Failed bidder files trade challenge against Ottawa's frigate design pick

The federal government's decision to select a group of companies led by Lockheed Martin Canada to design and support the construction of the navy's new frigates is now facing a trade challenge, on top of a Federal Court challenge filed last week.

Alion Science and Technology Corp. and its subsidiary, Alion Canada, have asked the Canadian International Trade Tribunal to look into the procurement deal. They're telling the tribunal that Lockheed Martin's design will need substantial changes to meet the federal government's requirements, which would mean higher costs and more delays.

The company last week separately asked the Federal Court for a judicial review and an order quashing the decision, which saw Public Services and Procurement Canada select Lockheed Martin Canada as the preferred bidder on the $60 billion program.

Alion pitched the De Zeven Provinciën Air Defence and Command (LCF) frigate, a Dutch-designed warship that is already in service in other countries.

More delays?

Depending upon how they play out, said defence procurement expert Dave Perry, both challenges have the potential to further delay the frigate program. Federal procurement officials had hoped to nail down a fully fledged design contract with Lockheed Martin by the winter.

Perry, who works with the Canadian Global Affairs Institute, said he expects those negotiations to continue — unless the Federal Court orders them to halt.

"Unless there is a compelling reason to stop, they are going to keep going," he said. "There is a recognition of the urgency across the board."

That urgency is partly due to the program's legacy of delays, which have stretched the design competition out for almost two years.

Public Services and Procurement Canada would not comment on the matter because it is before the courts, but a senior official, speaking on background Thursday, said the federal government has up to 20 days to respond to the court challenge.

The official — who was not authorized to speak on the record because of the sensitivity of the file — said there is flexibility built into the timeline and the government is optimistic it can meet its goal of an early 2019 contract signing.

Perry said there are aspects of both the court challenge and the application to the Canadian International Trade Tribunal that he finds puzzling.

Alion claimed in its court filing that the winning bid was "incapable of meeting three critical mandatory requirements" of the design tender.

Speed bump

The company said, for instance, that the Type 26 cannot meet the mandatory speed requirements set out by the navy and that both Public Services and Procurement Canada and Irving Shipbuilding, the yard overseeing the construction, should have rejected the bid outright.

Perry said the criteria cited by Alion were among the first the federal government evaluated.

"The rest of Lockheed Martin's bid wouldn't have been looked at if the Crown and Irving was not satisfied that the bid met each of those [initial] criteria," he said. "It's a weird dynamic."

Alion's trade tribunal application argues in considerable detail that in order for the Type 26 to meet Ottawa's speed requirement, it will have to undergo considerable redesign.

The court application also cites the fact that the design tender was amended 88 times and those changes "effectively diluted the [warship] requirements" and allowed the government and Irving to select "an unproven design platform."

Unlike its two competitors, the Type 26 has yet to enter service with the Royal Navy. Competitors have privately knocked it as "paper ship."

Navantia, a Spanish-based company, was the other bidder in the competition.