The race to build Canada’s next submarine fleet is on its final lap as the federal government evaluates two rival bids for the lucrative contract.
The two qualified bidders, South Korea’s Hanwha Oceans and Germany’s TKMS, have fought tooth and nail in an unusually short competition to supply the Royal Canadian Navy with some 12 submarines — a large order expected to be worth tens of billions of dollars.
The federal government’s internal analysis of the competing bids is expected to be complete by now.
“Third quarter of the game and it’s still a draw, so let’s see who will win,” TKMS CEO Oliver Burkhard told The Canadian Press recently while he was in the nation’s capital for CANSEC, Canada’s largest defence trade expo.
“We’re ready.”
Ottawa hasn’t tipped its hand but Prime Minister Mark Carney’s government is pushing the project along at an unusually fast pace for such a massive procurement. It also hasn’t made a secret of the fact that it sees the contract as a way to secure domestic economic benefits.
Secretary of State Stephen Fuhr, Carney’s point person for military equipment purchasing, said this past week the winner will be selected by the “end of June.”
“This could possibly be the biggest military procurement Canada has ever done … and Canada will have done a competitive process on submarines inside a year,” Fuhr told journalists on May 27.
“That is an unbelievable speed to do such a large procurement, so we’re really proud of that.”
Procurement projects for major navy combat ships typically take longer than five years. Burkhard said Canada is moving at “light speed,” something he’s not seen before.
“We have to accept as industry that this is maybe the new normal and Canada is maybe leading the pack maybe for other nations as well, to find out how much benefit (the country) can generate when (it) buys submarines,” he said.
The German sales pitch revolves around building up the NATO alliance. It’s promoting its subs as interoperable with German and Norwegian fleets which track Russian sub movements together and share knowledge, data and equipment.
The company is an established industry powerhouse that has supplied most of the NATO alliance’s conventional fleet.
“If Canada would choose us, then it’s a proven, not a promised, approach,” Burkhard said.
His rival is a dark horse that has never exported a submarine abroad but is hungry to establish itself as a major global player.
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While TKMS has — like its submarines — operated stealthily throughout the competition by mostly targeting key government officials, the South Korean firm Hanwha launched a massive nationwide advertising blitz.
It plastered ads all around Parliament Hill and the Ottawa airport, and ran a TV and online ad campaign voiced by Peter Mansbridge.
Hanwha Defence Canada CEO Glenn Copeland said the company has aspirations to outfit the Canadian military with all kinds of hardware and wants to become a household name, like LG, Kia and Hyundai.
“Hanwha is just as big a brand back in Korea, but it’s not a known quantity from North America as a tier one defence provider. So in order to be successful, you really have to establish your brand,” Copeland told The Canadian Press.
Copeland said Hanwha sees its advantage in speedy delivery and its promises of economic development.
Hanwha said KPMG valued its bid at $60 billion in economic opportunities and said it would support 22,500 full-time jobs a year and generate $94 billion in GDP.
Ottawa is in a race against time to replace Canada’s current submarines, which are old, rusted and barely in operation.
Canada’s fleet of four Victoria class submarines is expected to be out of commission by 2035. Only one is currently functional and the government will likely find itself forced to cannibalize some of those remaining subs for spare parts.
Hanwha, which boasts a massive shipbuilding factory in Geoje, Korea, that makes heavy use of robotics, has pitched Canada an aggressive delivery schedule — four subs by 2034 and then one a year until they’re all delivered.
Germany and Norway are also ordering submarines from TKMS, so Canada would join a queue.
But while TKMS at first pledged to deliver Canada’s first sub by 2034, it amped up its offer this week to four deliveries by 2036. Germany and Norway would each bump back a submarine delivery.
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“That would be the drumbeat: 2032, 33, 35, 36,” Burkhard said.
TKMS also put out its economic figures this week, which pledge $160 billion in economic activity, $86 billion in GDP and more than 650,000 jobs over the entire project.
Germany’s Defence Minister Boris Pistorius stumped hard for the German submaker throughout the week while at CANSEC.
“TKMS is unparalleled in terms of providing long-standing expertise in submarines,” he said while standing next to Defence Minister David McGuinty.
