BAE Type-26 GCS to be operational in 2027; Still considered a top contender for CSC Fleet

By: David Pugliese, National Post 

One of the top contenders in Canada’s new frigate program – a ship now being built for the United Kingdom – won’t be operational for the Royal Navy until 2027.

BAE’s Type 26 frigate has been ordered by the United Kingdom and the cutting of steel started last year.

But the United Kingdom’s defence procurement minister Guto Bebb has told parliamentarians that the first of those frigates won’t be delivered until 2025. Because of testing it won’t become operational until 2027, the minister added.

Artists Rendition of the BAE Type-26 Global Combat Frigate. 

The Type 26 design has been submitted to Canada for its Canadian Surface Combatant program and is one of three contenders. Construction on the Canadian frigate program to start in the early 2020s.

That raises the possibility, say industry insiders, that Canada could be the first nation to acquire the Type 26 and put it to sea.

Being the first to deploy a new class of warships, however, comes with associated issues of working through the initial problems of new vessels.

That, however, is what the Canadian government had hoped to avoid with its CSC program. It originally stated that only mature ships or proven designs would be considered.

But the Liberal government inexplicably retreated on that stipulation and allowed the Type 26 design to be entered even though the vessel had not been built yet.

That, in turn, sparked a belief in some quarters of industry that the fix is in for BAE’s Type 26. The federal government has denied that.

Lockheed Martin Canada is leading the consortium that has proposed the Type 26. A company spokesperson said the progress of the British program will not have an impact on CSC.

“Our CSC bid meets or exceeds all requirements and this does not impact our bid in any manner,” the spokesperson noted in an email to Defence Watch. “Our CSC bid does not rely upon the T26 becoming operational before 2027.”

Some industry officials have also suggested that the 2027 date won’t be an issue because they expect the CSC to fall significantly schedule. By the time CSC gets really underway, the Type 26 will be ready.

The Canadian Surface Combatant program will cost between $55 billion and $60 billion. Fifteen ships will be eventually built. Three consortiums have bid on the program.

A contract for the CSC is expected to be awarded by the end of this year, said Pat Finn, assistant deputy minister for materiel at the Department of National Defence.

About half of the cost of the surface combatant price-tag is for systems and equipment that will go on the 15 ships, according to federal documents obtained by Postmedia through the Access the 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.

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.

Warship Project At Risk as Shipbuilders Threaten to Withdraw from Bidding

By: David Pugliese, The National Post 

Canada’s multibillion-dollar project to buy a replacement for its frigates is so poorly structured that Italian shipbuilder Fincantieri, one of the world’s largest shipbuilders, has warned the Liberal government it won’t bid unless changes are made.

A number of other ship designers are also considering backing out because of the problems plaguing the project to spend more than $26 billion on a new fleet of Canadian Surface Combatants.

Italian shipbuilder Fincantieri sent Procurement Minister Judy Foote a detailed outline of why the acquisition process is in trouble, warning that, “Canada is exposed to unnecessary cost uncertainty,” according to the Oct. 24, 2016, letter obtained by Postmedia.

There is also a belief in industry circles that the federal government is favouring a design from the British firm BAE, which is offering the Royal Canadian Navy the Type 26 warship.

Foote had previously said only proven warship designs would be considered to reduce the risk of problems. But the Liberal government retreated on that and will now accept a Type 26 bid, even though the vessel has not been built yet, which is causing other shipbuilders to reconsider their bids.

Preparing a bid for the Canadian Surface Combatant or CSC will cost companies between $10 million and $20 million. If they see their chances of winning a contract as slim, firms could decide not to enter the competition, further narrowing the choices for the Liberals on a new vessel for the navy.

The government announced Oct. 27, 2016, that Irving Shipbuilding, its prime contractor, had issued a request for bids from companies on the design of the new ships.

The firms have until April 27 to provide those bids, which must not only include the design but details of teaming arrangements with Canadian firms.

Irving Shipbuilding Inc.A keel unit of an Arctic Patrol Ship is lowered into place at Irving Shipbuilding’s Halifax Shipyard in an undated photo.

In its letter to Foote, Fincantieri pointed out that the current structure of the procurement limits the role of the warship designers to simply providing engineering and design services to Irving, which will then build the vessels. In return for that small role, the companies are being asked to provide valuable intellectual property to their designs, access to their established supply chains and transfer technology to Irving and Canada.

In addition, the warship designers have to provide a warranty on the integration of technology into their designs, even though they are not responsible for buying that equipment.

The project as it is structured now leaves little incentive for warship designers and builders such as Fincantieri, which has designed and constructed ships for the navies of Italy, the United Arab Emirates, India, Iraq, Malta and Malaysia.

“If the current proposed procurement approach is retained, then it will be very difficult for Fincantieri to obtain approval to bid from its board,” the company warned Foote.

Fincantieri declined to comment on the letter.

