Bids for Future RCN Warships Don't Meet Many of the Requirements

By: David Pugliese, The National Post 

Canada’s quest for a new fleet of warships is off to a rocky start with all bidders failing to meet some of the federal government’s requirements.

Procurement officials are now trying to regroup on the $60-billion project and figure out ways that bidders might be able to change their proposals to make them acceptable, a number of defence industry executives pointed out.

The problems centre around technical issues. Some are minor but in other cases there is a view among defence industry officials that Canada is asking for too much in some areas such as radar, which may be causing problems with meeting requirements.

Public Services and Procurement Canada spokeswoman Michèle LaRose said the bids received for the Canadian Surface Combatant project have not been disqualified. Three bids have been received. The federal government and Irving Shipbuilding are still evaluating the proposals, she added. LaRose pointed out that the evaluation is at the second stage in the process.

Government officials say that involves what is known as “the cure process” in which bidders will be given details of how their proposals have failed to meet the stated criteria. They will then be given only one opportunity to fix issues with their bids.

HMCS St. John’s, one of Canada’s Halifax-class frigates, undergoes a mid-life refit at the Irving Shipbuilding facility in Halifax on Thursday, July 3, 2014. Andrew Vaughan/Canadian Press

If they are still considered “non-compliant” after the cure period they “will be eliminated from the competition,” according to the federal government.

Technical specifications are now being evaluated by the government. Later this year, the companies will provide the financial information related to their bids.

Warship builders submitted their bids on Nov. 30. A winning bid is expected to be selected sometime this year.

Irving Shipbuilding will begin construction of the first ship in the early 2020s and delivery of the first vessel is expected in the mid-2020s, according to the federal government.

But the project has been plagued with delays and controversy.

Approximately one-half of the CSC build cost is comprised of labour in the (Irving’s) Halifax yard and materials

The final cost of the ships is still unknown. In 2008 the government estimated the total cost of the project to be about $26 billion.

But in 2015 navy commander Vice Admiral Mark Norman voiced concern that taxpayers may not have been given all relevant information, and publicly predicted the cost for the ships alone would be around $30 billion.

Cost estimates for the project are now between $55 billion and $60 billion.

About half of the cost is for systems and equipment that will go on the 15 ships, according to federal documents obtained by Postmedia through the Access to Information law. “Approximately one-half of the CSC build cost is comprised of labour in the (Irving’s) Halifax yard and materials,” the documents added.

HMCS Iroquois arrives in Halifax on Oct. 23, 2008 after a six-month deployment to the Persian Gulf and Arabian Sea. Andrew Vaughan/Canadian Press

Last year, Jean-Denis Fréchette, the parliamentary budget officer, estimated the CSC program would cost $61.82 billion. He also warned that every year the awarding of the contract is delayed beyond 2018, taxpayers will spend an extra $3 billion because of inflation.

The surface combatant will be the backbone of the future Royal Canadian Navy.

In November in a surprise twist a French-Italian consortium declined to formally submit a bid and instead offered Canada a fleet of vessels at half the price.

Officials with Fincantieri of Italy and Naval Group of France said they don’t believe the procurement process as it is currently designed will be successful.

Instead they provided the Canadian government with a direct proposal that Irving Shipbuilding on the east coast construct 15 ships based on the consortium’s FREMM frigate design, which is proven and is currently in operation with the French and Italian navies. They are guaranteeing the cost of the ships at a fixed price of $30 billion.

The deal would have also focused on using Canadian technology on board the ships and included technology transfer to Canadian firms, so they could be involved in future sales of the FREMM vessels on the international market.

FREMM ships are operated by the Italian, French, Moroccan and Egyptian navies.

Under that plan, Irving could start building the warships almost immediately.

The Liberal government, however, rejected the deal.