Halifax, Vancouver win $33-billion in shipbuilding sweepstakes

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Ottawa has awarded three decades of government shipbuilding work to just two yards – one in Halifax and one in Vancouver– an effort to end the industry's boom-and-bust cycle and create centres of expertise that offer uninterrupted employment for a generation.

The decision leaves Quebec's Davie Shipyards in the cold, though, as Atlantic Canadians and British Columbians prepare to embark on the greatest round of public shipbuilding since the Second World War.

The Harper government made a deliberate, if politically risky, decision to concentrate the $33-billion of large vessel contracts in only two yards instead of spreading the goodies around further. The goal is to ensure a sufficient buildup of shipwright talent at these locations and give the winners better economies of scale, thereby reducing the costs of the vessels.

At the same time, the Conservatives did their best to firewall the process of picking winners from allegations of political interference, handing responsibility for making the decision to a cadre of more than 20 civil servants watched over by a "fairness monitor."

There's still a tremendous political payoff for the Tories, though. The shipbuilding will create an estimated 15,000 jobs, which will allow the Harper government to claim credit for stimulating the economy with the recovery still fragile.

And while Ottawa did its best to insulate the largest procurement package in Canadian history from allegations of unfairness, that didn't stop the Quebec government from calling Ottawa's judgment "absolutely incomprehensible" on Wednesday.

Irving Shipbuilding's Halifax Yard wins the right to build $25-billion of combat vessels, including frigates, destroyers and patrol ships, while Seaspan Marine's Vancouver Yard has secured dibs on $8-billion of non-combat vessels, including the polar-class Diefenbaker icebreaker.

It's a departure from old-style politics in previous governments where ministers, worried about placating each region, cut up contracts to spread them around more broadly.

Regional anger over procurement decisions are the stuff of legend in Canadian politics and have damaged governments. A 1986 decision by the Mulroney government to award a CF-18 fighter maintenance contract to a Quebec firm over a superior bid by a Winnipeg-based company enraged Western Canadians and helped spur the rise of the Reform Party.

The Official Opposition NDP, with more than half of its MPs from Quebec, offered up mixed messaging on the shipbuilding decision.

The New Democrats' shipbuilding critic, Nova Scotia MP Peter Stoffer, praised the announcement, calling Wednesday "a very good day for all of Canada." But NDP interim leader Nycole Turmel chimed in too, sharply criticizing the deal for "picking winners and losers" and leaving "our Quebec area shipbuilding in a more fragile position."

While the money won't start flowing until 2012, when contracts are signed for ship construction, it's expected that Irving and Seaspan will begin hiring project managers and engineering talent in anticipation of the work.

In the first five to eight years, both packages will pour roughly the same level of investment into shipyard work, and the non-combat order is expected to grow over time to include more replacement Coast Guard vessels.

The Quebec shipyard still has a chance to bid for $2-billion of smaller vessel construction contracts, although this is a consolation prize at best.

While Quebec Economic Development Minister Sam Hamad reacted angrily to Davie's loss, Yves-Thomas Dorval, head of the business group Conseil du patronat du Québec, said the selection process appears to have been fair and free of politics. "Quebec is losing out on a big slice," he said, "but that's competition for you."

The fact that the group bidding for the Davie shipyard work came late to the game – winning 11th-hour court approval to buy the financially ailing company and bidding at the last minute – might not have helped matters, Mr. Dorval said.