Defence sources tell The Canadian Press that Justin Trudeau's government is uncomfortable with sole-source nature of the arrangement and the way the Conservatives handled the arrangement with Project Resolve, a subsidiary of Levis, Que.-based Chantier Davie shipyard.
The company's plan is to upgrade a civilian tanker to act as military replenishment ship while the navy's long-delayed, joint support ships are built.
Project Resolve CEO Spencer Fraser speaks to local stakesholders last October. (Photo: Jacques Boissinot/CP)
In order to get the deal going last spring, the Harper government quietly made an unprecedented change to the cabinet regulations governing sole-source purchases.
Documents obtained by The Canadian Press last summer revealed a line was added to contracting regulations in June. It gives the cabinet authority to award a deal to a single company if there are urgent "operational reasons'' and it fulfills an interim requirement.
The letter of intent signed with Project Resolve and the planned $700 million, seven year contract were put before the federal Treasury Board but defence sources say the plan puts the Liberals in a political jam.
For years they have demanded open competitions in military procurement, but the first program they're asked to approve is a sole-source arrangement that required a special cabinet fix.
The sources, who were not authorized to speak to the media, said there are a number of questions about the deal itself that need to be answered. For instance, the letter signed by the Conservatives puts the federal government on the hook for costs that the company has incurred if the deal falls through
Defence sources with knowledge of the negotiations say the company has already lined up a ship for conversion, the 24,000-tonne, double-hulled Asterix.
Part of the work is to be done at Aecon Pictou Shipyard in Nova Scotia before moving on to the modern Davie facility outside of Quebec City.
The company — perhaps sensing the deal was in trouble — recently produced a slick presentation that highlighted the ability of the ship to respond to a humanitarian disaster, such as the Syrian refugee crisis. The proposal noted that the vessel could be converted to carry hundreds of people and provide floating hospital services.
The Liberals are also facing pressure from the two companies involved in the national shipbuilding program — Irving Shipbuilding, in Halifax, and Seaspan, in Vancouver.
Both yards, which are the federal government's contractually preferred military and civilian builders, have written letters and protested vigorously about the deal with Chantier Davie.
The Harper government went looking for a temporary supply ship after the navy was forced to retire its existing, 45-year-old vessels — HMCS Protecteur and HMCS Preserver. The promised new support ships, to be built by Seaspan, are still years away.
Some internal defence department estimates don't have the replacements arriving until 2020, or even later. The federal government has yet to negotiate a construction contract for the ships.
Without replenishment ships, the navy's frigates are forced to rely on other nations for ammunition, fuel and food while on long overseas deployments.
It also affects the navy's ability to deploy more than one warship at a time.
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