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French and Italian governments endorse long-shot bid for 15 new ships for Canada's navy

by Daniel Leblanc (feat. Dave Perry)

The Globe and Mail
December 8, 2017

The French and Italian governments are officially backing an unsolicited proposal to supply 15 military vessels to the Royal Canadian Navy outside of the ongoing competition for the $60-billion contract, documents show.

The French and Italian ministers of defence submitted a letter last month to their Canadian counterpart, Harjit Sajjan, stating that they "fully support" the joint bid by Naval Group and Fincantieri to replace the RCN's existing frigates and retired destroyers. The support from the French and Italian governments could give additional weight to the long-shot proposal, which aims to bypass the official procurement process for new Canadian Surface Combatants.

"Under the umbrella of an intergovernmental agreement, we will provide project management support so that the Royal Canadian Navy can operate the purchased warships, sustain their operational capabilities and manage their evolving capabilities throughout their entire lifecycle," said the letter from French Defence Minister Florence Parly and Italian Defence Minister Roberta Pinotti.

The submission from Naval and Fincantieri has shaken up the process put in place by the federal government to acquire 15 new vessels. Halifax-based Irving Shipbuilding Inc. is the government's prime contractor, with a competition under way to select a warship design.

Defence-industry sources said the leading contender in the process is a joint bid by U.S.-based Lockheed Martin and British-based BAE Systems. The same sources said only three of the 12 prequalified bidders submitted a formal proposal by the Nov. 30 deadline, a number the federal government will not confirm.

Under Canada's defence policy unveiled earlier this year, the federal government is planning to get its first Canadian Surface Combatant in 2026, with the entire project costing between $56-billion and $60-billion.

Under the Franco-Italian proposal, the 15 vessels would also be built at the Irving shipyard. Based on production costs in Europe, the two companies said they could provide the vessels to the Canadian government for $20.9-billion (€13.8-billion), with construction starting in late 2019.

The bid from Naval and Fincantieri was unsolicited, essentially relying on the possibility that none of the bidders under the existing process will be deemed compliant. The defence-industry sources described the offer as a "Hail Mary" that could succeed if the ongoing process unravels, like many previous military procurements.

"Everything depends with what happens with the process that is under way right now," said David Perry, senior analyst at the Canadian Global Affairs Institute. "If they can get two compliant bids or ideally all three … I wouldn't see a need to go back and do a comparison with the [Naval/Fincantieri] bid."

The federal government said this week that it will not even analyze the unsolicited bid.

"To be clear, any proposals submitted outside of the established competitive process will not be considered," Public Services and Procurement Canada (PSPC) said in a statement.

"The submission of an unsolicited proposal at the final hour undermines the fair and competitive nature of this procurement suggesting a sole-source contracting arrangement. Acceptance of such a proposal would break faith with the bidders who invested time and effort to participate in the competitive process, put at risk the government's ability to properly equip the Royal Canadian Navy and would establish a harmful precedent for future competitive procurements," the statement said.

In addition, the government rejected the notion that the Franco-Italian bid could generate significant savings, stating that the acquisition of the ships accounts for only about half of the price tag.

"It is important to note that a warship project budget must cover more than just delivering the ships. It must also include the costs associated with design and definition work, infrastructure, spare parts, training, ammunition, contingencies and project management," PSPC said.

The Naval/Fincantieri proposal is based on the European multimission frigate program, under which the two firms are supplying 18 ships to the French and Italian navies. The two companies said their "off-the-shelf solution" is less risky than other projects still in development.


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