Feds losing leverage by ‘bypassing’ key step to expedite submarine purchase, say former senior public servants

The federal government's decision to use different guidelines for the coming multibillion-dollar submarine contract is a "huge issue" that can hinder its ability to deliver best value for taxpayers, say former senior public servants who previously led major defence procurements.

The Liberal government is set to announce its choice for the new submarine fleet shortly. That critical decision was expected to be unveiled by the end of June, but the process is still underway, according to the Defence Investment Agency (DIA), which is spearheading this procurement.

Once a supplier is chosen, the government will enter into negotiations, to finalize the contract including technical specifications, timelines, economic commitments and requirements fulfillment, according to the DIA.

Negotiations will be conducted with “a focus on maximizing economic growth, industrial development, and enduring partnerships with Canadian industry” Lindsey Ehman, a spokesperson for the DIA told The Hill Times in a June 30 email.

However, that can be a painful process that leads to delays and cost overruns due to the way the Liberals are moving ahead, bypassing a crucial step of the procurement process, say some former senior government officials. 

The federal government established the Canadian Patrol Submarine Project (CPSP) in 2021 with the intention of acquiring up to 12 submarines for the Royal Canadian Navy. Public Services and Procurement Canada (PSPC), the central purchaser for the government, issued a request for information (RFI), a preliminary step in the procurement process where the government outlines its needs and gathers information from suppliers. During this RFI process—which ran from September 2024 to February 2025—the government received 25 responses from potential bidders. 

The RFI sought input from industry on capabilities, in-service support, training, and infrastructure for the new submarine fleet, and how partnerships with Canadian industry could be leveraged to create economic benefits in Canada throughout the lifecycle of the fleet, according to an August 2025 PSPC press release.

The natural next step would be issuing a request for proposal (RFP)—a formal bid solicitation document anchored by a statement of work that outlines critical terms and conditions such as deliverables, project timelines, and vendor performance standards to fulfil an upcoming contract. It defines pricing structure, sets clear benchmarks on things like Industrial and Technological Benefits (ITBs) and dollar allocations for research and development. Under this framework, the supplier is contractually obliged to deliver against what it signs up for.

But the government did not follow this traditional structure. 

On Aug. 26, 2025, the government narrowed its selection down to the two qualified bidders: German company Thyssen Krupp Marine Systems (TKMS) and South Korean company Hanwha Ocean Co., Ltd.

This decision was informed by a thorough assessment of Canada’s requirements for the submarine purchase, including construction and delivery timelines for the new submarine fleet, according to the PSPC press release. 

Then instead of an RFP, proposal preparation instructions (PPI) were issued directly to both qualified suppliers on Nov. 14, 2025. The PPIs outlined Canada’s requirements, proposal expectations, evaluation approach, and submission instructions. The two firms submitted their proposals in response to the PPI back in March. 

Clem Srour, a former director of Innovation, Science, and Economic Development Canada’s ITB branch, told The Hill Times that the government will have less leverage when negotiating the multibillion-dollar submarine contract as it will be going into that process already having selected a supplier. 

This can hinder the government’s ability to deliver best value for Canadian taxpayers, lead to delays and cost overruns in the long term, he said.

“Not having an RFP means that the government will have less certainty on cost, what is delivered at the end of the day, and the economic benefits that comes along with it,” he said. Srour explained that in an RFP, bidders have to fully cost out their proposal against specific criteria defined by the government.

“I think there is a risk it will be almost like a sole-source situation where the government will have limited leverage to get good results for Canadians,” Srour said. “This is a bit like buying a car, but not knowing the final price tag, or how much power there is in the engine. We are likely sacrificing the greater certainty that a full RFP will provide.”

A traditional RFP process “creates competitive tension,” and bidders compete through the packages they offer through technical requirements, cost, and economic benefits, Srour explained. He also noted that in a regular competitive process, the companies’ ITB proposals become a contractual obligation if they win.  

“It does not seem to me that the government will be holding companies contractually to what they submitted in their proposal,” he said.

Alan Williams, a former assistant deputy minister of materiel at the Department of National Defence (DND), told The Hill Times it is a “huge issue” for the government to “bypass” the RFP step in order to expedite the procurement process, arguing that means there are no set standards by which the selected company must abide. He echoed that the government loses its leverage going into negotiations, and that the public can no longer assess why a certain bidder was chosen and how the contract will look.

“When you go through the process [without an RFP] where all the terms and conditions are already specified, and you pick somebody, you're then subject to all of the debates and discretions between you and that company on the terms and conditions,” he said.

