Shipbuilding association calls Davie contract for navy supply ship 'fair'

The association representing Canada’s shipbuilders has taken the extraordinary step of chastising a key Canadian shipyard for allegedly overstating its case in a growing spat over a government ship contract.

$700M contract for a navy supply ship was to be finalized this month, but is now on hold

Chantier Davie has been told its $700-million contract with National Defence is on hold. (Jacques Boissinot/Canadian Press)

The industry group that represents Canada's shipbuilders has taken the extraordinary step of chastising a key Canadian shipyard for allegedly overstating its case in a growing spat over a government ship contract.

The Shipbuilding Association of Canada appeared Monday to rebuke Irving Shipbuilding Inc., saying it is surprised and disappointed over Irving's intervention in the government plan to have Chantier Davie build and operate an interim supply ship for Canada's navy.

The roughly $700-million contract with the Lévis, Que., shipbuilder has been finalized and was due for cabinet approval by the end of the month.

But as CBC News reported last week, a federal cabinet committee stalled the unconventional deal, postponing any decision for 60 days. That followed an intervention from one of Davie's fiercest competitors, Irving Shipbuilding, which operates the Halifax Shipyard.

James D. Irving, the firm's co-chief executive officer, accused the government of pursuing a sole-source contract with Davie, despite an offer from Irving and partner Maersk Lines to provide a different and potentially lower-cost option.

"This was done on a non-competitive basis without transparency and without a full evaluation of cost, delivery schedule, capability and risk associated with the Irving-Maersk proposal," the letter dated Nov. 17 alleges.

The cabinet committee met just two days later and decided to push back the Davie deal, at a potential cost to taxpayers of some $89 million.

That letter became controversial, and Irving eventually felt it necessary to offer an explanation. On Saturday it sent out a press release highlighting some of the details and capabilities of its own interim supply ship offer.

Canadian Defence Minister Harjit Singh Sajjan (left) and Minister of Public Services and Procurement Judy Foote (right) are among the members of cabinet contacted by Irving Shipbuilding about the navy supply ship contract. (Canadian Press)

"Our request has and continues to be for an open, merit-based evaluation of all proposals to ensure the best solution for the navy and best value to Canadians," reads the statement from Kevin McCoy, president of Irving Shipbuilding.

But it's that clarification that seems to have irked the Shipbuilding Association of Canada, whose president Peter Cairns in a press release Monday sought to "set the record straight."

Cairns highlighted the process that led to the government signing a letter of intent to go ahead with the deal.

"Following an extensive consultation period lasting for six months and subsequent evaluations by those departments, Canada selected the Davie proposal on its merits ahead of other domestic and international bids."

Awarded 'fairly and due process'

In short, Cairns suggested Irving had its shot and lost.

"This was a fair process open to all industry, which followed common sense and resulted in one of the most successful shipbuilding procurements for decades. It demonstrated that Canada is indeed able to fast-track programs when vital for national security."

Cairns urged the government to follow through on the Davie deal, which it said had  "been awarded fairly and with due process."

"The association strongly recommends that the government … not delay the signing of the contract for this urgent operational requirement."

Not surprisingly, Irving Shipbuilding Inc. disagrees with the assessment. 

In an interview with CBC News in Nova Scotia, McCoy said Davie's proposal was risky. 

"We looked at a container ship which is proposed by another shipyard [Davie] and we immediately dismissed it as the wrong ship," McCoy said. "It requires too much conversion, it's too risky, too expensive, and it doesn't provide the large interior payload that could be easily accessed by trucks in a humanitarian emergency such as Haiti, where I served and saw first-hand," he said.

Navy needs a supply ship

The navy's own ability to replenish itself at sea was lost when the 45-year old HMCS Protecteur was written off following a massive 11-hour blaze in 2014 that threatened the lives of 279 crew members and effectively destroyed the ship. Protecteur's sister ship was also retired early after it was found to be too rusty to take to sea.

The government already had plans to build replacement supply ships at the Vancouver Shipyards facility in B.C., but the first of those ships is not due to arrive until 2020 at the earliest.

Chantier Davie came up with the idea of converting an existing civilian cargo ship into a military supply vessel. It came up with a partner to provide the crew and charter the vessel exclusively to the navy.

That $700-million, seven-year deal negotiated by the former Conservative government is now pending cabinet approval.

The government signed the letter of intent in the summer, which allowed Davie to start spending money to fulfil its plan. Davie has hired staff and bought the ship it plans to convert.

It took more than 30 hours last week for the new Liberal government to explain why the Davie deal was postponed.

An official with the Public Services and Procurement Department sent out a statement late Friday:

"Given the importance of this procurement and the fact the Government just took office two weeks ago, the government, working with Chantier Davie Inc., will take the time required to exercise due diligence," Annie Trepanier wrote. "A decision, informed by evidence and analysis of information, will be made as quickly as possible."

It's rumoured the new government is concerned about a change to contracting regulations that was authorized by the Conservative government to allow the Davie deal to go through without the formality of a government bid process.

Davie was frozen out of the government's $39-billion national shipbuilding procurement strategy. Irving, by contrast, was selected to build the so-called combat package of vessels for the navy, including new Arctic patrol ships, and, eventually, new warships to replace Canada's Halifax-class frigates.

There is frustration in some corners of the industry that Irving does not appear to be happy with the roughly $25 billion in business it's been selected for.

The possibility of Davie losing the deal also angered Quebec Premier Philippe Couillard, who told the CBC last week the deal should not be cancelled.

"Let me say that the ship is in the yard. Two hundred and fifty workers are there. Four hundred more are going to be hired in a few days. It's a $700-million investment," he said. "We will simply not accept that there is any change in the plan."


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