrastructure," but "the efficient design and build of the ships."

The savings, he said, would be passed on to the government, although they would be hard to quantify in the absence of a known price for the larger ships. 

Flaws in management

However, a report by the government's procurement strategy secretariat in December 2015 found persistent "inefficiencies and delays" in the so-called "non-combat program" (NCP), meaning the ships to be built by Seaspan, as opposed to the warships being built by Irving in Halifax.

The report summarizes a series of expert reviews that paint a bleak picture of disarray in the program — both at Seaspan and in the government bureaucracy.

It found a "lack of sufficient human resources in the shipyard and within the government to effectively manage a program with the complexities of the NCP. All parties underestimated the capacity required."

The secretariat concluded that there was "a lack of clarity between all parties on expectations and priorities" and "insufficient framework to enable the effective management of the NCP." This had resulted in "lost opportunities to capitalize on economies of scale."

Four science vessels, two naval supply ships and a polar icebreaker are to be built at the Seaspan shipyard in North Vancouver under the $36-billion shipbuilding procurement strategy. (Seaspan)

'As if money is no object'

A similar critique has emerged from Canada's largest shipyard, the Davie yard, across the St. Lawrence from Quebec City. Davie lost out in the selection process, although it is now converting a used freighter to serve as an interim supply ship. But Alex Vicefield, CEO of Inocea, the international shipping group that owns Davie, said in March that his company can build other ships, such as an icebreaker, immediately and much more cheaply than under the national shipbuilding program, which he said entailed "exorbitant" costs.

"Never have I witnessed a country so willing to spend money unnecessarily," Vicefield told CBC News.

"It's almost as if money is no object."

The new Liberal government, however, says it is "fully committed" to the previous government's shipbuilding strategy. 

According to a so-called "caretaker convention," Canadian governments are not supposed to make controversial decisions during an election campaign. As the Privy Council website describes it, "during an election, a government should restrict itself — in matters of policy, expenditure and appointments — to activity that is: (a) routine, or (b) non-controversial, or (c) urgent and in the public interest, or (d) reversible by a new government without undue cost or disruption."

Jessica Kingsbury, a spokeswoman for Procurement Minister Judy Foote, defended the contract, which she said "‎aims to co-ordinate, align and manage the non-combat package more strategically."

As for the timing, she said, "The task was issued in accordance with the departmental directives that were in place during the election period."

About the Author

Terry Milewski

Terry Milewski worked in 50 countries during 38 years with the CBC. He was the CBC's first Middle East Bureau Chief, spent eight years in Washington during the Reagan, Bush and Clinton administrations and was based in Vancouver for 14 years before returning to Ottawa as senior correspondent.

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