Mega-contracts a big mistake by the federal government

When we look at the federal government's decision to bundle its shipbuilding into two mega-contracts, we can only give our heads a shake

Bigger is not always better. When we look at the federal government’s decision to bundle nearly all of its naval and coast guard shipbuilding for the next 20 years into two mega-contracts, we can only give our heads a shake and wonder what they were thinking of.

Ottawa announced last week that Irving Shipbuilding of Halifax had been awarded a $25 billion contract to construct new naval warships.

Vancouver’s Seaspan Marine Corp. is getting an $8 billion contract to build non-combat ships.

A total of 28 large vessels will be built.

The third of the three short-listed companies, Davis Shipyard of Levis, Quebec, did not get a contract but will be eligible to bid on a smaller contracts totaling $2 billion.

The next step, we are told, will be for the government to begin negotiating the sub-contracts for the individual ships.

What meaningful terms are there left to negotiate? If the government has already decreed that certain shipyards are to build the ships, what leverage does it have to get a lower price or higher quality? If the first ships turn out to be over-priced or shoddily built, will the government be able to back out without penalty? And if it can, what’s the purpose of the mega-contract in the first place?

It doesn’t take a lot of imagination to think of many different ways this process could turn into another fast ferries fiasco, only multiplied by 10, 20 or more.

Also, what does this process do for national unity? Some would think that to be a factor more important to Canadian security than the number of ships on the ocean. With two mega-contracts to give and three short-listed finalists, it was pretty clear that at least one part of the country would feel short-changed. As it turned out, the losing shipyard is in Quebec – something that will not help the federalist cause in that province.

Nearly everyone would like to see the Canadian Navy rebuilt and renewed, and the same with the Coast Guard. We particularly need more small patrol vessels and submarines.

Having a 20- or 30-year plan also is a good idea that most would agree with.

The government has bragged about how the process for awarding the mega-contracts was free from political interference.

 

However, lumping all the shipbuilding contracts into two mega-contracts in the first place was almost certainly a big mistake, and politicians made that decision.