What’s behind the Liberals’ shipbuilding strategy shift? In short: everything

Liberal MP Joel Lightbound, then Parliamentary Secretary to the Minister of Finance, arrives to announce a contract given to Davie shipyard. He spoke out against his government's position on vaccine mandates on Tuesday. Tuesday, July 16, 2019 in Levis Que. THE CANADIAN PRESS/Jacques Boissinot. THE CANADIAN PRESS/Jacques Boissinot

The Liberals are set to announce within weeks the start of a contest to allow a third shipbuilder to enter the National Shipbuilding Strategy.

Global News has learned federal officials do not plan to have an umbrella agreement in place with the winner before the election this fall, which is expected to begin around early or mid-September. But the decision to open up the multi-billion dollar program raises questions about what may have prompted it.

Documents obtained by Global News through access to information laws show just six months before announcing the plan to open up the program, officials were preparing to insist privately that no such changes were being entertained.

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In May 2019, Prime Minister Justin Trudeau and Fisheries and Oceans Minister Jonathan Wilkinson announced that a third domestic shipyard would be invited to compete to enter the National Shipbuilding Strategy; that is widely presumed among officials and industry sources to mean Quebec’s Davie shipyard.

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Only months earlier though, Wilkinson was told in briefing notes dated Nov. 20, 2018, to echo remarks by former Treasury Board President Scott Brison when the latter insisted repeatedly late last summer there were no changes planned that would change the role of one of either of its two existing members.

Global News repeatedly requested a timeline of the decision to invite a third firm into the National Shipbuilding Strategy.

Both Wilkinson’s office and the Prime Minister’s Office refused to answer when asked for a timeline of when the decision was made or whether any of the tumultuous events over the last six months factored into the decision.

Instead, they referred questions to the office of Procurement and Public Services Minister Carla Qualtrough, which also has not provided a timeline despite repeated requests.

However, the briefing notes obtained by Global News and dated Nov. 20, 2018, show how officials were advising Wilkinson to handle a scheduled meeting with James Davies, the president of Davie shipyard in Quebec — a meeting Wilkinson’s office says never actually ended up happening.

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In a section titled “Minister’s Objectives,” Wilkinson was advised to “reiterate Minister Brison’s message that there are no planned or contemplated changes to the National Shipbuilding Strategy.”

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Davie, the advice notes, was encouraged to keep bidding on smaller contracts for repair and small vessel work.

So what changed between November 2018 and May 2019?

In short: everything.

“It’s a couple different things, if not more,” said Dave Perry, vice president of the Canadian Global Affairs Institute and a Canadian defence procurement expert.

He pointed to multiple possible factors: changes in the federal cabinet with the departure of Brison in January 2019 and and the appointment in January 2019 of a new deputy minister at Public Services and Procurement Canada, which is the department in charge of procurement, as well as a review by bureaucrats of the needs of the Canadian Coast Guard that determined more capacity was needed to supply all of the required work.

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Add in the political hit to Liberal fortunes in Quebec from the SNC-Lavalin scandal, which began in February and lasted until roughly the end of April, and another defence expert says it’s no wonder the government changed course so close to an election.

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“I suspect the principle factor was the significant drop in support for the Liberals in the polls as a result of the SNC Lavalin scandal … and all of a sudden [they] went from feeling very confident about a second majority government to realizing their hold on power was actually in peril,” said Michael Byers, a defence policy expert and professor at the University of British Columbia.

“There was a lot of scrambling to protect seats in Quebec, for instance, that they had felt comfortable with in terms of their prospects and no longer did … this is a government that was on cruise control until the SNC Lavalin scandal broke.”

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Polls suggest Liberal support dropped from around 45 per cent in Quebec to around 36 per cent in the midst of that scandal, in which the Liberals were accused of inappropriate political interference in a bid to help the Quebec firm avoid criminal trial for alleged corruption and fraud.

Perry said he suspects the timing is “no accident” given the Liberals will need to either hold or gain seats in Quebec in order to have a path back to power.

