Quebec shipyard added to federal shipbuilding plan after lobbying, delays

Feds reach agreement to partner with Que. shipyard The Davie shipyard in Levis will become the third manufacturer in the national shipbuilding strategy.

The excitement was palpable on Tuesday as Prime Minister Justin Trudeau formally admitted Quebec-based Chantier Davie into the exclusive club of shipyards eligible for billions of dollars in federal work.

The announcement was the result of a decade of intense lobbying by the company and delays by the other two yards in the delivery of new vessels for the Canadian Coast Guard and Royal Canadian Navy.

It also followed protracted negotiations between Davie and the federal government that appeared at times on the verge of collapse, as questions swirled about Davie's ability to deliver a fleet of new icebreakers on time and on budget.

Many of those questions remained as Trudeau appeared before a jubilant crowd of hard hat-wearing workers and politicians to confirm Davie's addition to Ottawa's shipbuilding plan with Vancouver-based Seaspan Shipyards and Halifax-based Irving Shipbuilding.

"Today, we're announcing that our government has reached an agreement with Chantier Davie for the shipyard to become the third strategic partner under the national shipbuilding strategy," Trudeau said to applause from the crowd.

"This means that we're officially starting negotiations for contracts that include the construction of six icebreakers and one polar icebreaker for the Canadian Coast Guard."

The prime minister, who was joined at the shipyard by Quebec Premier Francois Legault and a bevy of federal and provincial ministers, later pegged the cost of those icebreakers at around $8.5 billion.

Both Trudeau and Legault, whose province will be contributing $500 million to help Davie expand and upgrade its facilities to build the much-needed icebreaker fleet, also expressed confidence that work on the fleet would begin soon.

"We wouldn't be here today making this announcement if we weren't incredibly optimistic," Trudeau told reporters.

But there were also reasons for skepticism, starting with the fact it took Ottawa and Davie over three years to negotiate the agreement -- more than two years longer than anticipated. Officials at one point raised the prospect heading back to the drawing board.

The shipyard, which is owned by a company based in Monaco, also has a mixed record when it comes to making good on the federal contracts that it has won in recent years. That includes the provision of three second-hand icebreakers to the coast guard.

Originally ordered in August 2018, the last of the three Norwegian-built icebreakers was only delivered by Davie late last year. By that point, the cost to Canadian taxpayers had soared from $610 million to nearly $1 billion.

Trudeau did not provide a timeline for when the government expects Davie to begin producing new icebreakers to replace the coast guard's existing vessels, many of which have already exceeded their expected lifespans.

Davie, which is owned by a company based in Monaco, referred questions to Public Services and Procurement Canada. Neither that department nor Fisheries and Oceans Canada, which oversees the coast guard, responded to requests for comment.

Trudeau did defend the delay and the shipyard, saying: "Bringing this all together today took a lot of work by a lot of partners. But the fact we're able to do this is a validation ... of the great work people have done here at Davie, and of the leadership of governments."

The prime minister also stood by the decision to add a third shipyard to the strategy, which was originally premised on the idea of supporting only two national shipyards to create a stable and sustainable Canadian shipbuilding industry.

When Irving and Seaspan were selected to the plan, analysis at the time said adding a third yard would undermine the strategy's long-term objectives.

But Trudeau said Tuesday that more recent assessments have shown there is enough work for everyone.

Such assurances did not convince Rob Huebert, an expert on the Arctic and Canadian Coast Guard at the University of Calgary, who predicted the addition of Davie will ultimately undermine the long-term sustainability of the shipbuilding plan.

Huebert blamed years of government mismanagement for the fact the government now has to undercut the original intent of the shipbuilding strategy to build new icebreakers, which are long overdue.

"What's happening is we're saying we're in a crisis situation, but the crisis has been self-created by the government," Huebert said.

Davie was initially excluded from the shipbuilding plan following a 2011 competition that selected Irving to build the navy's new warships, and Seaspan to build two new naval support ships and the bulk of the coast guard's new fleet.

The Quebec shipyard was able to pick up some piecemeal work, including the construction of two federal ferries and the provision of several second-hand ships for the navy and coast guard. Those included a supply vessel for the navy and the three used icebreakers.

But Davie made no secret of its desire for more and, with help from allies in Quebec City and the opposition benches in Ottawa, the company based in Levis, Que., lobbied the federal Liberal government hard for official inclusion in the shipbuilding plan.

At the same time, Seaspan was struggling to meet its delivery schedules thanks to mismanagement by both the Vancouver yard and federal government. All the while, the coast guard's fleet was becoming increasingly decrepit.

The impact of those delays crystallized last year when the coast guard announced it was retiring CCGS Hudson, an ocean research vessel, at the same time it revealed Seaspan would not deliver its replacement until at least 2025.

It was in this context that the Liberal government announced in August 2019 that it was adding a third yard to the shipbuilding plan to build Canada's next icebreaker fleet, and formally called for shipyards to indicate their interest.

Ontario shipyard Heddle Marine wasted no time accusing the government of stacking the deck in Davie's favour. Yet the Canadian International Trade Tribunal was blocked from investigating Heddle's complaint after Ottawa invoked a special exemption.

In December 2019, the government announced Davie was the only shipyard to meet its requirements.

- This report by The Canadian Press was first published on April 4, 2023