“You're actually at a disadvantage because they know you want them, and so they will be hardcore dictating the terms and conditions, so it's a fallacy to presume that if you want to do things fast, bypass competition—it's the exact opposite,” Williams said.

“It doesn't expedite the process whatsoever.”

The DIA is overseen by Secretary of State for Defence Procurement Stephen Fuhr (Kelowna, B.C.). A June 25 statement to The Hill Times from the agency said the proposal preparation instructions “function similarly to an RFP and set out deliverables and timelines for the project.” 

“Canada’s deliverables and timelines are based on a comprehensive assessment of operational requirements for the CPSP, including submarine design, construction, delivery, sustainment, and infrastructure considerations,” said Ehman in that statement.

No 'prescriptive approach,' says South Korean competitor

The Hill Times asked both Hanwha and TKMS whether they as contractors find it challenging to not have set deliverables, timelines, and a statement of work for the submarine procurement. TKMS did not respond.

“None of that [detail] is in there right now,” Glenn Copeland, CEO of Hanwha Canada, told The Hill Times in an interview, adding that in its PPI, the government asked the two companies to demonstrate how they will deliver the submarines, provide economic packages, train crews, and in-service support.

“When we talk about this particular program, it’s not like any of the others in the sense that there’s no prescriptive approach to the industrial and technological benefits or the offsets, or the investments in this particular program,” Copeland said.

Jeffrey Collins, director of the Palmer Canadian Leadership Institute and a defence procurement expert who formerly served as a senior policy analyst at DND, told The Hill Times that the government’s a new approach to leverage defence expenditures to boost the industrial base, create jobs, and foster deeper relationships with middle powers makes this procurement process unique. He said it would be difficult to attach all those objectives in RFP criteria.

“I think that's why this project has taken such an unorthodox approach because, by some measure, it will be—both by dollar and complexity—one of the, if not the, most expensive and most complex public procurements of any that the government in Canada has ever done,” he said.

When asked if he sees any risks of delays or cost overruns in this procurement process due to the way it is being held, Collins said: “There's a long history that even if you follow an RFI to an RFP, you still have delays, and you can still run into costing issues. That's kind of the nature of the beast of defence procurement."

However, it's still right to question things when deviating from the standard seen as best practice, he said.

“What are the safeguards in place to ensure that taxpayers see the money spent [right], and also that the Navy is getting what it needs with the timelines that are identified, and those are the big unanswered questions,” he said.

Collins said the lack of an RFP does not negate having a contract, so whether the government’s choice to employ a PPI instead creates any issue will be seen over time. Collins also argued that the government had some freedom to pursue this different approach, because the Navy has established that both vessels meet the technical requirements.

The contract management process is where the government might want to be more transparent, Collins noted.

The government is aiming to award a contract by 2028, to avoid a capability gap, and have the first submarine delivered no later than 2035, according to the DIA. While the government did not release an exact program cost for a full fleet of submarines, media reports have estimated the price of a full fleet to be between $60-billion and $100-billion.

In her June 30 email, Ehman underlined that the submarine procurement process was “designed to identify a single preferred supplier with whom negotiations will be conducted.”

“A single supplier approach ensures interoperability, reduces technical and logistical complexity, and lowers long-term risks and costs associated with operating and sustaining multiple submarine classes,” Ehman said.

If the negotiations with the initial choice are unsuccessful, the government may designate the other shortlisted supplier as the preferred one and enter into negotiations, according to Ehman.

In response to the criticism about the government losing competitive edge due to the process it is following, Ehmen said the process “preserved competitive tension across all areas of the qualified suppliers’ proposals.”

This approach included the submission of comprehensive proposals, a formal period during which Canada asked for clarification on all aspects of the submissions, including the proposed contractual terms and conditions. 

“A proposal amendment period was also implemented where suppliers could amend any aspect of their proposal to ensure its alignment with Canada’s requirements and priorities including ensuring value for money for Canadians,” she said. 

“This process provided Canada insight not only on technical and operational requirements, but also on the contractual terms qualified suppliers were prepared to offer in a competitive environment.”

The new submarine fleet of 12 will replace Canadian Navy’s Victoria-class submarines, which will remain operational into the mid- to late-2030s. The German firm has said if a contract were to be awarded this year, it could deliver the first submarine well in advance of 2035, while the South Korean firm committed to delivering the first submarine by 2032, and four more by 2035, completing the full fleet by 2043. 

ikoca@hilltimes.com

The Hill Times