Finland gets a slice of $587-million Canadian supply ship program

The Quebec company that's planning to supply the navy with a leased replenishment vessel next year outsourced some key portions of the conversion work to an offshore shipyard, CBC News has learned.

Federal Fleet Services Inc., which is operating out of the Davie Shipyard in Levis, Que., has a contract to convert a civilian cargo ship for military purposes. It is also tasked with leasing the ship to National Defence, with crew and support, for five years.

The total cost of taxpayers is $587 million.

But in order to meet the federal government's delivery date of fall 2017, the company has contracted with Almaco, a major builder of accommodations in the offshore industry.

The company is building a major portion of the superstructure for the MV Asterix at a shipyard in Rauma, Finland.

There are conflicting accounts as to precisely how much the offshore contract is worth.

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Alex Vicefield, chairman of the Davie yard and CEO of its parent company Inocea, was quoted in a trade publication saying that the Finnish subcontract was worth between US $70 million and US $100 million. ($94million to$134 million Cdn).

But Spencer Fraser,CEO of the company in charge of the project, Federal Fleet Services, pegged the deal at closer to US $44 million ($60 million Cdn).

The subcontract created as many as 150 jobs in Finland at peak production.

It's significant because the federal government under both the Liberals and the Conservatives hasplaced a high priority on rebuilding the country's shipbuilding capacity.

'Hard delivery date'

Potentially, the work could have been in Canada, Fraser says, but it would have meant a delay of almost a year in getting the converted ship into service.

"We don't start getting paid until the ship is delivered and we have a hard delivery date for commencement of service in the fall of 2017," Fraser said in an interview with CBC News.

"The main driver of this project is giving the capacity of a refueller to the navy as quickly as possible."

He said it has cost his company more to source the work offshore, but there was no choice given that the Davie yard had other projects underway.

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The navy found itself strapped when both of its supply ships HMCS Preserver and HMCS Protecteur were retired. Replacements,known as Joint Support Ships, are expected to be built by Seaspan, in Vancouver, under the national shipbuilding program, but are not expected enter service until the early 2020s.

The absence of replenishment ships means the country's frigates must rely on allies to refuel and rearm them at sea. The former Conservative government approved the lease agreement with Federal Fleet Services, which was known as Project Resolve at the time, in the summer of 2015.

The Liberals briefly reviewed the plan before giving it their blessing a month after the last federal election.

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National Defence was aware of the outsourcing of a portion the contract.

Retired rear admiral Pat Finn, the head of military procurement, told the House of Commons defence committee earlier this month that a major piece of the structure "has been built in Scandinavia" and will be brought over and attached to the ship in the spring.

He assured MPs the project was still on track and the federal government regularly visits the yard.

"We're there monthly, and have a third party overseeing it," Finn testified. "Currently notwithstanding some schedule risks that we see in all of our projects, it is on track to be able to provide that service to the navy in the fall of 2017."

Davie Shipyard not bound by national program

The vessel is currently stripped down to the point where Fraser describes it as looking like "a giant canoe." Slowly, over the next few months, the different decks and fittings, including the Finnish built superstructure, will be added.

Since the Conservative government launched the national shipbuilding strategy over six years ago, there has been a debate about whether the buy-Canadian policy is a good idea. Some in the business and academic community have argued the federal government should be free to purchase ships offshore.

The Davie Shipyard is not bound by the national shipbuilding program.

Peter Cairns, of the Shipbuilding Association of Canada, says he understands concern over the outsourcing of jobs, but says it's a common practice.

He noted the industry because it was allowed to decline for so many years has stopped producing a number of major components and those parts and expertise can only be found in other countries.