Federal Government Rejects FREMM Frigate Proposal That Could Save $30B

By: David Pugliese, National Post

Liberals reject warship proposal that companies said would save taxpayers as much as $32B
Industry sources alleged the Canadian competition is skewed to favour a bid by Lockheed Martin Canada and the British firm BAE which would see Canada buying the Type 26 frigate. 

The 3rd FREMM "Languedoc" sails during the acceptation ceremony by the OCCAR on March 16, 2016 in Toulon.BORIS HORVAT/AFP/Getty Images.

The Liberal government has rejected a European consortium’s offer to provide Canada with a fleet of new warships, which industry officials said could have saved Canadian taxpayers as much as $32 billion.

Postmedia reported last week that the French and Italian governments made the Canadian government a proposal on behalf of their shipbuilders, Fincantieri of Italy and Naval Group of France, offering Canada 15 of the consortium’s FREMM frigates at a fixed price of roughly $30 billion. The offer came in lieu of a bid from the consortium to win the design for the $62-billion Canadian Surface Combatant program, intended to provide the Canadian navy with the core of its future surface combat fleet.


To be clear, any proposals submitted outside of the established competitive process will not be considered

But the Canadian government announced Tuesday it was rejecting the pitch. “The submission of an unsolicited proposal at the final hour undermines the fair and competitive nature of this procurement suggesting a sole source contracting arrangement,” Public Services and Procurement Canada said in a statement. “Acceptance of such a proposal would break faith with the bidders who invested time and effort to participate in the competitive process, put at risk the Government’s ability to properly equip the Royal Canadian Navy and would establish a harmful precedent for future competitive procurements.

“To be clear, any proposals submitted outside of the established competitive process will not be considered,” the statement said.

The Fincantieri-Naval Group’s gambit was always seen as risky, as federal bureaucrats were expected to fight the proposal. But sources close to the European companies said they felt they didn’t have anything to lose. They alleged the Canadian competition is skewed to favour a bid by Lockheed Martin Canada and the British firm BAE which would see Canada buying the Type 26 frigate BAE is building for Britain’s navy.

A photo shows the FREMM Aquitaine multipurpose frigate on May 11, 2017 in Brest harbour, western France. FRED TANNEAU/AFP/Getty Images

The Canadian government had originally asked for only bids featuring proven ship designs. It changed those parameters last year to allow a bid from BAE, though the Type 26 was at the time still on the drawing board.

Both Public Services and Procurement Canada and Halifax’s Irving Shipbuilding, which the government has named prime contractor on the CSC project, have denied allegations of favoritism.

Industry sources, however, told Postmedia that two other European shipbuilders also decided against submitting bids on the Canadian program because of concerns over the fairness of the process.

PSPC has declined to say how many bids were received for the CSC project by the Nov. 30 deadline. Besides the Lockheed-BAE group, only two other companies have publicly acknowledged bidding.

Fincantieri and Naval Group had hoped their offer might sway the Liberals, as it eliminated much of the risk in such a large procurement by offering a proven warship design at a fixed price. The consortium had proposed building the ships at Irving’s Halifax yards, as well as using Canadian technology on board the ships and transferring some technology to Canadian firms so they could be involved in future sales of FREMM vessels on the international market.

But the Canadian government dismissed the consortium’s claim of cost savings. “With respect to suggestions that significant savings could be realized through this alternative process, this is far from evident,” PSPC’s statement said.

Officials from Fincantieri and Naval Group were not available for comment Tuesday.

The Italian, French, Moroccan and Egyptian navies currently operate FREMM frigates; Australia is considering buying them for its new fleet, and they are seen as serious contenders in the competition to outfit the U.S. Navy with modern frigates.

The cost of the CSC program has steadily increased. Originally set at $26 billion, the Department of National Defence later estimated its price tag at $40 billion. Then in June, Parliamentary budget officer Jean-Denis Fréchette estimated its cost at $61.82 billion. He also warned that inflation will cost taxpayers an extra $3 billion for every year beyond 2018 the awarding of the contract is delayed.