Companies & Industries

A navy contract gone bad

Irving isn’t hiring—it’s laying people off.

(Photo: Paul Sancya/ Canadian Press)

(Photo: Paul Sancya/ Canadian Press)

Nova Scotia premier Darrell Dexter could not have raised expectations much higher. Standing in front of a jubilant crowd of Halifax Shipyard workers and onlookers clutching provincial flags, he declared: “Oct. 19, 2011, will go down as one of the proudest days in Nova Scotia’s history.”

Much has changed since that day when Irving Shipbuilding Inc., part of the privately held Irving family conglomerate, won the right to negotiate $25-billion worth of federal contracts to rebuild Canada’s navy. The initial enthusiasm, though not completely gone, has certainly diminished. Why?

First, the effort is behind schedule. Initially predicted to begin as early as late 2012, steel cutting is now not expected until 2015. Then, in November company president Steve Durrell abruptly departed. A 27-year Irving veteran, Durrell had spearheaded the successful bid for the hotly contested contract. Finally, in late December Irving laid off 32 employees, despite having roughly 20,000 resumés on file.

What happened to the hiring boom? “That is the reality. It is the boom-and-bust cycle of shipbuilding that we have lived with for generations,” says Irving spokeswoman Mary Keith. “That’s what the National Shipbuilding Procurement Strategy is intended to alleviate.”

It won’t be providing the expected stability for the East Coast industry any time soon. The pace of talks between Irving and the federal government has been sluggish. Irving has secured only a tiny fraction of the $25 billion—a single contract worth $9 million. (Keith says a second contract is nearly finalized.)


On closer scrutiny, the guiding agreement between the two parties guarantees very little. As reporting by the Halifax Chronicle Herald has revealed, the umbrella agreement stipulates that Ottawa can reduce the $25-billion workload by any amount it pleases.

“We’re not looking at real ships. We’re looking at ghost ships,” says Steven Staples, president of the Ottawabased Rideau Institute. Staples also questions the economic figures thrown around by boosters. Those include a prediction of 11,500 Nova Scotian jobs and a near $1-billion annual boost to the province’s GDP during the peak years of construction.

“I don’t think it’s going to turn out as advertised,” Staples says. “The largest cost of building warships is not in building the hulls and welding the steel. It’s from the communications, the weapons systems, the engines—all the stuff you put inside the hull. Last time I checked, they don’t make cruise missiles in Halifax.”

Others are predicting the final price tag will balloon far beyond $25 billion. Dalhousie University professor Dan Middlemiss, a defence policy expert, predicts rising costs will eventually force Ottawa to trim the order. He says the stated request for up to eight arctic off shore patrol ships will likely drop to five. Similarly, he predicts only 10 or 12 warships will emerge from the original call for 15. Then there’s the thorny issue of public funding. Last year, the Nova Scotia government announced up to $304 million in financial assistance for Irving, including a “forgivable” loan worth up to $260 million. Kevin Lacey, of the Canadian Taxpayers Federation, calls it the “largest corporate giveaway in the history of the province.” His concerns are compounded by the fact that the province is refusing to release details of the financial agreement. “Given the huge investment taxpayers are making, the question is: what’s there to hide?”