ANALYSIS | Politics of shipbuilding mean rough seas for Harper

This week, the government is expected to announce two winning bidders for nearly $35 billion in shipbuilding contracts. The problem for the Conservatives is there are three shipyards — in three regions — competing for the deals.

The Harper government is sailing into a potential political hurricane over $35 billion of naval shipbuilding contracts, the largest military procurement in modern Canadian history.

Later this week, the government is expected to announce two winning bidders for most of the work, one to build $25 billion of naval warships; another to construct $8 billion of supply vessels and other non-combat craft.

The Titanic-sized political problem for the Conservatives is there are three shipyards — in Halifax, Quebec City and Vancouver — competing for just two mega-deals and the thousands of regional jobs that come with them.

That means either the Maritimes, Quebec or the West is about to get one huge, painful and likely lasting kick in the shipyard.

Recent interviews with industry and government insiders suggest that Irving Shipbuilding of Halifax is the odds-on favourite to win the grand prize, the massive contract to build up to 15 warships at a cost of $25 billion over the next several decades.

That would leave Quebec and the West at broadsides for the $8-billion contract for the non-combat vessels.

Vancouver Shipyards is in a strong position to win that deal.

But so is a Canadian-Korean consortium that recently acquired the previously insolvent Quebec-based Davie shipyards. The group is betting everything on the non-combat project, and didn't even bid on the much larger deal for the warships.

The likelihood of a political storm from whatever region gets shut out of the naval contracts helps to explain why a Conservative political machine ordinarily fuelled by photo-ops has become all but invisible in the lead-up to such a huge and important military procurement.

Ministers not out front

Senior Conservative sources say this week's expected contract awards are causing so much political trepidation inside the Harper government that there is a good chance the prime minister, Defence Minister Peter MacKay and most other members of cabinet will be nowhere in sight for the official announcement.

If anyone isn't hiding under the cabinet table, it will be Public Works Minister Rona Ambrose.

She may lend her face and considerable communications skills to the event as the minister responsible for federal contracting, and to press the claim that $35 billion of taxpayers' money is being awarded entirely free of partisan and regional politics.

One senior official told CBC News that most ministers won't even know which companies have won the bids until the last minute.

Instead, the final selection and official announcement are being handled entirely by a special group of senior bureaucrats who have been managing the bid process for the past 16 months.

The official says the whole $35 billion worth of contracts were reviewed and approved by the Treasury Board in the past few weeks, but even those documents did not include the names of the two winning companies.

At no time will the full federal cabinet have any role in approving or otherwise reviewing the winning bids.

"The whole bidding process has been unprecedented," said the senior government official. "Everything has been done to ensure there is a fair result."

Consultants provided oversight

In addition to public servants trying to keep the process out of the hands of the politicians, teams of outside consultants were hired to oversee the bureaucrats.

For instance, a large British naval consulting firm, First Marine International, was hired to review all the Canadian shipyards in the running to ensure they were capable of undertaking such massive projects.

The accounting and business management firm KPMG was hired to ensure the bid selection process was set up to be fair and reasonable — that is, not slanted by the military to favour one shipyard over another.

The Davie shipyards in Levis, Que. wasn't nearly as active in terms of lobbying compared to its two competitors. (Jacques Boissinot/Canadian Press)

Finally, the government hired a number of outside firms to act as "fairness monitors," essentially independent consultants overseeing the other consultants overseeing the bureaucrats managing the process.

There was certainly no shortage of material to oversee.

According to one report, Vancouver Shipyards alone spent more than $1 million just to prepare its bid — 30,000 pages of documents in 125 binders, shipped to the federal government in 22 boxes.

One of the more unusual moves by the Harper government was a warning to all the bidders this past summer that last-minute lobbying would not be welcome.

Perhaps the government had simply heard enough.

In the past two years, for instance, Irving Shipbuilding and its hired arm-twisters registered more than 100 formal meetings with Conservative cabinet ministers, senior political staffers and high-ranking bureaucrats in various departments.

Vancouver Shipyards and its lobbyists also logged dozens of equally high-level encounters.

Davie shipyards wasn't nearly as active as the others in the federal lobbying register, perhaps in part because it spent most of the past two years looking for a buyer to save the company from bankruptcy.

'Not about' one region over another

With only days to go until the final announcement of the winning bids, the Harper government is clearly scrambling for ways to try to soften the blow on the losing region.

For instance, one Conservative official close to the process tried to frame this week's expected announcement as "not about one region winning over another — this program is all a big win for Canada."

No matter where the ships are built, she said, the benefits of subcontracts will be felt across the country.

The government will point out that almost half the cost of the warships, for instance, will go into engines, high-tech components and other parts from subcontractors, many of them in Ontario and Quebec.

The government is also promising to hand the losing shipyard much of the leftover $2 billion in miscellaneous naval contracts included in the $35 billion, but not part of the two main deals being announced this week.

No matter how the government tries to spin this week's announcement, the Conservatives know the politics of it all guarantees rough seas ahead.

In 1986, Brian Mulroney's government took away a fighter jet maintenance contract won by Bristol Aerospace of Winnipeg, and gave it to Bombardier of Quebec.

The resulting outrage in the West drove the popularity of Mulroney's government into the basement of public opinion, and helped spawn the Reform Party.

This time, the Harper government has gone overboard to prove there was no political interference.

Voters in one part of the country, at least, will be demanding to know why.

Greg Weston can be reached at greg.weston@cbc.ca


Greg Weston was an investigative reporter for CBC News and a regular political commentator on CBC Radio and Television from 2010 to 2015.