For two days last week a team of federal government experts sat in a conference room of Saint John’s Delta Brunswick Inn and questioned the men in charge of building the six most expensive ships Canada has ever decided to buy. Officials representing the Canadian Navy, Supply and Services Canada, the department of regional industrial expansion and the department of justice fired questions at executives of Saint John Ship-
building Ltd. about progress over the past three months on the six patrol frigates that the New Brunswick company is contracted to deliver to the navy beginning in 1989 at a current cost ceiling of $3.87 billion. That was the official agenda. Unofficially, both sides had other things on their minds —including the fact that the first of the new ships will likely be delivered six months later than originally planned.
Shipyard officials admitted that their firm is as much as 18 months behind in meeting some of the production “milestones” laid down by the contract for various elements in the project. For their part, federal officials sought reassurance that after a slow start, the largest single naval procurement order ever issued by a Canadian government will meet future contract milestones on time.
The shipbuilding executives, led by Peter Jaquith, program manager for the Canadian Patrol Frigate (CPF),
were anxious to show that they now are on course. In recent months company officials have also been trying to persuade Ottawa to revise parts of the contract so that the shipyard will receive progress incentive payments that have so far been withheld. At the same time, both sides were keenly aware that the company’s performance on the current frigate program could determine whether it lands the contract for a second batch of frigates, which
will be awarded next year.
When Ottawa awarded the frigate order to the New Brunswick firm in July, 1983, it was the first time in history that the navy had entrusted private industry with the job of designing and delivering a fully operational warship. In addition, the order was crucial: by the time the navy takes delivery of the first of the 4,200-ton, two-gun frigates in October, 1986, only four destroyers in the navy’s fleet of 20 will be less than 20 years old.
The company vowed that it could meet the challenge of overseeing the job. At a lavish press luncheon in May,
1984, shipyard officials boasted that they had assembled “the most sophisticated manage-
ment system ever devised.”
But the project was troubled almost from the start. Within three months the company was failing to meet the milestones set out in the contract. November, 1984, passed without the planned construction start on HMCS Halifax, the first ship in the order. In August the office of the federal auditor general in Ottawa acknowledged that the project would likely be the subject of an audit. In the meantime,
because of the delays Ottawa has deferred millions of dollars in progress payments which the federal government is committed to making only when specific milestones are met.
Jaquith told federal officials last spring that HMCS Halifax would be delivered six months behind schedule, in October, 1989, and that the second ship in the program —HMCS Vancouver —would also be late. But he insisted at that time that the remaining four vessels would be delivered on time, and declared that all would be built within budget. Jaquith blamed problems earlier in the project on a shortage of professional manpower and “a redirection of priorities” ordered by
the company’s senior management in January, 1985. The changes in the yard’s working plan meant that ship plans had to be completed sooner than expected. Moreover, Jaquith told Maclean's last week that the changes the company has asked for in some milestone dates do not arise from delays, but instead reflect the company’s new working plan. Declared Jaquith: “We haven’t asked to reopen the contract, we’ve asked to redefine the milestones.”
In the meantime, a second batch of frigates that the navy will need by the mid-1990s has become a factor in the equation. The navy would like to see the first of the “batch two” frigates slide down the ways soon after the last of the first group of frigates is launched in 1992. Industry observers assumed that the contract would go to Saint John Shipbuilding without tenders being called.
But now the company’s problems, as well as Ottawa’s struggle with deficit reduction, have led the government to consider asking for industry-wide bids. Ottawa’s acting director of procurement for the frigate program William Johnston told Maclean 's that his department has asked a group of potential suppliers whether any would be willing to replace Saint John as lead contractor for the second round of frigates. Said Johnston: “They’ve been asked to make expressions of interest.”
The canvass of other suppliers surprised some experts who believe that Saint John Shipbuilding’s initial troubles were the inevitable consequence of inexperience, after more than a decade during which Canada did not build a single warship. The last warship built in Canada was the destroyer HMCS Algonquin, launched by Davie Shipbuilding Ltd. of Lauzon, Que., in April, 1971.
Jaquith said that Canada lacks sufficient naval architects and shipbuilding managers to support two competing frigate-building programs. “We have hired essentially all of the people with experience,” he said. “If Canada were to pursue that approach, it would dilute our group and we’d end up with two groups that were relatively weak.” For his part, Vice-admiral J. Andrew Fulton, who retired as commander of the Canadian navy in 1983, suspects that federal officials are merely “hedging their bets, using this to get a better deal” from Saint John Shipbuilding. Still, Associate Defence Minister Harvie Andre insisted last week that the choice of builder for the second round of warships was “by no means a foregone conclusion.” Added Johnston: “Whether Saint John gets batch two will depend on its performance on batch one.”
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