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Halifax’s Irving big winner in $33 billion federal ship contracts

Vancouver's Seaspan wins $8 billion worth of contracts; troubled Davie down but still not out


October 19, 2011
by The CANADAN PRESS

OTTAWA—The wait is finally over for three ship builders and their bids for $33 billion in federal contracts.

Irving Shipbuilding of Halifax won the largest piece of a $33-billion federal shipbuilding program, becoming the prime contractor for the navy’s new warships in a contract worth $25 billion.

Vancouver-based Seaspan Marine Corp. picked up $8 billion in federal contracts for non-combat ships.

Another $2 billion for smaller vessels is to be allocated later to another shipyard yet to be chosen.

The decision itself was announced by Francois Guimont, deputy minister of the Public Works Department

The Harper government pledged to keep politics out of the decision by having four senior bureaucrats evaluate the bids and hiring an accounting firm to ensure a fair selection process.

Davie shipyard, the financially troubled builder based in Levis, Que. was left out of the program, but will be eligible for the $2 billion contract.

The Irving decision is expected to be a boon for the hard-pressed Nova Scotia economy, which has struggled in the wake of disappointing returns from its offshore natural gas sector.

Irving Shipbuilding will enter contract negotiations with the federal government with hopes of starting production by the end of next year.

Halifax Shipyard has been in operation since 1889. Irving Shipbuilding has built tugs and offshore supply vessels for clients around the world and 80 per cent of Canada’s current fleet of surface warships.

Halifax Mayor Peter Kelly says the contract will create about 4,000 jobs in Nova Scotia.

“This is indeed a proud moment for our municipality, for our province and for everyone who worked so hard to prove that ships do start here, home to Canada’s East Coast navy,” he said.

In B.C., cheers erupted from provincial legislators as the announcement was made.

“You know what? Despite the fact that I was absolutely confident throughout the process, you’re still on the edge of your seat,” said Premier Christy Clark. “It was like the Olympics there, don’t you think? Trying to wait for them to get through all the stuff that had to happen before they finally made the announcement … You know what this tells us. It tells us that Canada works, so B.C. can get to work.”

The evaluation process gave the most weight to a shipyard’s existing capacity and its plans for executing the work.

The bidders were also asked to spell how they would foster long-term innovation to return Canada to the cutting edge of shipbuilding.

While the decision establishes a special relationship with the selected firms, it will now be up to the federal government to deliver on decades worth of individual contracts.

It is perhaps the biggest uncertainty in the deal, especially given Ottawa’s deficit woes.

Peter Cairns, of the Canadian Shipbuilders Association, said the deal contains protections for the yard in case future governments get cold feet, but trying to plan decades worth of work is fraught with uncertainty.

“In every contract the government writes it always reserves the right to do what it considers is best for Canada,” he said. “Is there an iron-clad guarantee? Is there something you can take to the bank? There is no guarantee, but then again there are the other protections that companies have, like pursuing through the courts.”

Cairns also said he’s confident the special relationship with individual yards, rather an opening bidding process, will be good for taxpayers.