Monday, January 9, 2017

Liberals select Thales for $5.2-billion AOPS Maintenance Program

By: David Pugliese, The Ottawa Citizen 

A subsidiary of French defence giant Thales has been selected for a $5-billion contract to maintain Canada’s new Arctic patrol vessels and supply ships, but according to documents obtained by the Ottawa Citizen, the Canadian government had earlier been warned by some officials at the Department of National Defence that its strategy of having one firm do maintenance for both fleets could cost taxpayers more money in the long run.

Pierre-Alain Bujold, a spokesman for Public Services and Procurement Canada, said Friday that all the bids received for the maintenance contract have been evaluated and the government will now enter into negotiations with the highest-ranked bidder. Despite the Liberal government’s vow of openness and transparency, the department declined to name the winning bid, citing reasons of commercial confidentiality.

But multiple industry sources say Thales Canada and was told in late December it had won the $5.2-billion project.

The deal would see the firm provide in-service support for an initial period of eight years, with options to extend services up to 35 years. Bujold said the actual contract is expected to be awarded in the fall of 2017. “If the parties cannot reach an agreement on the financial aspects of the contract within an allocated 45 calendar days, the GoC will invite the next highest ranked bidder to enter into negotiation,” he added.

The first Arctic Offshore Patrol Ship is being built by Irving on the east coast and is expected in 2018. Construction has yet to start on the two new Joint Support Ships. The first of those supply ships, to be built by Seaspan in Vancouver, is expected in 2021.

Thales Canada did not respond to requests for comment.

The Canadian government announced in July it was seeking bids from companies to repair and maintain the two new fleets over a 35-year period.

But some Department of National Defence officials warned the government years ago that selecting one company for a single in-service support (ISS) contract covering two types of ships could give one firm too much control and end up being more costly. “A single ISS provider may assume a ‘take it or leave it’ attitude at the time of contract option renewal, forcing prices up,” warned an April 2012 DND briefing note for then-deputy minister Robert Fonberg.

A dispute with the contractor could also force the Royal Canadian Navy to resort to conducting maintenance and support for the ships on a piecemeal basis, a development that would affect its operations, added the briefing obtained by the Citizen.

DND also warned that not all companies would be happy with such a strategy as it would take a significant amount of business out of competition for a long time. Other DND officials, however, argued that the single contract strategy would work and any risks could be handled by increasing the level of oversight on the deal.

Last year, the government said the competition to pick one firm to provide in-service support, including refit, repair and maintenance and training for the two fleets, would benefit Canadian industry and the public. “By combining the Arctic Offshore Patrol Ships and Joint Support Ships In-Service Support into one contract, we ensure the effective maintenance and support of these fleets over their operational lives,” Judy Foote, the Minister of Public Services and Procurement, said at the time.

The federal government also noted, “that combining the contracts for the AOPS and JSS In-Service Support under a single contractor will benefit industry by increasing workforce stability and benefit Canadians by reducing costs through economies of scale.”

Industry sources say there is no need for the intense secrecy about Thales being the top bidder since the news has circulated over the last couple of weeks among various companies. They warn that there is a growing pattern of secrecy over defence purchases at Public Services and Procurement Canada.

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