Billions in shipbuilding contracts will make waves for Harper
STEVEN CHASE OTTAWA— From Thursday's Globe and Mail Thursday, Feb. 03, 2011
Article Link
Stephen Harper is poised to kick off the greatest round of government shipbuilding in Canada since the Second World War.
The massive equipment purchase is also going to give him a political headache.
Pegged at $35-billion, the sums involved easily dwarf the funds committed for the Conservatives' controversial and hotly contested plan to buy $9-billion worth of F-35 fighter jets from Lockheed Martin.
It will ultimately pit three regions of Canada against each other and force a difficult choice upon Mr. Harper. He'll have to decide which region to leave in the cold during what could be an election year: the East, the West or Quebec.
The federal shopping list includes a fleet of new defence, patrol and scientific research vessels, from frigates to the John G. Diefenbaker, which will be the most powerful icebreaker Ottawa has ever owned.
The Conservative government will select two marine construction yards for the job of building $33-billion in large vessels – companies that will end up dominating public shipbuilding in Canada for decades.
But by giving two yards the bulk of the work, Mr. Harper is inviting trouble.
Regional anger over procurement decisions are stuff of legend in Canadian politics and have damaged incumbent governments. A 1986 decision by the Mulroney government to award a CF-18 fighter maintenance contract to a Quebec firm over a superior bid by a Winnipeg-based company enraged western Canadians and helped spur the rise of the Reform Party.
Five yards are expected to bid for either one or both of the shipbuilding packages: the larger order to assemble frigates, destroyers and patrol ships – and the smaller to build non-combat vessels including the polar-class Diefenbaker icebreaker.
Ottawa hasn't attached an official dollar figure to these packages, but sources familiar with the matter value the combat order at roughly $25-billion, the non-combat around $8-billion. In the first five to eight years, both packages will pour roughly the same level of investment in shipyard work – and the non-combat order is expected to grow over time to include more replacement Coast Guard vessels.
The bidding competition will heat up this month when Ottawa invites bids for the two large-vessel packages. The federal government is expected to render its decision by August or September.
Winning a contract will mean the right of first refusal to build all the vessels in the package.
Of the five yards that have made the shortlist for bidding, three are considered major contenders. They include Irving Shipbuilding Inc.'s Halifax yard, Davie Yards of Lévis, Que., and Washington Marine Group's Vancouver Shipyards in North Vancouver, B.C.
Mr. Harper's National Shipbuilding Procurement Strategy is an attempt to change the playbook for Canada's boom and bust shipbuilding industry, laying out a 30-year plan that ensures a steady stream of construction work for at least two yards.
There's a strategic military reason for this too. It ensures Canada, like many of its NATO allies, maintains a constant capacity to build naval vessels.
A politically risky feature of this new procurement style however, is that it concentrates the work into just two shipyards. From an accountant's perspective this makes sense: The winners have better economies of scale, thereby reducing costs – as well as ensuring a buildup of skilled labour at the yards in question.
It's a departure from the way regional politics have forced Ottawa to conduct government shipbuilding in the past, when contracts have been chopped up and spread around. Traditionally, a single ship might be assembled by different yards – ultimately increasing the vessel's price tag.
The consolation price for three losing shipyards is they will be able to bid on an estimated $2-billion of construction work for smaller non-combat ships.
Ottawa says there's enough of these smaller jobs to suffice.
More on link and second page