Fincantieri instead proposed to Foote that a fixed-price competition be held, with the winning shipyard building the first three warships, complete with Canadian systems, and delivering those to Irving. The ships would then be run through evaluations and after any technical issues were worked out, Irving would begin to build the remaining 12 vessels.

That way work on the new ships could get underway faster, the vessels will be fully tested, and the risk to the Canadian taxpayer significantly reduced. The “winning team can be held accountable for the overall performance of the finished ship,” Fincantieri added.

“Companies are also given incentive to make long-term investment in Canada because they can expect to get a fair return from the greater value of their work responsibility,” Foote was told.

The minister responded by suggesting Fincantieri approach Irving with its concerns. Foote’s response further worried the Italian shipbuilder as it had believed the Canadian government and its ministers were ultimately responsible for the program and the spending of billions of tax dollars.

Related
Irving Shipbuilding’s $26-billion warship procurement deal under review, senior source says
Irving accused of conflict as it teams with company bidding on Canada’s multibillion-dollar warship program

Foote’s spokeswoman Annie Trépanier did not comment specifically on Fincantieri’s letter but repeated previous government comments about how industry was consulted extensively and those shaped the final documentation used to solicit bids. An independent fairness monitor is also involved in the process, she added.

Irving spokesman Sean Lewis said the contract for the CSC design will be awarded to an existing warship design that best fits the requirements of Canada’s navy. “I can assure you that the procurement process is being conducted in a way that ensures that all bidders are treated equally, with no unfair advantage given to any individual bidder, and under observation of an independent fairness monitor,” he added.

The surface combatants will be the backbone of the Royal Canadian Navy’s future fleet. The project has seen repeated delays, with the navy at one time expecting the ships by 2015. The first vessel is now planned for sometime in the early 2020s.

Initial cost estimates for the project were set at $26 billion. But that could potentially rise to more than $40 billion, depending on the number of ships constructed.

Irving Accused of Conflict of Interest with BAE in Future RCN Warship Contract

By: Lee Berthiaume, The Canadian Press

OTTAWA — The multibillion-dollar effort to replace the navy's warship fleet is being buffeted by concerns about a potential conflict of interest involving the Halifax company that is leading the project.

Canada's Irving Shipbuilding and British shipbuilder BAE Systems recently announced they have paired together to bid on a $5-billion maintenance and support contract for the navy's new Arctic patrol vessels and resupply ships.

But BAE is also expected to enter its Type 26 frigate into a competition being run by Irving, in conjunction with the Defence Department, to select the warship design to replace the navy's 12 frigates and three destroyers.

Irving will ultimately build the vessels.

Irving and the federal government say measures have been taken to ensure full transparency and fairness around the warship project, which previous estimates have pegged at as much as $40 billion.

The warship project "is being conducted in such a way that ensures that all bidders are treated equally, with no unfair advantage given to any individual bidder," Irving spokesman Sean Lewis said in an email.

Part of that has involved Irving and BAE putting safeguards in place to avoid any conflict, Lewis said, including the creation of separate teams for the maintenance contract and warship design competitions.

"All members of both teams, as well as senior management at both Irving Shipbuilding and BAE, have been thoroughly briefed on these measures and the government of Canada has been made aware," Lewis said.

Defence Minister Harjit Sajjan said Tuesday that the government has worked hard to make sure the process for selecting the next ship design is open, transparent and "done in a manner that is fair for all."

Some of BAE's competitors had already been grumbling about the Type 26 being allowed to compete, given that the ship has never actually been constructed, as well as Irving's role in selecting a design.

The announced partnership between BAE and Irving for the maintenance contract ratcheted those complaints to higher levels on Tuesday.

Several industry representatives, speaking on the sidelines of an aerospace conference in Ottawa, worried Irving would give BAE and the Type 26 preferential treatment during the design competition because of their existing relationship.

"This is an outright conflict," said one industry source, who like the others did not want to be identified because of a clause in the design competition restricting what companies can say publicly.

The warship project, known in defence circles as the Canadian Surface Combatant or CSC, is the single largest military procurement in Canadian history.

It forms the backbone of the federal government's national shipbuilding strategy, which includes new Arctic patrol vessels and resupply ships for the navy and a variety of Canadian Coast Guard vessels.

Previous estimates have put the budget for CSC at between $26 billion and $40 billion for 15 ships.

But the Liberal government has since said it will not discuss cost or how many ships it plans to buy until more information is available.

Defence officials have said they are trying to shave off the amount of time it will take to get the warships in the water, to both save time and ensure the navy has what it needs to operate.

The first CSC is expected to be ready in 2026, though officials would like to cut that back to 2024.

Any legal challenge to the process could scuttle those efforts, costing taxpayers millions of dollars and leaving the navy short of ships.

The British government announced earlier this month that construction on the first of eight Type 26s would begin next summer after years of delays.