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.

Feds looking to extend CF-18 Fleet until at least 2026

By: Lee Berthiaume, The Canadian Press

OTTAWA — The Royal Canadian Air Force may have to keep its aging CF-18s airborne even longer than already expected after industry sources warned Wednesday that the Trudeau government is planning to push back the delivery date for its new fleet of fighters.

Word of the likely delay comes with the government moving ahead with the purchase of used fighter jets from Australia as a temporary stopgap alongside its existing CF-18s, rather than the original plan of buying brand new Super Hornets from U.S. aerospace giant Boeing Co.

But the government is also wrestling with how best to sell Canadians on the idea of used jets, mindful of the disaster that followed the purchase of second-hand British submarines in the 1990s.

The Liberal government said last year that it planned to start receiving new fighter jets in about five years, or around 2021, at which point the phase-out of CF-18s was scheduled to begin.

But several sources told The Canadian Press on Wednesday that defence officials now don’t expect the first of 88 new fighters to be delivered for another eight years, putting the new time frame around 2026.


The sources, speaking on condition of anonymity because of the sensitivity of the issue, would not speculate on why the delivery schedule was being changed.

But the decision could have major financial implications if it means having to sink even more money into the CF-18s to keep them in service longer than planned.

National Defence had already planned to spend up to $500 million to keep its 76 CF-18s flying to 2025, but previous estimates have said extending past that date would be very expensive.

Some are also wondering whether the Liberals, who promised to launch a formal fighter-jet competition to replace the CF-18s before the 2019 election, now plan to hold off until after Canadians go to the polls.

Retired military officers and defence experts alike say a competition, which latest estimates say would be worth up to $19 billion, could be launched right away, and urged the Liberals to take that step, rather than waiting several more years.

“If they had launched a competition last year, we could already be getting on with it,” said Alan Williams, who previously served as head of military procurement at the Department of National Defence.

“Even today, it could be started.”

Defence Minister Harjit Sajjan would not comment Wednesday on when the competition would be launched, saying only that it would be announced “at the appropriate time.”

In the meantime, government and industry sources say the Liberals have settled on buying Australia’s used jets from Australia. The original plan to buy 18 Super Hornets, at an estimated cost of $6 billion, was scuttled after Boeing triggered a bitter trade dispute with Montreal-based rival Bombardier earlier this year.

The Australian plan does have its advantages. The aircraft will almost certainly be cheaper than the Super Hornets, and easier to incorporate into Canada’s existing fleet, since they are nearly identical to the CF-18, and won’t require new training or infrastructure.

But the Australian jets are 30 years old — the same vintage as the CF-18s — and sources say the government is concerned about resurrecting memories of the four second-hand subs Canada bought from the U.K. One of those vessels, HMCS Chicoutimi, caught fire while crossing the Atlantic in 2004, killing a naval officer and injuring nine other sailors.

Billions of dollars have also been sunk into the vessels over the years to address a multitude of technical problems, which has kept them docked more often than they have been at sea.

During question period Wednesday, Conservative MP Tony Clement called on the Liberals to abandon the “rusted out” Australian “bucket of bolts” and hold an immediate competition to replace the CF-18s.

The Australian planes come with another built-in advantage, said defence analyst David Perry of the Canadian Global Affairs Institute: Canada has long since learned how to keep them in service.

“We’ve proven to be very good, out of necessity, at keeping them flying for quite some period of time, whereas the Upholder class of submarines were totally unique. Canada hadn’t operated them,” Perry said.

“But at the end of the day, when you’re buying heavily used, 30-year-old aircraft, you’re buying heavily used 30-year-old aircraft.”