And according to the federal lobby registry, Davies has been making a concerted effort to meet with top officials over the last six months.

James Davies has had 46 recorded meetings with senior officials since December 2018 including four with Matthieu Bouchard, a senior advisor in the Prime Minister’s Office who was among the 11 officials accused of inappropriate political interference in the SNC-Lavalin scandal.

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Davies also met eight times with Taras Zalusky, the director of policy at Public Services and Procurement Canada; eight times with Olivier Duchesneau, chief of staff to Employment and Social Development Minister for Quebec Liberal MP Jean-Yves Duclo; and twice with Duclos himself.

He also met once in that span of time with Joel Lightbound, Liberal MP for the neighbouring Quebec City riding of Louis-Hebert; and multiple Conservative MPs and senators, along with policy advisers, deputy ministers and other top bureaucrats from Public Services and Procurement Canada, the Department of National Defence, Transport Canada and others within the PMO.

“The purpose of the activity is to have the benefits of the NSPS [National Shipbuilding Procurement Strategy] extended to the province of Québec where Davie is located,” the description on the lobby registry states.
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Fred Boisvert, vice president of public affairs at the shipyard, says the firm has so far been blocked from the program but is pleased to see the contest to add a third yard set to move ahead.

“We have stated clearly that Canada needed to add capacity to the current Shipbuilding Strategy to be able to replace the fleet of ships operated by the Royal Canadian Navy, Canadian Coast Guard, as well as federally-owned ferries,” he said in a statement to Global News.

“To date, Davie has been blocked because of political considerations. It is good to see that political interests are being set aside to allow Canada to engage Davie to help deliver vessels.”

Both Duclos and Lightbound are Liberals who won their seats by single-digit margins in the generally solidly-blue region of Quebec City, where Davie shipyard is located, and one source with direct knowledge of the situation stressed they and the government have been facing questions about whether they are doing enough to support the shipbuilder.

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Some of that has come from the Association of Davie Shipbuilding Suppliers, a regional group of business stakeholders that work with the shipyard.

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Quebec mayors from regions like Saguenay, the Eastern Townships, Laval and around Montreal have also been raising the issue of securing more work for Davie with the federal government, the source said, raising concerns the government could take heat for not supporting the shipyard on the campaign trail.

“In every city, in every place they [federal officials] were going to they were hearing about Davie from everybody so at some point, there’s a reckoning – what are we going to do with it? Do we want them on the campaign trail harassing us on a daily basis? So there’s also that,” the source said.

“It has been having a huge impact.”

That source also indicated that while the decision to invite a third yard into the National Shipbuilding Strategy involved a “cocktail” of factors, they said Brison’s departure when he resigned from cabinet in January 2019 and quit as an MP the following month were a “big piece” of that.

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Davie, of course, is the firm at the centre of the Mark Norman affair.

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The former Conservative government changed the rules around sole-sourcing urgent military procurement deals shortly before the election in 2015 and negotiated a deal with Davie to lease an interim supply ship for the navy after both of its remaining vessels had to be abruptly retired.

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When the Liberals won the election in 2015, they put that deal under the microscope at their first cabinet meeting in November 2015 after both Irving and Seaspan sent letters to cabinet ministers asking them to reconsider the deal with Davie — and consider their own offers instead.

The result was a plan to freeze the deal, which would have cost taxpayers roughly $70 million in penalties.

When that plan was leaked to a reporter, the resulting outcry effectively forced the Liberals into approving the deal, Brison was later cited as telling RCMP in court documents used to obtain a search warrant against Vice-Adm. Mark Norman, who was accused of the leak.

The Crown stayed its breach of trust charge against him this spring, citing lack of evidence.

Davie had originally been among the firms invited to compete to be part of the National Shipbuilding Strategy when it was created back in 2011.

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But the firm was in creditor protection at the time and was not selected.

It came under new ownership in 2012 and has been pursuing repair and maintenance work under the National Shipbuilding Strategy ever since.

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