Canada’s instructions to submarine contract bidders highlight sustainment, economic benefits

The papers went come out to ThyssenKrupp leatherneck Systems (TKMS) of frg and Hanwha sea Co. Ltd. Of South Korea last week.

James Rourke, an official in the newly established federal Defence Investment Agency, acknowledged the document, which specifically outlines the federal government’s expectations and how the decision will be weighted, was delivered to both qualified bidders.

As it makes the decision, the federal government will put a lot of weight on what kind of package each company can offer in terms of sustainment for the fleet of 12 submarines after they’re purchased. Fifty per cent of the company’s score will be in that category.

According to the bid instruction documents, 20 per cent of the decision will be weighted on the platform itself. The company’s financial wherewithal counts for 15 per cent and the remaining 15 per cent involves what sort of economic benefits can be offered in relation to the contract.

Rourke declined to comment on the specifics.

“We have been clear that this procurement must result in the maximum economic benefit to Canada while fully leveraging Canada’s defence industry to create high-quality jobs and drive economic growth,” Rourke said.

“Given the sensitive nature of procuring an advanced submarine capability, we have no additional comment given the national security and sovereignty context.”

Two separate defence sources said the Canadian government is expecting to see responses from both companies by March.

Five firms were initially interested in building submarines for Canada. Prime Minister Mark Carney’s government narrowed the field last summer to two.

Carney has visited both shipyards and toured both the facilities and types of submarines on offer.

The project, meant to replace Canada’s aging Victoria-class submarines, could be worth up to $24 billion just for the purchase of the boats. The federal government has signalled it is interested in having sustainment facilities on both coasts — centres that are expected to create Canadian jobs.

Alan Williams, a former top procurement official at the Defence Department, said he had initial concerns about how quickly the federal government downselected to two bidders, but is satisfied to see the formal instructions go out.

Given the size of the purchase, he said, it’s important there be transparency.

The federal government, in particular Industry Minister Mélanie Joly, has made clear the Liberals want to leverage defence spending to help build the Canadian economy. 

Williams, however, said the government has to tread carefully. There’s been extraordinary political debate around the review of the plan to buy 88 F-35 stealth fighters for the air force from U.S. Defence giant Lockheed Martin. 

The federal government is weighing whether to proceed with the full order (16 are already being assembled or have parts on order) or reduce the number and buy another jet. 

Joly has acknowledged she’s been speaking with Swedish defence giant Saab about buying its Gripen E fighter jet, which finished second to the F-35 in the federal competition. She has openly said the number of Canadian jobs created by the F-35 program is not enough and is openly shopping for a better deal.

Williams said that kind of political gamesmanship will not fly in the submarine program now that bidding is underway.

“The fact that we were having ministers going out is really fearful to me,” Williams said, noting his advice to ministers at this juncture would be to clam up and remind them “you can't intervene without there being huge legal ramifications.”

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