Bid Submissions Mark Launch of Canadian Surface Combatant Project
By DAVID PUGLIESE, Special Correspondent
VICTORIA, British Columbia, Canada — U.S. and European firms submitted bids for the next generation of Canadian warships Nov. 30 as the Canadian government launched its largest naval construction project since World War II.
But one European consortium took a significant gambit, bypassing the established procurement process and submitting a fixed-price proposal it claimed would produce a new fleet for Canada at a significantly reduced cost.
The proposals focus on the Canadian Surface Combatant (CSC), which will form the backbone of the Royal Canadian Navy for decades to come. The project is expected to cost as much as $62 billion Canadian dollars ($47 billion) and will see the construction of 15 warships to replace the existing Halifax-class frigate surface fleet and the already retired Iroquois-class destroyers.
“We expect the announcement of a winning bidder in 2018,” said Lisa Campbell, assistant deputy minister of acquisitions at Public Services and Procurement Canada, the government department overseeing the procurement.
Irving Shipbuilding Inc. of Halifax is the prime contractor for the project and will build the vessels.
A number of consortiums are chasing the contract, which includes providing a ship design and combat management system.
Lockheed Martin Canada heads one of the bids, and includes on its team BAE Systems, CAE, L3 Technologies, MDA Corp. and Ultra Electronics. The team is offering the BAE Type 26 warship for the Canadian program. Britain began cutting steel on the Type 26 in the summer. Eight of those warships are being built for the U.K. Royal Navy.
Alion Canada, a subsidiary of the U.S.-based Alion Science and Technology, is offering Canada the Dutch De Zeven Provinciën Air Defence and Command frigate design. Alion, the prime design agent for the U.S. Navy’s DDG 51 Arleigh Burke-class destroyers and Ticonderoga-class guided-missile cruiser, has partnered with Damen Shipbuilding, Atlas Electronik and Hendsoldt on the Canadian program.
Navantia of Spain is believed to have to have submitted a bid using the F-105 frigate as its baseline vessel for the CSC.
Fincantieri of Italy and Naval Group of France have taken a different route. Instead of submitting a formal bid, the French and Italian governments have approached Canada directly to offer the FREMM frigate to be built by those firms.
The work still would be done at Irving Shipbuilding, but the companies would provide the vessels at a guaranteed fixed cost. That would reduce risk and speed up delivery of the warships, company officials said.
The Canadian government, however, announced Dec. 5 that it had rejected the unsolicited proposal from Naval Group and Fincanteri, leaving BAE-Lockheed, Alion and Navantia as the active bidders.
Construction of the first CSC is expected to begin in the early 2020s with the first ship delivered in the mid-2020s, Campbell said.
The Royal Canadian Navy (RCN) is hoping for the construction of one ship a year, with the last vessel delivered around 2040. It is expected that the warships will operate until 2070.
The long period for construction will allow for technology improvements to be inserted as they are developed, RCN officers said.
A separate contract will be awarded for support of the CSC’s combat management system. For security reasons, that contract will be awarded to a Canadian firm and all work must be done in Canada, Campbell said.
Kevin McCoy, a former U.S. Navy vice admiral who is president of Irving Shipbuilding, said the workforce at the yard will go from its current 1,800 to 2,700 to handle the construction of the CSCs.
The cost of the CSC project has steadily increased, raising concerns that the number of ships to be built might have to be scaled back. The original budget was $26 billion Canadian, but Department of National Defence analysts projected the ships could eventually cost $40 billion.
However, one of the Canadian government’s fiscal watchdog agencies set the cost even higher. In June, Jean-Denis Fréchette, the Parliamentary Budget Officer, estimated the CSC program would cost $61.82 billion Canadian if all 15 ships were built. The estimate included costs resulting from development, production, spare parts, ammunition, training, government program management and upgrades to existing facilities. It did not include costs associated with the operation, maintenance and mid-life refurbishment of the ships, other than the spare parts that will be purchased when the vessels are built.
Canadian Defence Minister Harjit Sajjan has said the government is committed to building all 15 surface combatants. The government’s new defense policy will ensure that enough funding is available, Sajjan added.
The Parliamentary Budget Officer also warned about additional costs due to inflation if the awarding of the CSC contract is delayed beyond 2018.
“We estimate that for each year of delay, the program would cost about $3 billion more,” Fréchette noted in the study.