But if the Washingtons scraped some extra profit out of the cast-off ferry flip, the political damage from the debacle inflicted a lasting injury on the local industry—almost all of which was now in the hands of the Washingtons. (Allied Shipbuilders is pretty much the only non-Washington yard on the coast that is capable of building a ship larger than 1,000 tonnes.) BC Ferries went to Germany for its next three ferry purchases, signing a $325-million contract with the Flensburger Schiffbau-Gesellschaft shipyard in 2004, and then negotiating for relief from the federal import tariff on the basis that the local yards weren’t up to the task.
By that time, the shipbuilding industry’s problem seemed to be epidemic—nationally. Aside from BC Ferries, the most obvious public-sector shipping investor is the federal Department of Defence. But the big navy contracts have usually been reserved for Eastern Canadian operations. And lately, even those yards had been starved for work. The last major federal-sponsored project was launched more than 20 years ago—Saint John Shipbuilding Ltd. in Saint John and Davie Shipyard across from Quebec City turned out a dozen Halifax-class frigates that have operated impressively in salty theatres around the world.
Two decades is a long time for a national shipbuilding industry to go without government work. It’s hard in a country with a sprawling geography and a small population for yards to keep up with the latest efficiencies and technologies, especially in an industry that is as protectionist as shipbuilding. As a consequence, when Ottawa announced its Joint Support Ship project in 2004, saying it would call for tenders on a $2.1-billion project to build two (or perhaps even three!) state-of-the-art supply ships, the industry all but laughed. Given the inevitable cost of modernizing yards, no one could afford to bid on the work at that price. Canada had lost the capacity to build its own naval fleet.
That realization, according to sources intimately familiar with the federal procurement strategy, is what inspired the government to change the question. Rather than asking, “Where can we get good, cheap ships, without sending taxpayer money on a European vacation?” they asked, “How can we be sure that the federal government has access to a supply of efficiently built ships, forever?” As one federal government source says, it became an issue of national security: “As a sovereign nation, we should have the capacity to build our own naval vessels.”
Of course, these gigantic government spending sprees—this particular program, known as the National Shipbuilding Strategy, is estimated to be worth $33 billion—are also a wonderful opportunity for political showboating. Aidan Vining, a business professor at Simon Fraser University, says, “Normally, the government wants to take political credit for job creation in the regions.…Normally, the ‘winners’ in these tournaments are very happy while the ‘losers’ are highly dispersed.”
But the Conservative administration of Prime Minister Stephen Harper could see, for a couple of reasons, that these were not normal circumstances. First, there was a hard historical lesson in the dangers of playing East against West on big defence contracts. In 1986, the Progressive Conservative government of then-prime minister Brian Mulroney ran a relatively transparent bidding process for a maintenance contract on its then-new CF-18 fighter jets. Bristol Aerospace in Winnipeg emerged the clear winner, on both technical and financial grounds—but the clout of Mulroney’s Quebec caucus meant the contract was given to Canadair in Montreal. Western Tories responded in a destructive fury. It was a major factor in the West’s shifting allegiance to the Reform Party, splitting the right-of-centre vote and dispatching conservatives to the federal political wilderness for more than a decade. That’s not a mistake that Stephen Harper was going to repeat.
Second, because there are so few shipbuilding centres in Canada—and because the federal government couldn’t afford to revive them all—Vining’s “losers” were going to be concentrated in a single province. Rather than take the heat for manipulating a process that was going to leave a single group of voters seriously unhappy, the Tory political machine did something that no one ever expects from a group of politicians: They got out of the way.
There followed a procurement process that—in contrast to the debacle surrounding the contract for the Lockheed Martin F-35 stealth fighters—has been held up as a model of bureaucratic rectitude and political restraint. The feds knew from the failed Joint Support Ship project that rustling up some specifications and suggesting a preferred purchase price was not going to work. So, beginning in 2009, federal officials began meeting with the folks at Seaspan—and their counterparts at other yards across the country—asking how the government should engage, and how industry could guarantee that it would upgrade its capacity and invest in its own sustainability.
The result was not a traditional Call for Proposals or even for Expressions of Interest. Rather it was a challenge to Canada’s largest shipyards. Limiting the conversation only to those yards that had a track record of building ships larger than 1,000 tonnes, the government asked potential bidders to explain how they could reach and sustain a world-class shipbuilding standard—while also kicking back part of the federally funded bonanza into community benefits.