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The Globe and Mail

PM to seal shipbuilding deals in Vancouver, Halifax

A tugboat undergoes maintenance at Vancouver's Seaspan yard on Feb. 2, 2011.

Darryl Dyck for The Globe and Mail/darryl dyck The Globe and Mail

Stephen Harper is visiting Canada's East and West Coasts in the same day to trumpet a key milestone in his $35-billion public shipbuilding effort, having secured deeds of licence to construction yards that will let Ottawa temporarily take them over if contractors default on the jobs.

On Thursday, Mr. Harper is holding press conferences in both North Vancouver and Halifax to announce that his government has concluded negotiations on so-called umbrella agreements with vessel builders, deals that officially give yards the right of first refusal to build the ships they were picked to construct last fall.

The agreement also grants Ottawa unfettered access to shipyard accounting books for the life of the construction projects, which will stretch over 25 to 30 years.

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These powers obtained by Ottawa allow the Tories to keep a tight rein on the projects, which constitute the biggest round of government shipbuilding since the Second World War.

The October decision to award shipbuilding contracts to Halifax and B.C. was a political success for Mr. Harper: Ottawa managed to pick winners for the largest procurement package in Canadian history while avoiding serious charges of regional favouritism.

That's in part because the Conservative government left the task of choosing the shipyards to a cadre of civil servants who firewalled their decision-making from political interference.

Whether the national shipbuilding strategy is a procurement success remains to be seen because Ottawa must still negotiate construction contracts for up to 31 vessels and avoid the twin demons of big-ticket government purchases: missed deadlines and cost overruns.

Last fall, Irving Shipbuilding Inc.'s Halifax Yard was awarded the right to build $25-billion of combat vessels for Canada, including frigates, destroyers and patrol ships, while Seaspan Marine Corp.'s Vancouver Yard secured dibs on $8-billion of non-combat vessels, including the polar-class Diefenbaker icebreaker.

Another $2-billion in smaller ship work has yet to be awarded.

For the last six weeks federal government officials have been hammering out the construction umbrella agreements with the two shipyards, working through the Christmas break in order to finalize the deals.

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Sources say the most difficult matter to resolve was the access that federal officials sought to shipyard books to verify the costs of construction.

The "step-in" rights will allow Ottawa to take over Halifax or Vancouver shipyards to complete vessels if a builder defaults on contractual obligations. This provision is rarely included in procurement deals, federal officials say.

The next stage of negotiations will see both Irving and Seaspan begin talks with Ottawa on the construction contracts for the initial order of military and civilian ships.

The first military ships set to be built are six to eight Arctic offshore patrol vessels, and the first non-military order will be a series of coast guard scientific research vessels.

It could take until 2014 before the first Arctic patrol ships are completed, federal officials have said. Early estimates said the patrol ships might cost about $3-billion before bills for maintenance and operations are included.

It may be weeks before Ottawa and the yards sign the umbrella agreements that are being announced Thursday. That's because lenders to each shipyard must review the terms of the deeds of licence that the builders have signed over to Ottawa.

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About the Author
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

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