The government then produced something called a Solicitation of Interest and Qualifications, which went out in September, 2010. According to Seaspan vice-president John Shaw, a 30-year veteran of the marine industry and the leading architect of Seaspan’s bid, it was not the usual question: “Who wants to build ships A, B and C?” It was, more broadly, “Who thinks they have what it takes to be the federal government’s preferred shipbuilding contractor for the next 20 or 30 years?”
The solicitation also set out a very clear assessment process, heavily populated by third-party validators (the third parties not to include federal cabinet ministers). There was a “fairness monitor” (Hill International Inc.), there were advisers and validators for process and financial matters (KPMG and PricewaterhouseCoopers), and there was a technical analyst, what the federal government describes as “the foremost expert in international shipyard assessment,” the U.K. firm First Marine International (FMI). Among them, these validators were to measure four areas.
Bidders would be accorded 60 points for their Current State and Plans—how close were they to a globally competitive capacity now and what were they prepared to do to achieve a target state. They got 20 points based on the Costs to Canada for Upgrades and Improvements required to get to the target state; 10 points for the shipyard’s Financial Situation; and 10 points for what the federal government called the Value Proposition—the investment that yards would make in such things as “human resources development, technology investment and industrial development activity.” To make that last part completely obvious, the material specified that “A sum equivalent to 0.5% of the value of the shipbuilding contracts is to be invested in these value propositions.”
The theory (and everyone involved says that it rolled out well in practice) was that the external validators would score the bidders and that a Deputy Ministers’ Governance Committee would make a decision—with no ministerial intervention.
Three yards rose to the challenge: Irving Shipbuilding in Halifax, Davie Shipyard in Quebec and Seaspan all bid on the smaller of two contracts: to build seven so-called non-combat vessels, an icebreaker, two naval support ships, three fisheries vessels and one research ship. Only Irving and Seaspan bid on the larger “combat vessel” contract: to build 15 frigates and destroyers. And the rules made it clear that no yard would get both contracts.
On decision day, Irving claimed the larger prize, Seaspan the smaller and Davie was left standing on the largest dry dock in Canada, with nothing to do but wait for repair work and its share of a $2-billion federal package of 116 much smaller vessels. Remarkably, while acting NDP Opposition leader and Quebec MP Nycole Turmel was complaining, mildly (“We have to build this industry everywhere, not pick winners and losers like the Conservatives have done”), her shipbuilding critic, Nova Scotia MP Peter Stoffer, was calling it “a very, very great day for all of Canada.”
That was certainly the West Coast consensus. When asked if he was disappointed that his company had lost out on the combat vessel package, Seaspan CEO Jonathan Whitworth pointed out that he had just scooped the largest shipbuilding contract that any West Coast yard had won in more than half a century. An $8-billion job would do, thanks. In a quote that summons an image that a more conventional executive would have tried to avoid, Whitworth told The Vancouver Sun, “Today is living proof that sometimes that scrappy dog catches the bumper of that car.”
Whitworth again makes no bones about the “junkyard dog” status of his enterprise. When Seaspan threw itself into this process, he says, “There was no Plan B.” Looking around at the state of the industry and the amount of work that Seaspan could attract without a serious upgrade, “We realized that we had to win this or start shutting shipyards.” So the company spent $2.5 million producing a 25,000-page proposal.
Which brings the story back to the Washington fortune: The actual cost of the National Ship Procurement Strategy bid was only a small first step in the necessary spending. Specifically, in order to make sure that Seaspan scored 20 out of 20 in the second category, “Costs to Canada for Upgrades and Improvements,” the Washingtons committed to spending between $150 million and $200 million on new buildings and equipment, principally at the 35-acre Vancouver Shipyards site in North Vancouver—at no cost to the government or taxpayer. It’s likely that Seaspan also scored an easy 10 out of 10 for “Financial Situation.” Dennis Washington’s idea of an interesting personal project is to rebuild luxury yachts. His most recent refit, the 328-foot Attessa IV, is estimated to have cost $200 million, which would suggest that the Washingtons’ financial situation is just fine, thanks.
Follow us on Twitter: