CSC Fleet In Limbo as Trade Tribunal Investigates Alion Claims

By: Murray Brewster, CBC News 

The federal government's plan to award a group of companies led by Lockheed Martin Canada the contract to design and support the construction of the Navy's new frigates was dealt another setback late Tuesday by the Canadian International Trade Tribunal, CBC News has learned.

The agency said it intends to investigate a complaint by one of the other bidders, Alion Science and Technology Corp., and its subsidiary Alion Canada.

The tribunal ordered the Liberal government to suspend negotiations with Lockheed Martin, which was selected last month by Public Services and Procurement Canada as the preferred bidder on the $60 billion program.

An artist's rendering of the British Type 26 frigate, which Lockheed Martin submitted for consideration as the replacement for Canada's patrol frigates. (BAE Systems Inc./Lockheed Martin Canada)

"You are hereby ordered to postpone the award of any contract in connection with the above-mentioned procurement until the Canadian International Trade Tribunal determines the validity of the complaint," said a copy of the letter that was obtained late Tuesday by CBC News.

Alion asked the CITT last week to investigate the procurement deal, saying the preferred warship design will need substantial changes and that it doesn't meet the Navy's requirements as spelt out in the government tender.

Last week, the company asked the Federal Court in a separate filing for a judicial review of the long-awaited decision.

Three companies were in the running to design the next generation of warships to replace the navy's aging Halifax-class frigates. Navantia, a Spanish-based company, was the other bidder in the competition.

Alion proposed its De Zeven Provinciën Air Defence and Command (LCF) frigate, a Dutch-designed warship, for the Canadian competition. The ship is already in service in other countries.

No one from the trade tribunal, nor the federal government was immediately available for comment late Tuesday.

A program already behind schedule:

Experts had warned the trade challenge and the court case might delay the program, which is already behind schedule.

The design competition stretched for almost two years as public services officials and executives at the federal government's go-to shipyard for combat vessel construction, Irving Shipbuilding of Halifax, worked with bidders to ensure a fair competition and to avoid post-decision court fights.

Public Services and Procurement Canada declined to comment when the court challenge was launched last week. But a senior federal official, speaking on the background at the time, said the federal government has up to 20 days to respond in Federal Court.

The official — who was not authorized to speak on the record because of the sensitivity of the file — said there is flexibility built into the timeline and the government is optimistic it can meet its goal of an early 2019 contract signing.

The substance of the Alion complaint is that the Lockheed Martin Canada-led bid should have been disqualified from the outset because it allegedly doesn't meet the Navy's criteria in terms of speed and crew space.

The Liberal government said it wanted to go with a proven warship design, rather than starting from scratch because it would be faster and cheaper.

Alion Canada Sues Over Failed Canadian Surface Combatant Bid

By: Andrea Gunn, The Chronicle Herald
Alion Canada, one of the firms involved in the $60-billion dollar procurement of Canada’s new fleet of warships, has launched a Federal Court appeal to overturn a recent decision to select Lockheed Martin as the preferred bidder.

According to an application for judicial review filed in Ottawa on Friday, Alion Canada, a Nova Scotia-based wholly owned subsidiary of the U.S. parent company, is asking the court to prohibit the federal government and Irving Shipbuilding from entering into a contract with Lockheed Martin Canada on the grounds that Lockheed’s bid was non-compliant.

Last month, Public Services and Procurement Canada announced that after a lengthy, and sensitive competition, Lockheed Martin Canada was selected as the preferred bidder to design replacements for the navy’s frigate and destroyer fleets, beating out two other bids: Alion Canada, which offered up Dutch De Zeven Provinciën Class air defence and command frigate, and Navantia/SAAB’s design based on the F-105 anti-submarine frigate design for the Spanish navy.

But now Alion is alleging that the BAE Systems Type 26 Global Combat Ship design offered by Lockheed, which is currently also being constructed for the U.K. and Australian navies, is incapable of meeting three critical and mandatory requirements of the request for proposals that the firms crafted their bids around: two requirements concern the vessels’ speed, and one deals with the number of crew berths.

