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Competition provides the best results

National Post - November 17, 2014

Nationalnewswatch - November 18, 2014

Huffington Post - November 20, 2014

By Colin Kenny

With its current fleet of frigates and destroyers getting close to the best before date, the Royal Canadian Navy (RCN) is at an important fork in the road.

The Harper government has plans for the construction of 15 Canadian Surface Combatants (CSC) to replace the old fleet and has chosen Irving Shipbuilding in Halifax to construct them.

But the prime minister has yet to decide how his government will pick a contractor to oversee systems integration and ship design for the project.

This decision, which is expected in the coming weeks, is no small consideration. At stake is approximately $26 billion in contracts.

The prime minister has two choices in front of him.

The first, known as Most Capable Design (MCD), would involve soliciting competitive bids from different defence contractors and picking the best one. European firms advocate this option.

The second approach, called Most Qualified Team (MQT), would entail selecting one contractor based on its overall capabilities. The government would give the winner carte blanche to work out the specifics of how it will get the job done.

Selecting the latter approach, which favours American firms, would be very politically risky for the prime minister. It was this same process that led to a fiasco in the government’s effort to replace Canada’s aging fleet of CF-18 fighter jets with 65 “next generation” F-35 fighters. The lack of transparency in that project incited public outrage that the government certainly doesn’t want to rekindle in an election year.

Giving a green light to the Americans still has its advantages.

The US military maintains a global supply network of replacement parts that the RCN could easily tap into if it procures American-designed ships. No European firm can offer a comparable service.

Future Canadian military missions will likely be conducted as part of a coalition involving American forces. Procuring American-designed ships means that our navy would be interoperable with theirs, which is critical during joint operations. 

But the European firms are just as capable of offering interoperability. Recent NATO exercises demonstrated that French military platforms had no problems talking with US systems.

The supply advantages offered by the Americans, in addition to Canada’s special relationship with Washington, do not outweigh the need for transparency and competition with such a colossal procurement initiative.

A competitive process would allow government officials to compare the attributes of different bids and pick the best one for Canada in an open and fair way, unlike with the opaque F-35 initiative.

The cost of botching yet another major military procurement would be tremendous. It would force the Navy to do less with less.

Some worrying setbacks in the initiative are already starting to emerge, placing added importance on Harper getting the decision right. Serious delays with another part of the government’s shipbuilding strategy, the Arctic Offshore Patrol Ship project, pose a substantial risk to the surface combatants.

Delays are especially perilous in the world of defence procurement. Military inflation runs at 7 to 11 percent annually, meaning the initial dollar figure committed by the government to purchase military hardware buys less and less of it with each additional month.

Given that the same Halifax shipyard is slated to build both ships, CSC construction can’t begin until the delayed patrol ship project is completed. As a result, many knowledgeable people are doubtful that even ten CSCs will be constructed. That is far below the 15 promised by the Harper government, which is the bare minimum needed to allow the RCN to fully protect Canada.

The knock-on effects of this on Canada’s marine industry are equally dire. The government’s own National Shipbuilding Procurement Strategy has stated that a vibrant shipbuilding sector is strategically important for Canada. But with the number of ships being continuously eroded, the shipyards involved may be out of work far sooner than expected.

Despite the huge implications the CSC procurement has for the RCN’s future, the Harper government has shut the navy out of the process. In an attempt to avoid a repeat of the F-35 debacle, where the military brass was perceived as exercising excessive influence, the prime minister has gone to the other extreme by allowing Public Works and Industry Canada to run the show.

Ensuring the CSC initiative is steered successfully depends on the navy having a lead seat at the table. The men and women of the RCN who will actually have to fight in these ships deserve to have a big say in their procurement.

[Colin Kenny is former chair of the Senate Committee on National Security and Defence. Kennyco@sen.parl.gc.ca]