Ottawa locks down design for $60-billion warship fleet

OTTAWA — The federal government will announce Friday that it has locked down a design for its $60-billion fleet of new warships following a series of high-stakes negotiations that appeared in jeopardy at one point because of a trade challenge.

Federal Procurement Minister Carla Qualtrough will be in Halifax to announce that the government and Irving Shipbuilding are officially awarding U.S. defence giant Lockheed Martin a contract to design the vessels.

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The deal means that the Royal Canadian Navy's 15 new warships, which will be built by Irving and replace Canada's existing frigates and destroyers, will be based on the British-designed Type 26 frigate.

The announcement has been expected since Lockheed's design was selected as the best last October, over submissions from Alion Science and Technology of Virginia and Spanish firm Navantia.

Alion subsequently asked the Canadian International Trade Tribunal to quash the decision, saying Lockheed's design did not meet the navy's requirements and should have been disqualified.

The trade tribunal initially ordered the government not to award a contract to Lockheed until it could investigate Alion's complaint, but it later rescinded that decision and then tossed the case entirely last week.

That paved the way for the government and Irving, which is technically subcontracting Lockheed to design the ships it will build, to move ahead and award the contract.

Alion has also challenged Lockheed's selection at the Federal Court, though that case is expected to drag. Alion alleges that the Type 26 did not meet the navy's requirements for speed and crew accommodations.

While Friday's announcement means the government has now settled on a design for the warship fleet, more work will need to be done before steel starts to be cut in Halifax.

Defence Department officials will now sit down with counterparts from Irving and Lockheed to figure out what changes need to be made to the company's design as well as the navy's requirements to make sure they fit.

That process will have a direct bearing on how much the ships ultimately cost and how long they will take to build.

In a recent interview with The Canadian Press, the Defence Department's top procurement official, Patrick Finn, said the plan is to keep changes to a minimum to keep costs and schedule under control.

"This is ultimately about building warships that will be in service from the middle of next decade to 2070," Finn said, emphasizing the importance of moving ahead quickly and getting ships in the water.

"The destroyers have already been retired. … So principally from a defence of Canada, combat-capable, navy, time is of the essence."

The bid by Lockheed, which also builds the F-35 stealth fighter and other military equipment, was contentious from the moment the design competition was launched in October 2016.

The federal government had originally said it wanted a "mature design" for its new warship fleet, which was widely interpreted as meaning a vessel that has already been built and used by another navy.

But the first Type 26 frigates are only now being built by the British government and the design has not yet been tested in full operation.

There were also complaints from industry that the deck was stacked in the Type 26's favour because of Irving's connections with British shipbuilder BAE, which originally designed the Type 26 and partnered with Lockheed to offer the ship to Canada.

Irving also partnered with BAE in 2016 on an ultimately unsuccessful bid to maintain the navy's new Arctic patrol vessels and supply ships. That 35-year contract went to another company.

Irving and the federal government rejected such complaints, saying they conducted numerous consultations with industry and used corporate firewalls and safeguards to ensure the selection process was completely fair and unbiased.

And while government officials acknowledged the threat of legal action, which has become a favourite tactic for companies that lose defence contracts, they expressed confidence that they would be able to defend against such attacks.

— Follow @leeberthiaume on Twitter.

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