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Sunday, November 22, 2015

Project Resolve: Navy's iAOR on HOLD

According to CBC's James Cudmore - the Liberal government has chosen to delay approval for the final contract to Davie Shipbuilding for the Asterix boxship to be fully converted into an Interim Auxiliary Oil Replenishment Vessel.

According to the CBC, the potential 7-year lease is estimated at $700 million, where the RCN will be given the option to purchase the Asterix at the en of the lease agreemnt.

The Liberal Cabinet commitee decided to delay the decision on whether or not top proceed with with the Project - a delay of possibly 2 months - all while Davie is already doing work.

If the government does not sign the final contract before November 30th, they will owe Davie $89 Million - as it was written into the original offer of intent signed by the Conservative Government.

Davie has already purchased the Asterix and had it delivered to its shipyard in Levis, Quebec earlier this year, and has already begun work.

The big question is whether or not the delay will scuttle the project - and leave the RCN without AOR capabilities until beyond 2021.

The Shipbuilding Association of Canada announced that they are surprised and disappointed in the delay being caused by the Government - saying the delay will only cause more cost to Canadians (as per the $89 million owed to Davie on December 1st if the final contract is not signed, and the potential legal ramifications if the government withdraws from the project - Davie has planned to invest close to $400 million.

According to Davie  they are still moving forward. Project Revolve released this statement:

"The[initial] agreement enabled Davie to commence the build program while the final details of a services agreement (relating to when the vessel enters service following the build) were being concluded and several independent auditors were engaged to assist the Government of Canada with its due diligence.

"We have now agreed all terms and conditions, all audits have been successfully completed and we expect the services contract to be signed before the end of this month.

"In the meantime, work continues onboard m/v Asterix"

CBC sources indicate that Irving Shipyards is to blame for the delay - sending letters to the Liberal Government - asking it to reconsider their initial options for iAORs for the RCN.

There are also allegations from different high-level sources in those same corners that Irving Shipbuilding Inc., a longtime competitor of Davie, meddled in the decision by sending letters to several cabinet ministers about the deal, an event that in the words of one defence source "tipped over the apple cart."

Davie, based in LĂ©vis, Que., has long done government work, but was frozen out of the government's $39-billion National Shipbuilding Procurement Strategy. Irving was that strategy's key beneficiary, winning the lion's share of the work available. The lesser portion of the work, the so-called non-combat package, was awarded to Seaspan in Vancouver.

New supply ships are part of that deal, but none are expected to be operational until 2020 at the earliest, leaving Canada with a significant gap in capability.
Liberal ministers were warned Thursday that without guaranteed access to a supply ship, Canada will have "dramatically diminished capabilities to defend Canada" and to go abroad in support of coalition operations, or to aid in natural disaster or support humanitarian missions, CBC News has also learned.

Davie created the idea of the interim supply ship deal in 2014 and pitched unsolicited to government.

Several sources say the idea was viewed with suspicion by bureaucrats inside the government's shipbuilding offices who worried the proposal would undermine or threaten the National Shipbuilding Procurement Strategy.

The Irving and Seaspan yards subsequently offered their own interim proposals, leading to the bizarre situation of NSPS shipyards offering to build an interim supply ship for Canada that was only necessary because the NSPS program had yet to deliver supply ships.

Whatever those yards offered, the Davie deal appeared to win the Conservative government's favour.
Irving letter to ministers

It's that decision that the Irving team complained about in its letter, obtained by CBC News, and addressed to new Defence Minister Harjit Sajjan and Minister of Public Services and Procurement Judy Foote. The letter was also sent to President of the Treasury Board Scott Brison and Finance Minister Bill Morneau.

In his letter dated Tuesday, 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 Maersk Lines to provide a 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.

Irving requested its proposal be evaluated once more, before the government signs off on the Davie deal.

Emails to several Irving staff went unanswered Thursday.

The Davie deal is, indeed, a sole-source arrangement as Irving complained. But cabinet was told Thursday the deal had won an exemption to the government's contracting regulations and that there was little risk it could be successfully challenged.

Davie has already bought the ship it is to convert and has brought it to its yard on the St. Lawrence River near Quebec City.

In a statement, Davie said it had an agreement with the government.

"All audits have been successfully completed and we expect the services contract to be signed before the end of this month."