December 17, 2020 | Local, Naval
David Pugliese • Ottawa Citizen
Dec 14, 2020 • Last Updated 3 days ago • 6 minute read
Defence industry executives have been told by a top bureaucrat to stop raising concerns about the controversial program to build a new fleet of warships that is now estimated to cost $70 billion and could go even higher.
Company officials have been complaining to politicians and media outlets that the Canadian Surface Combatant project has fallen far short on its promises of creating domestic employment. Another company is in the middle of a lawsuit over the Canadian Surface Combatant or CSC, alleging the procurement was bungled. Federal lawyers are trying to limit the amount of information that can be disclosed in court about the project, with the next hearing to be held Jan. 13. Other industry executives have been warning politicians the rising price tag for CSC will jeopardize funding for other equally important military equipment projects.
But Jody Thomas, deputy minister of the Department of National Defence, told executives Oct. 5 that they are hindering the project and she characterized their efforts as being those of sore losers. “I think there's still too much noise from unsuccessful bidders that makes my job and Bill's job very difficult,” she said, referring to Bill Matthews, deputy minister at Public Services and Procurement Canada.
The CSC project would see the construction of 15 warships for the Royal Canadian Navy at Irving Shipbuilding on the east coast. Construction of the vessels, to replace the current Halifax-class frigate fleet, isn't expected to start until 2023. But the project has already faced delays and significant increases in cost as the price tag has climbed from an original $14 billion estimate to around $70 billion.
In an email to this newspaper about Thomas's statement to defence executives, the DND noted that industry officials have the right to raise their concerns with politicians or turn to the courts if needed. “However, the Department of National Defence, including the Deputy Minister, works for Canadians,” the DND stated. “While we maintain close, positive working relationships with industry, our primary responsibility is to the Canadian taxpayer.”
But Thomas's admonishment didn't surprise industry representatives; although they won't go on record with their names for fear of jeopardizing future military contracts, a number of executives point out that for years federal officials have tried to keep a lid on questions and concerns as well as information about the CSC.
A review of past actions by the current Liberal and previous Conservative governments and internal documents obtained by this newspaper through the Access to Information law appear to support that view.
Federal officials have on two occasions tried to stymie attempts by the Parliamentary Budget Officer to obtain details and budget outlines of the CSC project, as well as with other vessel construction programs under the government's National Shipbuilding Strategy.
In 2019, officials with Public Services and Procurement Canada issued a directive that firms interested in maintenance work on the Canadian Surface Combatant program could not talk to journalists and instead must refer all inquiries to the department. That was the fifth such gag order on military equipment projects issued by government over a year-long period.
In one case, Procurement Canada threatened to punish any firms who violated the gag order on the proposed purchase of a light icebreaker. That prompted one unnamed company to submit a question to the department on whether a government ban on talking to journalists was even legal, according to records.
Industry executives pointed out last year the secrecy was not based on security concerns, but on worries the news media would be able to use the information to keep close tabs on the problem-plagued military procurement system. After this newspaper reported on the gag orders, Procurement Canada claimed last year it would no longer use such bans.
Michael Byers, a professor at the University of British Columbia who has produced two studies on the troubled federal shipbuilding program, said government officials have repeatedly tried to limit the amount of information available on the CSC and other shipbuilding projects. “These projects are in serious trouble and when you have those problems, combined with politics, the pressure to keep things secret are very very high,” he explained.
Federal officials appear to be concerned specifically about journalists who might be reporting on two particular ship projects; the CSC and the Arctic and Offshore Patrol Ships or AOPS. Both projects involve Irving Shipbuilding.
Documents show Irving representatives and bureaucrats from Procurement Canada (then called Public Works) warned DND procurement official Ian Mack in April 2013 that CBC journalist Terry Milewski was working on a story about the high costs of the AOPS and the fact that other nations paid a fraction of what Canadian taxpayers were being charged for similar vessels. Six days after Mack sent his warning out to other bureaucrats, Milewski produced his report.
In 2016, Public Works officials alerted Minister Judy Foote's office this newspaper was asking questions about the CSC. Foote's office, in turn, warned Irving representatives.
In March 2019, the DND and Public Services and Procurement Canada warned Irving Shipbuilding this newspaper was asking questions about problems with welds on the AOPS. Documents show that after a series of questions were submitted by this newspaper to the DND, PSPC deputy minister Bill Matthews, DND deputy minister Thomas and Pat Finn, then DND's top procurement official, held a conference call with Irving President Kevin McCoy.
McCoy briefed “Jody, Bill, Pat” about the company's plans to sue this newspaper if it “published anything that impugned our professional reputation.” There is no indication in the document that the bureaucrats raised any objections to the company's strategy. Thomas took no notes during the conference call, according to the department's Access to Information branch.
Matthews responded to Irving's decision with a supportive email. “Welcome to my world,” Matthews wrote to McCoy.
Matthews has declined requests to be interviewed by this newspaper. In an email, the department stated the deputy minister's comment was referring to the fact defence procurement “is a highly complex environment, in which we often face criticism about our processes and decisions.”
DND confirmed to this newspaper that there had been minor issues with welding on the AOPS and the article was published.
In May 2019, the Globe and Mail also reported federal officials alerted Irving the newspaper was seeking information from the Department of Innovation, Science and Economic Development about whether the French fry plant investment qualified as an industrial benefit for the Arctic ship project. After the Globe sent two emails to the department's media relations branch, the newspaper received a letter from a lawyer working for Irving. The letter threatened legal action if the article contained any allegations of improper conduct.