An artist's rendering of the Type 26 Global Combat Ship, Lockheed Martin's proposed design for Canada's $60-billion fleet of new warships. - BAE Systems Inc. / Lockheed Martin Canada

But now Alion is alleging that the BAE Systems Type 26 Global Combat Ship design offered by Lockheed, which is currently also being constructed for the U.K. and Australian navies, is incapable of meeting three critical and mandatory requirements of the request for proposals that the firms crafted their bids around: two requirements concern the vessels’ speed, and one deals with the number of crew berths.

“The RFP required (Public Services and Procurement Canada) and Irving to reject Lockheed’s bid because of its non-compliance,” the application reads.

Instead, the document says, the federal government and Halifax-based Irving Shipbuilding announced Lockheed as the preferred bidder and has entered into the conditions precedent period. This is the step immediately prior to awarding the definition subcontract between Irving, the prime contractor and shipbuilder, and Lockheed, the warship designer.

“(Alion) submitted a fully-compliant and conforming bid, at enormous expense, (and) expected that their bid, and the entire procurement process, would be administered in accordance with the terms and conditions in the RFP,” Alion says in the document.

“This was not the case and the applicants have been denied the fair treatment they were owed.”

As such, Alion is asking a federal court to set aside the decision to select Lockheed as the preferred bidder, and to prohibit the government from issuing the necessary approvals to award the Canadian Surface Combatant definition subcontract to Lockheed.

The respondents named in Alion’s application include Irving Shipbuilding, Lockheed Martin Canada, Navantia, SAAB Australia, and the Attorney General of Canada.

Alion’s legal actions come after months of rumblings and speculation from industry about bid-rigging: that the Type 26 was always the preferred ship of the Royal Canadian Navy, and that a number of amendments were made to the RFP to tailor it to Lockheed’s bid. These concerns centred around changes to the RFP that allowed Lockheed to offer a “paper” design that had not yet been in the water, even though Ottawa announced it was streamlining the National Shipbuilding Strategy back in 2016, axing plans for a fully Canadian designed ship and opting instead for a proven, off-the-shelf design to cut costs and mitigate risks.

The amendments, 88 in total, are referenced in Alion’s federal court application.

“While the RFP originally set out a requirement for a relatively mature and proven vessel platform, the amendments to the RFP effectively diluted the requirements and resulted in (PSPC) and Irving being able to accept an increasingly unproven vessel platform, like the one offered by Lockheed,” it reads.

David Perry, senior analyst with the Canadian Global Affairs Institute, told The Chronicle Herald he’s not surprised in the slightest that one of the other bidders is challenging the process in court.

“I mean there’s just far too much money and potential opportunity at stake for it not to be worth anyone’s while to at least try,” he said.

But, Perry said, he does find the premise of Alion’s appeal somewhat strange.

“(Alion) is basically saying that they know what (Lockheed) was able to substantiate better than either than the government/Irving did,” Perry said.

Large military procurements are a very technical and comprehensive process, and Perry said all requirements would have been laid out very clearly in the RFP. Bidders would have had to prove quite clearly to the teams evaluating the bids that they’re able to adequately meet all the requirements.

“Just to get to the point where Lockheed is right now they had to prove that they could do what Alion is saying they couldn’t,” he said.

Furthermore, Perry said it’s highly unlikely that anyone from Alion has managed to get their hands on a full copy of Lockheed’s bid. Because of the money on the line and the amount of incredibly sensitive corporate intelligence contained within a bid like this, Lockheed — one of the world’s biggest defence companies — would have guarded that information pretty closely.

“People in industry talk to each other a lot (and) have a good general idea of what others are doing, but as for if they have seen the bid, I would be astounded if that was the case.”

The Chronicle Herald reached out to Alion, Irving Shipbuilding Lockheed Martin Canada and and Public Services and Procurement Canada and all declined comment while the matter is before the courts.

Lockheed has responded to rumblings that it doesn’t meet all the RFP requirements in the past. In September, before they were announced as the preferred bidder, the Twitter account for the Lockheed/BAE team posted: “BAE System’s Type 26 meets all requirements in the CSC proposal, including speed.”

