OTTAWA — A project to provide the Canadian Navy with a commercial supply vessel has sparked a major battle among between US, British and Canadian-owned shipyards, with accusations flying about a lack of competition for the multimillion dollar deal.

But faced with the urgent requirement to secure an at-sea resupply and refueling capability for its Navy, the Canadian government announced Nov. 30 it had no choice but to proceed with the CAN $700 million (US $510 million) project.

Public Services Minister Judy Foote and Defence Minister Harjit Sajjan said the government signed a contract with Chantier Davie Shipyards of Levis, Quebec, for what is being called an interim auxiliary oil replenishment ship.

The ship will fill the gap left by the retirement earlier this year of the Canadian Navy's last two resupply-refueling vessels. Those ship provided food, water, medical services and fuel to warships at sea.

"If we restarted this initiative by launching a competition, we would lose precious time in providing the Navy with a critical refueling and naval support capability," Foote and Sajjan noted in a statement.

The previous Conservative Party government had in June entered into negotiations with the British-owned Chantier Davie. The company had acquired a commercial container ship and had planned to convert that to a refueling and resupply vessel that, through a lease arrangement, could provide such services to the Canadian Navy.

But on Nov. 20 the newly elected Liberal Party government of Prime Minister Justin Trudeau put an abruptly halted to those negotiations, a move that was spurred on by questions from Davie rival Irving Shipbuilding of Halifax, Nova Scotia. 

Irving officials had alleged there was no competition for the supply ship procurement and that it had proposed a cheaper solution. to the navy.

The US-owned Seaspan Shipyards of Vancouver, BC, also entered the fray, complaining about the lack of competition and noting that it, too, had a more cost-effective proposal.

Foote and Sajjan suggested in their statement that since the process with Chantier Davie was at an advanced stage, they had little choice but to proceed.

Chantier Davie had already purchased the container ship Asterix and the vessel was now in the firm's shipyard to be converted into a resupply ship. The firm had already hired several hundred employees for the project.

In addition, the structure of the negotiations previously agreed to by the Conservative government would have seen Chantier Davie receiving (CAN) $89 million in expenses if the contract was not signed, the ministers pointed out.

"After amassing the facts and carefully deliberating, the government of Canada determined that proceeding is the most viable course of action," they added.

Chantier Davie officials expect it will take about 18 months to convert the Asterix into a refueling ship. The firm and its partners have created Project Resolve, which will see the resupply service in place for the Royal Canadian Navy by the fall of 2017.

Under the contract, the company would provide a civilian crew to operate the ship. Royal Canadian Navy personnel would be on board to handle communications and the actual transfer of supplies and fuel to warships. The contract would run for five years, with options to extend, for in increments, for a total of another five years.

Spencer Fraser, who heads Project Resolve, said the deal is the best one for Canada. "It confirms that our solution had the greatest merits to meet the [Royal Canadian Navy's] urgent operational needs," he added.

Seaspan CEO Chief Executive Officer Jonathan Whitworth said the company was disappointed in the Canadian government’s decision but understood the need to quickly provide the Navy with the capability.

Irving Shipbuilding President Kevin McCoy said his firm was appreciative that the Canadian government listened to its concerns about the lack of competition, adding that . He noted that Irving would be interested in providing a similar commercial ship if Canada the Canadian government determines an additional one is needed.

"If the government decides to add a second interim ship so that the Canadian Navy can have refueling capability on both the East and West coasts, we would hope that our proposal would be given careful consideration," he said.

The need to lease a commercial refueling ship emerged earlier this year because of the Royal Canadian Navy’s decision to decommission its own aging supply vessels and , as well as because of ongoing delays in the service’s acquisition of two Joint Support Ships. Those vessels, to be built by Seaspan, won’t be ready until 2020/2021. Work on the ships is expected to begin in 2016.

Canada plans to spend (CAN) $2.6 billion on two new ships, which will replace the decommissioned supply vessels.

The Chantier Davie deal is the first time that a commercial vessel is to be used to conduct such operations, says Canadian defense analyst Martin Shadwick.

Department of National Defence spokeswoman Ashley Lemire also pointed out the Asterix would allow the Navy's personnel to maintain their skills in key areas until Seaspan's Joint Support Ships arrive. The first ship is expected to be in the water in 2020. The Asterix would be used until the arrival of the second Joint Support Ship in 2021, she added.

In the summer, Canada arranged with Chile's Navy to provide a resupply ship on the west coast.
It is currently negotiating a similar arrangement for next year with Spain's Navy.


David Pugliese is the Canada correspondent for Defense News.

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