Politics

Seaspan joins fight against $700M Davie supply ship deal

Yet another Canadian shipyard has written to the government asking for a competition in a now controversial plan to have a civilian cargo ship converted to a supply ship and chartered to the navy.
HMCS Protecteur is one of two auxiliary oil replenishment ships that must be replaced by the Royal Canadian Navy. Protecteur was heavily damaged by fire while at sea in February 2014. (Canadian Armed Forces)

Yet another Canadian shipyard has written to the government asking for a competition in the now controversial plan to have a civilian cargo ship converted to a supply ship and chartered to the Royal Canadian Navy.

The CEO of Seaspan ULC, Jonathan Whitworth, wrote to Canada's Defence Minister Harjit Sajjan, expressing his company's frustration and concern about the deal, and expressing interest in bidding on the project.

"We ask that you ensure that Canada run a fair open and transparent procurement," Whitworth wrote.

Last week, CBC News was the first to report a Liberal cabinet committee had put the brakes on a government plan to have Quebec-based shipyard Chantier Davie provide the navy with a converted cargo ship as an interim supply ship.

The details had been loosely agreed on with the previous government in a letter of intent, and Davie had been encouraged to start work on the plan. A contract for $700 million over seven years was finalized in October, pending cabinet approval.

Irving intervenes

Davie competitor Irving Shipbuilding Inc. intervened in a letter to Sajjan and Public Services and Procurement Minister Judy Foote. Like Seaspan, Irving complained the Davie deal was the result of a sole-source contract.

The Canadian navy lost its ability to replenish itself at sea last year after it was forced to retire its two 40-plus-year-old supply ships, one due to fire and the other due to rust.

The government already had plans to build replacement supply ships at Seapan's Vancouver Shipyards, but the first of those ships is not due to arrive until 2020 at the earliest.

It was that gap Davie sought to fill with its unsolicited offer of a converted cargo ship as an interim supply vessel, which it dubbed Project Resolve.

On Tuesday, the  CEO of Project Resolve, Spencer Fraser, defended the firm's refurbishment plan, which it said it won fairly.

"This competition to meet a Royal Canadian Navy operational requirement was open and well defined," he told CBC News in a statement. "We find it incredible that Irving and Seaspan believe they are so untouchable that they can dictate to the government and the Royal Canadian Navy, who evaluated the many international and domestic proposals, what is best for our navy.

 "It doesn't seem to be a coincidence that both Seaspan and Irving have resubmitted their failed proposals, at the very same time. Their proposals seemingly didn't meet the well-defined criteria set by the Royal Canadian Navy, and this is just a case of sour grapes."

The Davie deal is unconventional. It was approved earlier this year following a change in the government contracts regulations that allowed a sole-source deal, provided it fulfilled an "urgent operational requirement of an interim nature."

Process criticized

The government did ask for other yards to offer their own proposals, including rough capability and cost, but in its letter Seapan suggested that process was insufficient.

Vancouver-based Seaspan Marine wants an opportunity to bid on the interim supply ship deal handed to Quebec-based shipyard Chantier Davie. (Seaspan)

"There was no follow on discussion with any interested party other than Davie, and no competitive procurement process has been held for this opportunity," Whitworth wrote.

Seaspan and Irving are the two major winners in the government's $39-billion national shipbuilding procurement strategy. However, NSPS has yet to deliver any ships.

The government has also yet to negotiate a  contract with Seaspan to build supply ships, despite the initial plan to have one in place by as early as 2015.

That fact lends an air of surrealism to Seaspan's offer Monday: It's proposing to participate in a competition to build an interim supply ship for the navy that is necessary in part because new supply ships have not yet been built by Seaspan under the government's NSPS program.

In an interview with CBC News, the president of Seaspan's Vancouver Shipyards, Brian Carter, said the delay ordered by the new government gives it an opportunity to try to win the interim supply ship business, too.

"We said great maybe there is an opportunity for competition here," Carter said. "Why wouldn't you make sure that the taxpayers of Canada are getting the value they deserve. Generally, that is done through a competition."

Carter said a competition could be completed in just a couple of months.

Delay foreseen

However, CBC News reported last week the cabinet committee that delayed the Davie deal had been warned a competition would likely delay the delivery by an additional 14 to 18 months.That would mean an interim supply ship would only arrive in 2019, about a year before the final supply ships are scheduled to arrive, and would, "render the services unnecessary."

There would also be an economic consequence. The letter of intent signed by the government offers Davie up to $89-million if the finalized contract is not signed by Nov. 30.

CBC News has also learned the previous Conservative government considered awarding an interim contract to Davie and to Irving, which has made its own proposal, but not to Seapan.

Irving offered a "dandy ship," a source familiar with the Conservative cabinet discussion said, but in the end "there really was only one option — Davie."

In its own letter to the government last week, co-CEO James Irving said that decision was done "without transparency and without a full evaluation of cost, delivery schedule, capability, and risk associated with the [Irving] proposal."

In an interview with CBC News, Kevin McCoy, the president of Irving Shipbuilding Inc., backed off that complaint, saying instead it was impossible for the company to determine whether the government's process was merit-based because it had not been shown the results.

"With a new government coming in, we thought it was good opportunity to flag that to the new government, and the new government can decide what to do with it."

About the Author

James Cudmore covered politics and military affairs for CBC News until Jan. 8, 2016.

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