Harper government gave Seaspan shipyard $40M contract on election day

On the very day of its defeat last fall, the Harper government quietly awarded a $40-million "engineering" contract to the Seaspan shipyard in North Vancouver, despite having promisedthatthe yard would prepare itself to build new ships "at no cost to Canada."

Two months later, in December 2015,a confidential report for the new Liberal government, obtained by CBC News, found that the program remains chaotic,poorly managed and marked by"fragmentation, inefficiencies and delays."

Seaspanisone of two yards chosen by the former Conservative government to share a vast, $36-billion shipbuilding program for the navy and the coast guard. The other is the Irving shipyard in Halifax. To qualify for the work, both were required to upgrade their yardsat their own expense.

• Report raises alarm over Canada's aging coast guard fleet
• Davie shipyard boss calls Canada's national shipbuilding strategy 'bizarre'
• Irving Shipbuilding's deal to build Arctic patrol vessels questioned

Seaspanwas assigned some$8 billion to buildfour small science vessels, two big supply ships for the navy and a polar icebreaker for the coast guard. But actual construction contracts for the large vesselshave not been finalized and the contract awarded last Oct.19is not forbuilding any of them.

The contract was part of a little-noticed plan to help Seaspanget ready for work on a scale it has never before attempted, even as the government of Stephen Harper insisted that these preparations wouldcost taxpayers nothing.

No announcement contradicting that promise was made, although,at a committee hearing in December 2014, a government official admitted to MPs that"basically, what we're doing is investing in the shipyard's capability to get itself up to capacity, to start churning out vessels."

A big win on election day

That process became a contract for $39.7 million, awarded on Oct.19, 2015 election day.

Seaspan's CEO, Jonathan Whitworth, said there wereno politics involved and no haste to get the money out before a new government could stop it.

"That's a pretty good theory," said Whitworth, laughing,"but not one that I subscribe to."

Whitworth also said the money was part of a continuing program that could go as high as$50 million.He agreed thatit was not aimed at the construction of any particular ship, butwas intended to create "efficienciesthat would apply to all ships." He added that it did not cover "infrastructure," but "the efficient design and build of the ships."

The savings, he said, would be passed on to the government, although they would be hard to quantify in the absence of a known price for the larger ships.

Flaws in management

However, a report by the government's procurement strategy secretariat in December 2015 found persistent "inefficiencies and delays" in the so-called "non-combat program" (NCP),meaning the ships to be built by Seaspan, as opposed to the warships being built by Irving in Halifax.

The report summarizes a series of expert reviews that painta bleak picture of disarray in the program both atSeaspanand in the government bureaucracy.

It found a "lack of sufficient human resources in the shipyard and within the government to effectively manage a program with the complexities of the NCP. All parties underestimated the capacity required."

The secretariat concluded that there was "a lack of clarity between all parties on expectations and priorities" and "insufficient framework to enable the effective management of the NCP." This had resulted in "lost opportunities to capitalize on economies of scale."

'As if money is no object'

A similar critique has emerged fromCanada's largest shipyard, theDavieyard, across the St. Lawrence from Quebec City. Davie lost out in the selection process, although it is now converting a used freighter to serve as an interim supply ship. ButAlexVicefield, CEO ofInocea, the international shipping group that ownsDavie, said in March thathis company canbuild other ships, such as an icebreaker,immediately and muchmore cheaply than under thenational shipbuilding program, which he said entailed "exorbitant" costs.

"Never have I witnessed a country so willing to spend money unnecessarily,"VicefieldtoldCBC News.

"It's almost as if money is no object."

The new Liberal government, however, says it is"fully committed" to the previous government's shipbuilding strategy.

According to a so-called "caretaker convention," Canadiangovernments are not supposed to make controversial decisionsduring an election campaign. As the Privy Council websitedescribes it,"during an election, a government should restrict itself in matters of policy, expenditure and appointments to activity that is:(a) routine, or(b) non-controversial, or(c) urgent and in the public interest, or(d) reversible by a new government without undue cost or disruption."

Jessica Kingsbury, a spokeswoman for Procurement MinisterJudyFoote,defended the contract, which she said "aims to co-ordinate, align and manage the non-combat package more strategically."

As for the timing, she said, "The task was issued in accordance with the departmental directives that were in place during the election period."