Shipbuilding association calls Davie contract for navy supply ship 'fair'

The industry group that represents Canada's shipbuilders has taken the extraordinary step of chastising a key Canadian shipyard for allegedly overstating its case in a growing spat over a government ship contract.

The Shipbuilding Association of Canada appeared Monday to rebuke Irving Shipbuilding Inc.,saying it is surprised and disappointedover Irving's intervention in the government plan to have Chantier Davie build and operate an interim supply ship for Canada's navy.

The roughly $700-million contract with the Lvis, Que., shipbuilder has been finalized and was due for cabinet approval by the end of the month.

• Irving Shipbuilding fires back at shipbuilding association criticism
• Exclusive |Davie interim supply ship $700M deal delayed by Liberals
• Ottawa says Irving Shipbuilding will build up to 15 combat ships
• Davie shipyard considered to retrofit temporary naval supply ship

But as CBC News reported last week, a federal cabinet committee stalled the unconventional deal, postponing any decision for 60 days.That followed an intervention from one ofDavie'sfiercest competitors, Irving Shipbuilding, which operates the Halifax Shipyard.

James D. Irving, the firm's co-chief executive officer, accused the government of pursuing a sole-source contract withDavie, despite an offer from Irving and partnerMaerskLines to provide a different and potentially lower-cost option.

"This was done on a non-competitive basis without transparency and without a full evaluation of cost, delivery schedule, capability and risk associated with theIrving-Maerskproposal," the letter dated Nov.17alleges.

The cabinet committee met just two days later and decided to push back theDaviedeal, at a potential cost to taxpayers of some $89million.

That letter became controversial, and Irving eventually felt it necessary to offer an explanation. On Saturdayit sent out a press release highlighting some of the details and capabilities of its own interim supply ship offer.

"Our request has and continues to be for an open, merit-based evaluation of all proposals to ensure the best solution for the navy and best value to Canadians," reads the statement from Kevin McCoy, president of Irving Shipbuilding.

But it's that clarification that seems to have irked the Shipbuilding Association of Canada, whose president Peter Cairns in a press releaseMondaysought to "set the record straight."

Cairns highlighted the process that led to the government signing a letter of intent to go ahead with the deal.

"Following an extensive consultation period lasting for six months and subsequent evaluations by those departments, Canada selected theDavieproposal on its merits ahead of other domestic and international bids."

Awarded 'fairly and due process'

In short, Cairns suggested Irving had its shot and lost.

"This was a fair process open to all industry, which followed common sense and resulted in one of the most successful shipbuilding procurements for decades. It demonstrated that Canada is indeed able to fast-track programs when vital for national security."

Cairns urged the government to follow through on theDaviedeal, which it said had "been awarded fairly and with due process."

"The association strongly recommends that the government not delay the signing of the contract for this urgent operational requirement."

Not surprisingly, Irving Shipbuilding Inc. disagrees with the assessment.

In an interview with CBC News in Nova Scotia, McCoy said Davie's proposal was risky.

"We looked at a container ship which is proposed by another shipyard [Davie]and we immediately dismissed it as the wrong ship," McCoy said."It requires too much conversion, it's too risky, too expensive, and it doesn't provide the large interior payload that could be easily accessed by trucks in a humanitarian emergency such as Haiti, where I served and saw first-hand," he said.

Navyneeds a supply ship

The navy's own ability to replenish itself at sea was lost when the 45-year oldHMCSProtecteurwas written off following a massive 11-hour blaze in 2014 that threatened the lives of 279 crew members and effectively destroyed the ship.Protecteur'ssister ship was also retired early after it was found to be too rusty to take to sea.

The government already had plans to build replacement supply ships at the Vancouver Shipyards facility in B.C., but the first of those ships is not due to arrive until 2020 at the earliest.

ChantierDaviecame up with the idea of converting an existing civilian cargo ship into a military supply vessel.It came up with a partner to provide the crew and charter the vessel exclusively to the navy.

That $700-million, seven-year deal negotiated by the former Conservative government is now pending cabinet approval.

The government signed the letter of intent in the summer, which allowedDavieto start spending money tofulfilits plan.Daviehas hired staff and bought the ship it plans to convert.

It took more than 30 hours last week for the new Liberal government to explain why theDaviedeal was postponed.

An official with the Public Services and Procurement Department sent out a statement late Friday:

"Given the importance of this procurement and the fact the Government just took office two weeks ago, the government, working withChantierDavieInc.,will take the time required to exercise due diligence," AnnieTrepanierwrote."A decision, informed by evidence and analysis of information, will be made as quickly as possible."

It's rumoured the new government is concerned about a change to contracting regulations that was authorized by the Conservative government to allow theDaviedeal to go through without the formality of a government bid process.

Daviewas frozen out of the government's $39-billion national shipbuilding procurement strategy. Irving, by contrast, was selected to build the so-called combat package of vessels for the navy, including new Arctic patrol ships, and, eventually, new warships to replace Canada's Halifax-class frigates.

There is frustration in some corners of the industry that Irvingdoes not appear to be happy with the roughly $25billion in business it's been selected for.

The possibility ofDavielosing the deal also angered Quebec Premier PhilippeCouillard, who told the CBC last week the deal should not be cancelled.

"Let me say that the ship is in the yard. Two hundred and fifty workers are there. Four hundred more are going to be hired in a few days. It's a $700-million investment," he said. "We will simply not accept that there is any change in the plan."