Firms Skipped CSC Bib for Fear of Loss of Proprietary Information

By: David Pugliese, Ottawa Citizen 

In December Fincantieri of Italy and Naval Group of France decided not to bid on the Canadian Surface Combatant project. Instead, they offered the Canadian government a direct proposal that would see the the companies build 15 of the consortium’s FREMM frigates at a fixed price of roughly $30 billion.

The Liberal government rejected the offer.

A FREMM frigate sails off the coast of France in 2016. BORIS HORVAT/AFP/GETTY IMAGES

Fincantieri and Naval Group knew they were taking a chance when they passed on the formal bidding process for the CSC. Sources close to the European companies said at the time they felt they didn’t have anything to lose. They alleged the Canadian competition was 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.

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

Giuseppe Bono, the CEO of Fincantieri, recently told my colleagues at the U.S. publication Defense News of another concern that led to the decision not to bid on the CSC. Bono said that the firms were willing to turn over their sensitive technical data to the Canadian government but that they drew the line at providing the proprietary information to Irving and its team.

“We said we were prepared to give the information to the Canadian government but not to a rival company if we didn’t know if we were going to win the bid or not,” Bono said.

Fincantieri and Naval Group, along with other companies, have voiced concerns about Irving’s alliance with the U.S. firm, Gibbs and Cox, a top U.S. naval architecture firm that designs surface warships. Gibbs and Cox is also the main competitor for many companies – including Fincantieri and Naval Group – pursuing ship contracts around the world.

Irving, however, has rejected such concerns and has stated it is committed to protecting any sensitive data provided by companies bidding on CSC.

But Fincantieri and Naval Group weren’t buying that reassurance.

The firms still have their proposal ready in case the Canadian procurement falls apart and the federal government decides on a different course of action.

In February, the U.S. Navy named the FREMM design as one of five it could consider for its future frigate program and has provided Fincantieri $15 million to look at a design concept.

DND Needs $54M in Additional Funds to Evaluate CSC Fleet Proposals

By: David Pugliese, The National Post

The Department of National Defence needs an extra $54 million just so it can examine the bids from companies hoping to build it a new fleet of warships — an indication of the growing expense of a program that has more than tripled in cost over the years.

HMCS Ottawa, one of the Royal Canadian Navy's Halifax-class frigates that will be replaced by the eventual arrival of the Canadian Surfance Combatant Fleet. Roslan Rahman/AFP/Getty Images

The funds are not earmarked for anything to do with the actual construction of the ships, but instead to fund DND’s evaluation of the the bids this year — and they would be in addition to the $39 million the department has already received to review the bids, according to defence sources.

The cost of the new Canadian Surface Combatants, which will replace the existing Halifax-class frigates, has steadily been climbing. The 15 ships were originally estimated to cost $15 billion. That increased to $24 billion before DND came out with a new estimate of around $40 billion. That too has since changed, and the project is now estimated to cost between $55 billion and $60 billion — and even then, the federal government acknowledges it doesn’t know what the program’s final cost will be to taxpayers. Parliamentary budget officer Jean-Denis Fréchette estimated last year the CSC program would cost $61.82 billion, and warned that every year the awarding of the contract is delayed beyond 2018, taxpayers will spend an extra $3 billion because of inflation.

Despite the Liberal government’s repeated statements about openness and transparency, it took Postmedia more than three months to get basic information from DND about its request for new funding, and even then, the details provided are limited.

“These funds will permit the project to maintain the Project Management Office and to continue work under the Definition Support Contract with Irving Shipbuilding Inc. for the remainder of this fiscal year,” the DND said in an email. “This funding will primarily support the Request for Proposal, bid evaluation and preparations for the design services contract.”

The money will cover salaries and benefits for the 135 military and civilian staff at the DND who are assigned to the project office, the department said, and will also be used to train staff and upgrade their offices.

Prospective builders of the new warships submitted their bids on Nov. 30, and a winning bid is expected to be selected sometime this year. Halifax-based 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.

Artists rendering of a BAE Type-26 Global Combat Ship with the Royal Canadian Navy Ensign - a proposed design for the Canadian Surface Combatant Fleet. 

Defence analyst Martin Shadwick said that without more detail of how the funds will be spent it’s hard to determine whether taxpayers are getting value for money. “But it seems a very high cost to run a project office for a one-year period and to evaluate bids,” added Shadwick, a strategic studies professor at York University in Toronto.

The surface combatant project, intended to provide the backbone of the future Royal Canadian Navy, has long been controversial.

In a surprise twist in November, a French-Italian consortium declined to formally submit a bid, instead offering Canada a fleet of vessels at half the price. Fincantieri of Italy and Naval Group of France don’t believe the established procurement process for the surface combatant program, already beset with delays and increasing costs, will be successful.

They instead proposed that Irving Shipbuilding construct 15 ships based on the consortium’s proven FREMM frigate design, currently in operation in both the French and Italian navies, among others, and guaranteed a fixed price of $30 billion. Thier proposal also focused on using Canadian technology on board the ships, and would have transferred technology to Canadian firms so they could be involved in future sales of the FREMM vessels on the international market. Under the plan, Irving would have been able to start building the warships almost immediately.

The Canadian government, however, rejected the offer.

Italian Navy Alpino FREMM Frigate. Italy ordered 10 FREMM Frigates. The FREMM is currently operated by the Italian Navy, the French Navy, the Egyptian Navy, and the Royal Moroccan Navy. 

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.

French-Italian Consortium offers Canada a deal on a new fleet of frigates

By: David Pugliese, The National Post 

The proposal is for Canada's chosen contractor, Halifax-based Irving Shipbuilding, to build 15 ships based on the consortium’s FREMM frigate design, that could save the Federal Government close to $32 Billion. 