Innovation, Science and Economic Development spokesman Hans Parmar stated in an email that Irving was told of the media inquiry as part of the department's policy to ‘'encourage transparency.''
At the time, Irving spokesman Sean Lewis said while the firm respects the work of journalists, in the case of the Globe and this newspaper the company threatened legal action because the news organizations “had highly inaccurate information that would cause our company, and the reputation of our hardworking employees, considerable reputational damage.”
In the case of the Globe, Irving confirmed it had received the approximately $40 million industrial benefit credit for the French fry plant.
The incident with the Globe and Mail also revealed bureaucrats at Innovation, Science and Economic Development Canada had a system to alert Irving each time a journalist asked questions about AOPS. The department claimed it was required to do so according to its contract with Irving. However, that contract contains only a general reference to coordinating public communications. It is unclear whether the department has established a similar system for the CSC project.
The department did not answer questions about how many times it has shared information about journalists with Irving officials.
Asked about how many times Innovation, Science and Economic Development Canada has alerted Irving about journalists asking questions about shipbuilding matters, company spokesman Thomas Ormsby responded: “We do not discuss customer contracts.”
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Murray Brewster The Department of National Defence has faced some tough, pointed questions about whether it has chosen the right radar, main gun and close air defence systems for the navy's new frigates, which will soon hit the drawing board. An unsolicited defence industry slide deck presentation, obtained by CBC News, questions each of those key components in the planned $60 billion modernization of the fleet. It was circulated earlier this year and put in front of the senior federal officials in charge of the program. The defence industry briefing presentation points out that the Lockheed Martin-built AN/SPY-7 radar system — an updated, more sophisticated version of an existing U.S. military system — has not been installed and certified on any warship. A land-based version of the system is being produced and fielded for the Japanese government. The briefing calls it "an unproven radar" system that will be "costly to support," and claims it comes at a total price tag of $1 billion for all of the new ships, which the undated presentation describes as "an unnecessary expenditure." Lockheed Martin Canada and British-based BAE Systems Inc. were chosen earlier this year by the Liberal government to design and help build 15 new warships to replace the country's existing patrol frigates — the backbone of the navy. Old guns, inadequate defence systems? The briefing raises concerns about DND's choice of a main gun for the frigates — a 127 millimetre MK 45 described by the briefing as 30-year-old technology that will soon be obsolete and cannot fire precision-guided shells. The briefing also singles out as inadequate the Sea Ceptor close air defence system, which is meant to shoot down incoming, ship-killing missiles. Given the Canadian government's past missteps with military procurement — buying used equipment or opting for developmental systems that take years to get into service — a defence expert said the caution being expressed by the industry now is legitimate, but in some respects it's coming years too late. "There's a risk anytime you try to do something new for the first time," said Dave Perry, an analyst who specializes in procurement at the Canadian Global Affairs Institute. The navy struggled for years to get second-hand British submarines up to Canadian standards. The air force also sat on its hands while the manufacturer of the CH-148 Cyclone helicopters worked out all of the developmental bugs. The presentation, Perry said, essentially tries to re-litigate decisions made by federal officials over three years ago, when the government's request for proposals was mapped out. 'The ship has sailed' "This is calling into question whether the government set down [technical] markers in an appropriate spot or not," he said. "There is always the possibility that these issues can be revisited, but I think at this point the ship has sailed because a competition was run, it did produce a preferred bidder." The pressure to get the new frigate design right is enormous, given the enormous expense involved and the changing nature of warfare, Perry added. The briefing presentation apparently was circulated by a rival radar-maker which was not part of the bidding process. Federal officials declined to name the company. Raytheon Canada Ltd. and its U.S. parent are among the biggest electronics and radar manufacturers in the world. A request for comment sent to their international business division went unanswered last week. 'We did our homework' The concerns in the briefing were presented last summer to: Pat Finn, former head of materiel at DND; Andre Fillion, the assistant deputy minister of defence purchasing at Public Services and Procurement Canada; and Rear Admiral Casper Donovan, the navy's director general for "future ship capability." DND confirmed the existence of the briefing presentation but refused to say who received it or which defence contractor was pushing it. "It is not uncommon for companies to present unsolicited material to our department when they are unsuccessful in a competitive process," spokesman Andrew McKelvey said recently. "We do not comment on these unsolicited documents as they are provided outside the scope of our established procurement process." Both the department and the commander of the navy stand behind the decisions that were made and the systems chosen for the new frigate. "We did our homework. We talked to other navies. We engaged our allies," said Vice-Admiral Art McDonald, who added DND was aware of other options on the market. Delivering the warships on schedule and on budget in the mid-2020s is a constant preoccupation in the department, he said. He would not say whether the choice of radar system might mean a delay in delivery. A senior executive at Lockheed Martin Canada said the company's radar system is identical to one selected by the U.S. government and other countries. Much of the system's hardware, and some of its software, have been used on U.S. Aegis-type guided missile destroyers and cruisers. The difference between the radar system chosen for Canada's frigates and conventional systems is in its array: the Lockheed Martin system sweeps around and above the vessel, rather than only horizontally. "The work that remains is to integrate it into the ship and integrate it into the ship's combat system," said Gary Fudge, general manager and vice president of Lockheed Martin Canada. "We worked for two years with BAE during the proposal stage to optimize the ship design with this particular radar." https://www.cbc.ca/news/politics/frigate-gun-radar-canadian-navy-1.5405054