BC Ferries confirms order with Germany

BC Ferries confirmed its controversial decision to award a contract to build three new Super C-class ferries to a German shipyard rather than elect to have the ships built in Canada. “These are design-build, fixed-price contracts that provide B.C. Ferries with substantial guarantees related to delivery dates, performance criteria, cost certainty and quality construction,” said David Hahn, the company’s chief executive officer.

The $542-million deal had been expected for weeks after the union representing B.C. shipyard workers said the German firm of Flensburger Schiffbau was the only bidder left in the race. The union has fought an aggressive campaign, arguing local shipyards were given short shrift in the bidding process and that the half-billion-dollar contract should stay in the province, along with the jobs it would create.

Last week, George MacPherson, president of the B.C. Shipyard General Workers’ Federation, told a news conference the union has obtained a legal opinion stating it has a case that BC Ferries had breached a fiduciary duty to act in the best interest of the company, B.C. citizens and to treat all prospective bidders fairly. MacPherson said the union would consider suing if the contract went offshore. Hahn, however, has stated that the deal is a good one for the company and for people paying to ride the ferries.

The German company assumes all the design, construction and delivery risk, it guarantees the completion dates for the vessels, and guarantees vessel performance related to speed, carrying capacity, manoeuvrability and fuel consumption.

B.C. Ferries pays only 20% of the contract price up front with the rest not due until each vessel is completed. In addition, Flensburger has agreed to penalties for late delivery.

The ferry company has applied for the exemption from import duties but has not yet received word from the government on this issue. The union estimates the ferry company could be liable for $125 million in import duties, while the company said in its news release it’s more like $81 million. It is estimated that building the ships in Germany will save about $130 million as opposed to building them in British Columbia.

The ferries are to run on the Horseshoe Bay-Departure Bay and Swartz Bay-Tsawwassen routes and are to be 160-metres long. They will carry 370 vehicles and 1,650 passengers and the first ship is due to enter service in December 2007.