A FREMM frigate sails off the coast of France in 2016.Boris Horvat/AFP/Getty Images

OTTAWA — In a surprise twist in Canada’s shipbuilding saga, a foreign consortium is offering the country a way to build a fleet of warships at a guaranteed price of $30 billion — a potential savings of $32 billion.

Fincantieri of Italy and Naval Group of France — major forces in international shipbuilding — don’t believe the current $62-billion Canadian Surface Combatant program, already beset with delays and increasing costs, will be successful, industry sources told Postmedia.

Instead, the French and Italian governments have proposed that Canada’s chosen contractor, Halifax-based Irving Shipbuilding, build 15 ships based on the consortium’s FREMM frigate design, which is proven and is in operation with the French and Italian navies. They are offering to guarantee the cost of the ships at a fixed $30 billion.

The deal would use Canadian technology on board the ships, sources said, and include the transfer of technology to Canadian firms so they could be involved in future sales of FREMM vessels on the international market.

As well as the French and Italian navies, Morocco and Egypt operate FREMM ships. Australia is considering them for its new naval fleet, and they are seen as a serious contender in the competition to outfit the U.S. Navy with modern frigates.

Bids for the Surface Combatant program were to have been submitted by Thursday to Irving. The company has not responded to a request for comment, and it is not known how receptive it would be to the consortium’s proposal.

The Fincantieri-Naval Group gambit is risky, as federal bureaucrats are expected to oppose it. But the potential of $32 billion in savings for Canadian taxpayers will put pressure on the Liberal government to seriously consider the offer.

Defence industry insiders said the Fincantieri-Naval Group consortium thinks it has nothing to lose by trying to circumvent the CSC procurement process, which a number of observers believe is skewed to favour a bid by Lockheed Martin Canada and the British firm BAE. They would provide Canada the Type 26 frigate that BAE is building for the Royal Navy.

Industry sources pointed out that Canada had originally asked for proven ship designs, then at the last minute loosened that restriction to allow the Lockheed-BAE bid to qualify, since the Type 26 was at the time still on the drawing board. (Construction on the Type 26 frigate began in the summer, but the first ship for the Royal Navy is not yet completed.)

Both Irving and Public Services and Procurement Canada have denied any favoritism towards BAE.

An aerial image of Irving Shipbuilding Halifax Shipyard. Irving Shipbuilding Inc.

Another team, led by Alion Canada, is offering the Dutch De Zeven Provinciën Air Defence and Command frigate. Though no other bids have yet been reported, a number of other companies were expected to put their ships in the running for the CSC program.

Fincantieri, the fourth-largest shipyard in the world, has long warned the Liberal government it believes the CSC procurement process is flawed. On Oct. 24, 2016, the firm sent then-Public Services and Procurement Minister Judy Foote a detailed outline of why it thought the acquisition process was in trouble, warning that “Canada is exposed to unnecessary cost uncertainty.”

At the time, the company 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 them to Irving. The ships would have then be evaluated and, after any technical issues were worked out, Irving would have begun to build the remaining 12 vessels. That would allow work on the new ships to get underway faster, the vessels to be fully tested and the risk to the Canadian taxpayer significantly reduced, Fincantieri argued.

Foote dismissed the company’s recommendation. However, the cost of the CSC program has steadily increased. Originally set at $26 billion, the Department of National Defence later estimated the price tag at $40 billion. Then in June, Parliamentary Budget Officer Jean-Denis Fréchette estimated the CSC program would cost $61.82 billion — and warned that because of inflation, every year beyond 2018 the awarding of the contract is delayed would cost taxpayers an extra $3 billion.

There are also concerns that plans to build two supply ships for the Royal Canadian Navy and a new Polar-class icebreaker for the Canadian Coast Guard are in trouble.

The Liberals have said they can’t provide Parliament with a schedule for the delivery of the supply ships or the icebreaker because they deem such information secret.

Public Services and Procurement Canada would not comment on the reasoning behind that claim.

RCN Potential Future Frigate Fires First Test Missiles

The Royal Canadian Navy is considering a number of options for its multi-billion dollar rebuild of its fleet. The front runner in the design process is the DCNS FREMM (French: Frigate Europeenne multi-mission) Frigate. DCNS is hoping Canada will choose the FREMM for its Canadian Surface Combatant Fleet.

The French frigate Aquitaine (the first frigate of the multinational multi-billion dollar program) fired its first missiles; a European built Exocet MM40 surface-to-surface missile, as well as a naval cruise missile.

Artists rendering of a FREMM Frigate - from naval-technology.com

The testing took place on May 12 and May 19th respectively, and mark the first time a European surface ship has fired a European naval cruise missile.

The FREMM will be the future backbone of the French and Italian Navy's (Morocco is also an operator of the FREMM). The FREMMs are heavily armed warships, capable of carrying naval cruise missiles, Exocet MM40 anti-shop missiles, as well as MU90 anti-submarine torpedoes. All the FREMMs can accommodate a Caiman marine helicopter, as well as Special Forces units aqnd their equipment. France is expected to be operating 6 FREMMs by mid 2019. Italy's time table runs into the early 2020s. The FREMMs naval cruise missile provides a deep strike capability, with a range of several hundred kilometres.  Morocco currently operates a single FREMM, and Egypt plans to operate two of the frigates to help in policing the Suez Canal.

France brought the Aquitaine to Halifax in 2013 to showcase it to the Canadian Government in hopes of selling the design plans. France has even said it would allow Irving to build the ships in Canada.
The FREMMs certainly seem to fit the need of the future Canadian Surface Combatant fleet.