Hanwha recently sent one of its subs to Victoria, B.C. and brought Canadian navy sailors along for the ride.
The public campaigns have offered little on the actual capabilities of the subs and have instead emphasized geopolitical partnerships and domestic economic benefits.
The government earlier this year gave the companies a surprise extension on their bid timelines. Industry Minister Melanie Joly urged them to pony up offers to spin up an auto plant to help Canada’s tariff-battered auto-sector.
While both firms have signed agreements with Canadian firms, Hanwha has signed a long list of them and has targeted tariff-affected industries and support for LNG exports.
It signed an agreement with Sault Ste. Marie’s Algoma Steel promising to deliver hundreds of millions of dollars in support and to use its steel in its submarines. It also reached an agreement with Canada’s Automotive Parts Manufacturers’ Association to work on military land vehicles together.
Babcock, a weapons-handling equipment provider for Hanwha’s KSS-III and service contractor for the Victoria class subs, signed an agreement this week with COTA Aviation to locate some of its work on Korean weapons systems in Canada.
TKMS says its approach to corporate partnerships is to very carefully examine whether it makes sense to integrate companies into their supply chains.
“It’s not the number of MOUs that count. It’s the quality … and if you look at ours, it’s CAE, Cohere, Seaspan — they’re all the big ones,” said Burkhard, adding his company is opening a path for CAE to get into producing submarine training simulators.
The subs are expected to cost tens of billions of dollars and the economic benefits tens of billions more, with the biggest bang landing in the first years of the program.
The exact price tag of the overall order could vary heavily, depending in part on whether the Canadian government asks for modifications, said Deloitte’s Daniel Kerry, who worked on the U.K.’s submarine program.
“They’re going to be eye-wateringly expensive,” Kerry said in a past interview. “But they’re also going to bring an incredible amount of value to the Canadian economy.”
It seems Hanwha is offering more tangible benefits for the Canadian economy, and a pivot to the pacific is imo a good choice for the future
German subs will be too expensive for Canada. Hanhwa subs will costs much less and exceed Canadian requirements. Hanhwa is arguably number 1 ship builder in the world. Quality is guaranteed.
South Korea built up a massive navy with its domestic industry supporting everything. No one believes that Germans can deliver 4 subs by 2036. And its subs are too small to go under the ice.
It is No brainer.
Hopefully this procurement turns out to be good for the economy, it’s really needed right now.Very thankful that somebody with knowledge and ability is in charge as opposed to career a politician.So for so good, keep it up.
Haters are gonna hate , majority of Canadians are on board.
Canada in recession and Carney flits and farts around like the useless pos he is. People are needing relief from all this but where is he? Playing Captain Submarine. Hiding from the duty of a PM to do what’s right for the people.
There will be no relief from this Liberal sham of a government. They do not operate for Canadians. They operate for themselves.
maybe carney should go down with the sub
More biiiiiiiiig Carney talk. Keep talking Carney bla bla bla and what will happen? Nothing. That’s what will happen. Even if these liberal lunatics make a decision it will be years before they implement anything. Not to mention we only have the longest coast line in the world and we have to go somewhere else to have ships built for us. It’s embarrassing.
Let see, a choice between an experienced U Boat builder or supplier of junk. I expect the Liberals will do their usual thing. Buy junk for the military that comes with generous donations to the various Liberal slush funds.
Another tax dollar black holes to sink billions of our hard-earned money into.
Oh good. That means only another 3 or 5 years before we make a decision.
Buy a Nuclear sub or nothing at all. Sorry, I thought the Liberals were worried about “climate change” so why buy a diesel sub?
Toi bad Canadians are too mentally challenged to build their own submarines.
To bad the Liberals and Carnival Carney do not think. What did we do with the last diesel/battery powered subs. Absolutely nothing. We were lucky they got to Canada without sinking permanently. – So what if we get production line jobs. the money will go to South Korea, and we will have unemployed workers.
Maybe invest in something we want and need. A dedicated cross country passenger rail line? A port in Churchill not given to the natives? A pipeline to Prince Rupert, that is also not given to the natives. All good examples of what to invest our tax dollar in so we see benefit.