Shipbuilding contest moves in rough political waters

The largest procurement process in Canadian history — $35 billion in shipbuilding contracts — features regions competing hard for jobs.

Minister wants lobbyists out, as premiers head to Ottawa to make their case

Minister of Public Works Rona Ambrose tells the Canadian Association of Defence and Security Industries in Ottawa last week that the government intends to keep lobbyists out of the shipbuilding procurement process. (Fred Chartrand/Canadian Press)

Some of the hottest political action in Ottawa this summer will happen over massive contracts to outfit the Canadian navy and Coast Guard for years to come.

At stake are thousands of jobs, but as provincial premiers rotate into Ottawa to make the case for their regions, industry lobbyists have been told to stay away.

The Canadian military is buying more than 30 new ships for the navy and the coast guard, including frigates, supply ships, patrol boats and icebreakers.

An estimated $35 billion worth of contracts are up for grabs as part of a strategy to cover Canada's needs for the next three decades. Two shipyards will be picked from among four competing for the work.

The deadline for proposals is July 7, and the selection process could take another two months after that. The entire procurement process could take up to two years.

One winner will be awarded the $25-billion combat vessel construction deal.

Another bidder will be chosen to build the non-combat ships, which account for the remaining $8 billion of contracts initially. That order could grow to include more Coast Guard replacements.

Over the short term, both deals would result in about the same investment for a winning shipyard.

Losing shipyards may bid on an estimated $2 billion in construction work for smaller non-combat ships.

The huge size of the contracts has regions salivating over the potential economic spinoffs, including jobs.

Premiers make pitch

Nova Scotia Premier Darrell Dexter travelled to Ottawa on May 30 to make the case for Halifax Shipyards, owned by the Saint John, N.B.-based Irving interests. He said the yard builds "the best ships in the world" and is the only contenders that is fully Canadian owned.

"For Nova Scotia it would be like winning the Olympics every year for 30 years," Dexter said.

Federal New Democratic MPs from the Halifax area, as well as party leader Jack Layton, have expressed support for the Irving bid, although during the election Layton also called for "fair distribution of work" across Canada for the shipbuilding industry.

British Columbia's Liberal government was accused of being late to the lobbying game for its entry, Vancouver-based Seaspan, which owns Victoria Shipyards, Vancouver Shipyards and the Vancouver Drydock. But last Thursday, Premier Christy Clark announced she's headed to Ottawa this month to make a "big splash" on behalf of the B.C. shipyard, in which a Montana businessman has a significant stake.

A third competitor, Seaway Marine and Industrial Inc., is based in St. Catharines, Ont. The facility, closed in 2006 as the former Port Welland Dry Docks, may appear to be an unlikely candidate — ocean-going ships cannot sail through some narrow parts of the St. Lawrence Seaway — but the current repair yard recently completed a $2.7-million federal contract to repair the Coast Guard vessel Griffon. Local media have reported Conservative MP Rick Dykstra has been working hard on the bid from Seaway, whose investors come from several countries.

And then there's the near-bankrupt MIL-Davie Yards Inc. in Lévis, Que. An Italian consortium is restructuring the now-idle facility. 

Only solvent companies can bid on government contracts and if Davie is not able to get its finances together by the July deadline, the Quebec bid will be shut out. On the other hand, a winning bid would attract new investment and potentially restore a historically significant shipyard.

Quebec's Liberal government has offered support for a revitalized Davie Shipyards.

A Newfoundland and Labrador-based bid, Kiewit Offshore Services, withdrew in April.

Lobbyists told to stay away

As the East and West Coast arm-twisting continues, strategic persuasion by registered lobbyists should have effectively stopped. At least if Public Works Minister Rona Ambrose has her way.

Last week, Ambrose raised more than a few eyebrows at the CANSEC defence and security trade show in Ottawa when she used her keynote speech to tell defence industry insiders to butt out of the shipbuilding game.

The large gathering of defence industry insiders, military officials, business leaders — and lobbyists — were told the government doesn’t want lobbyists to play a role in Canada’s new national shipbuilding procurement strategy.

"It was our intention at the outset to ensure that the … competition would be run through a process that is completely arm’s length of politics," Ambrose said.

The government has already consulted industry association representatives and chief executives of large companies on the future of Canada’s shipbuilding industry, she said.

"Our government’s commitment to ensuring fairness and openness and transparency is clear. Whether shipyards are successful or not will depend 100 per cent on the merits of their proposals."

Ambrose went into great detail on how the government plans to keep the sometimes messy business of military procurement on the straight and narrow.

Public Works heads a national shipbuilding procurement strategy secretariat, which is "the workhorse of the governance structure looking after the day-to-day running of the process," she said. The committee includes deputy ministers from Defence, Fisheries and Oceans and Industry Canada.

Nova Scotia's Dexter said Friday he was skeptical lobbyists would stay out of the game.

"There's a lot of people who aren't going to count themselves out."

With files from James Cudmore, Canadian Press