Both Irving and Public Services and Procurement Canada have expressed numerous times in response to concerns about the Canadian Surface Combatant competition that they are committed to a fair, open and transparent procurement process.

Final Canadian Surface Combatant Bids Due Today

By: David Pugliese, Defence Watch 

The final bids are being submitted Friday by various consortiums for the Canadian Surface Combatant program.

The bids going in Friday involve the finalized portions of the bids on designs (the technical design bids were originally submitted in November but today marks the deadline for responses that deal with any questions the federal government may have had/changes needed to be made) as well as proposals for the financial elements for the project.

The new ships will be the backbone of the future Royal Canadian Navy.

The groups bidding include:

-Lockheed Martin Canada, who will be the prime on the team that includes BAE Systems, CAE, L3 Technologies, MDA, and Ultra Electronics. The team is offering the BAE Type 26 warship for the Canadian program. The proposal will include Lockheed Martin Canada’s combat management system, CMS 330, which is currently on board the modernized Halifax-class frigates. A scaled down version of the system will be used on the Royal Canadian Navy’s new Arctic Offshore Patrol Ship fleet. The United Kingdom is acquiring 8 of the Type 26 ships. Australia has also identified the Type 26 as the design for its future warship.

Gary Fudge, Vice President and General Manager, Lockheed Martin Canada Rotary and Mission Systems told Defence Watch that the group’s bid was submitted earlier this week. He noted that the Type 26 would be excellent in an anti-submarine warfare role as it is designed to be extremely quiet. The vessel also has room to future modernization, unlike older designs, he added. The Lockheed Martin team, which is making $17 billion in value proposition commitments to Canada, will commit to spending billions in innovation across Canada’s priority areas, including $2 billion in supplier development and $2 billion in research and development, and $200 million in advanced manufacturing, the company noted.

-Alion Science and Technology, along with its subsidiary Alion Canada, submitted their proposal based on the Dutch De Zeven Provinciën Air Defence and Command (LCF) frigate. “Our solution delivers an effective, affordable, production-ready 21st century naval capability to meet Canada’s defence needs,” Bruce Samuelsen, Chief Operating Officer for Alion, said last year while promoting the firm’s bid. The De Zeven Provinciën-class frigate is a proven NATO vessel, built by Damen Schelde Naval Shipbuilding, with more than 10 years of operational excellence, the company added.

Alion’s combat system solution is based on the world-class capabilities of ATLAS-Elektronik and Hensoldt Sensors. ATLAS brings an open architecture Combat Management System that readily accepts new and evolving technologies, the firm noted. Hensoldt’s capability and experience in developing and fielding state-of-the art radars was central to meeting the unique Canadian requirements with a fielded, non-developmental radar, the Alion team added in an earlier news release. Other key suppliers include L3 Technologies Canada, Raytheon Canada Limited, DRS Technologies Canada Limited (DRS TCL) and Rheinmetall Canada Inc.

-Navantia of Spain is leading a team that includes Saab Australia and CEA Technologies. Its proposal is based on the F-105 frigate design, a ship in service with the Spanish navy. The design has also already been exported to Norway and Australia. Saab, which would provide the combat management system, has support on the CSC program from Lockheed Martin (Moorestown, New Jersey), General Dynamic Mission Systems – Canada, DRS Technologies Limited Canada, OSI Maritime Service and Rheinmetall Canada, according to Navantia.

The F-105 Anti-Submarine Warfare ship will incorporate Saab’s 9LV Combat Management Systems, elements of which are in service on over 240 platforms in 16 navies across the globe, including Canada’s own Halifax-class frigates, the company has said.

The budget for the Canadian Surface Combatant project is estimated by the federal government to be between $55 billion and $60 billion. That is a range but specific costs won’t be known until contacts are signed and more details worked out. Fifteen warships will be built.

Pat Finn, assistant deputy minister for materiel at the Department of National Defence, told Defence Watch he expects a winning bid to be selected by the end of this year.

After that negotiations would start and a contract is expected to be signed sometime early 2019. If an agreement can’t be reached then negotiations would begin with the group that came second in the competition.

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.

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.