Always read the fine print

by Brian DuBreuil Posted: Jun 13, 2012 11:07 AM ET Last Updated: Jun 13, 2012 11:07 AM ET

According to reports coming out of Ottawa a chilling fog may be breaking over the bow of the federal government's multi-billion dollar ship building program.

Word is Ottawa may be trying to delay signing the first contracts, and may even be looking at building fewer ships.

Senior federal ministers deny there are any problems, but the fact is eight months after the big announcement no contracts have been signed to build even a single ship. Some analysts, such as Pat Brannon of the Atlantic Provinces Economic Council, now believe there is no way work will start next year as first hoped. In fact, Brannon says the Irving shipyard may not cut the first steel until 2015.

Whether Ottawa is getting cold feet, or the delays are simply the inevitable result of complex negotiations, it's a good reminder that while the ship building strategy offers great promise, it offers no guarantees.

According to officials of Public Works Canada, the framework agreement Ottawa signed with Irving Shipyards (and Seaspan Marine on the west coast) have what's known as "off ramps".
These "off ramps" state that it is "within Canada's absolute discretion to change the composition of the work including the right to add projects, add ships to existing projects, remove projects or remove ships from projects." It also gives the federal government the right to "terminate the agreement, with appropriate notice, without providing any reason."

In other words if the federal treasury suffers from a downturn in the economy, or if there is a change in government, or if there is a shift in defense spending priorities, Ottawa can scale back the program or even cancel it, at any time and without penalty.

Of course, most of that was lost amid the hype and hoopla that followed the announcement last October that the Irving Shipyard had won the bid for the largest share of the program. All most people heard was "$25 billion contract" and "thousands of jobs". And who could blame them? This was incredibly exciting news for a province that sorely needed some.

This is still a good news story and there is little doubt that ships will be built here. But given the terms of the deal, it's both prudent and fair to question whether, at the end of the day, the contracts will be as large as the politician's promise.

After all, there is a reason lawyers always tell you to read the fine print.

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