Bold move backfires as Canada declines Naval Group-Fincantieri frigate offering

PARIS, ROME, and VICTORIA, British Columbia — Naval Group and Fincantieri are out of the running to compete in Canada's program to acquire a fleet of new surface combatants after they failed to submit a bid through the formal process and instead sent a proposal directly to the Canadian government.

The companies had offered Canada a proposal to construct 15 ships at Irving Shipbuilding in Nova Scotia for a fixed cost. But the proposal circumvented the government's procurement procedure, which required formal bids to be submitted to Irving by Nov. 30. Naval Group and Fincantieri did not follow that requirement.

The Canadian government announced Tuesday it had rejected the proposal from the two firms. “The submission of an unsolicited proposal at the final hour undermines the fair and competitive nature of this procurement suggesting a sole source contracting arrangement,” Public Services and Procurement Canada, or PSPC, which is overseeing the procurement, said in a statement. “Acceptance of such a proposal would break faith with the bidders who invested time and effort to participate in the competitive process, put at risk the Government's ability to properly equip the Royal Canadian Navy and would establish a harmful precedent for future competitive procurements.”

Canada's decision effectively removes Naval Group and Fincantieri from taking part in the program since the companies never submitted a formal bid, government officials noted.

Public Services and Procurement Canada declined to say how many bids were received for the Canadian Surface Combatant project. Besides a bid from the BAE-Lockheed Martin Canada consortium for the Type 26 frigate, only two other companies have acknowledged bidding.

A team led by Alion Canada is offering the Dutch De Zeven Provinciën-class air-defense and command frigate. The Spanish shipyard, Navantia, has submitted a bid based on its F-105 frigate design.

Canada expects to make a decision on the winning bid sometime in 2018.

The program to build 15 new warships is estimated to be worth CAN$62 billion (U.S. $49 billion). The program was originally estimated to cost CAN$26 billion, but that figure has been revised a number of times and has been climbing steadily over the last several years.

Fincantieri and Naval Group had hoped the proposal of a fixed price tag of about CAN$30 billion for a new fleet might sway the Liberal government, as it would eliminate much of the risk and would offer a proven warship design. The proposal had the backing of the French and Italian governments and was made directly to Canadian Defence Minister Harjit Sajjan.

Naval Group and Fincantieri took note Canada had rejected their joint bid that filed outside the competition for a frigate fleet, but they were still ready to offer the design of their warship for local assembly, the companies said Wednesday.

“We acknowledge the position expressed by the Public Services and Procurement Canada (PSPC) not to take into consideration the offers submitted outside the process of the Canadian Surface Combatant program (CSC) Request For Proposal (RFP),” Naval Group and Fincantieri said.

“Nevertheless, Naval Group and Fincantieri remain at the disposal of Canada to contribute to the modernization of Canadian forces with a sea-proven warship, currently in service with the French and Italian Navies, that would minimize the scheduling gaps for design and construction of all the ships in Canada and maximize value for money,” the companies said.

Asked on Wednesday how Fincantieri and Naval Group will react to Canada's rejection, Fincantieri CEO Giuseppe Bono declined to give a direct response but did suggest there might be room for compromise.

“We don't want to take risks,” he said, adding: “we need to see what makes sense” and “the customer is always right.”

In addition, he said the design of the ship offered to Canada would be more similar to the Italian version than the French.

“We have made a joint offer of a FREMM, which is close to the Italian version if only because Italy has an anti-submarine warfare version,” he said.

The terms of the Canadian competition posed a problem as the tender required bidders to hand over intellectual property and there was danger it might end up in the wrong hands, an analyst said.

“The problem from the outset is how the Liberals have set the competition,” said Robbin Laird, of consultancy International Communications and Strategic Assessments, based in Paris and the Washington, D.C., area.

“One would think that with ... the U.S. and Australia launching new frigates as well as the French and Italians working on a new frigate program, the approach would be to leverage the allied global recapitalization effort,” he added. “Yet what the Canadian government has focused upon is simply forcing competitors to provide intellectual property to their own Canadian shipyard without any real protection against leakage of that technology to China or to other competitors.”

In their direct bid to the Canadian government, the European partners offered a speedy start of shipbuilding in 2019, which they said would help sustain local jobs. A frigate generally takes about four years to build.

The Franco-Italian frigate was offered with the Thales Sea Fire radar, a multifunction digital system, an industry executive said. Naval Group offered its Senit combat management system, with Fincantieri delivering the ship design.

Thales developed the flat-paneled Sea Fire for the FTI, an intermediate frigate ordered for the French Navy and aimed mainly for export markets.

Anti-submarine systems included Thales Captas hull-mounted and towed array sonars, specialist website Mer et Marine reported. The weapons could include a 127mm gun and two vertical launchers for surface-to-air missiles, which would likely be Aster but would also be available for American weapons.

https://www.defensenews.com/industry/2017/12/06/bold-move-backfires-as-canada-declines-naval-group-fincantieri-frigate-offering/