A man walks past an ad for military submarines in the downtown core near Parliament Hill in Ottawa on Jan. 15.Adrian Wyld/The Canadian Press
The Canadian government says it has extended its bidding process to pick a submarine builder so the two entrants vying for the prize – among the largest defence contracts in this country’s history – can sweeten their bids.
It’s an acknowledgment that Ottawa wasn’t satisfied with the economic and industrial benefits promised in the bids, submitted ahead of a March 2 deadline by South Korea’s Hanwha Ocean and Germany’s TKMS.
Defence Minister David McGuinty and Prime Minister Mark Carney tour a South Korean shipyard in Oct., 2025.Adrian Wyld/The Canadian Press
And it’s an ambitious opening move from a defence procurement agency created just last year – as well as a sign of how central the submarine contract is to the Carney government’s defence and sovereignty agenda.
Last week, Ottawa notified the two bidders they were being granted about 20 more days to revise their bids, with this “amendment period” ending on April 29.
Asked whether it found the bid packages lacking, the federal Defence Investment Agency (DIA), the new procurement agency, said this extension will allow bidders to enrich the benefits that will accrue to Canada should they win.
“Following the initial submissions of proposals the Defence Investment Agency provided a short, time-limited opportunity for bidders to improve their offers,” spokesperson Jeremy Link said in an e-mailed statement.
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He noted, as the DIA did last week, that this extension gives the bidders more time to tailor their proposals to the federal defence industrial strategy that was released Feb. 17 – shortly before the March submarine bid deadline.
“This is not a reopening of the competition, but a step to make sure we get the best possible outcome for the CAF and for Canada,” Mr. Link said, referring to the Canadian Armed Forces.
David Perry, president of the Canadian Global Affairs Institute, a think tank, said he cannot recall a previous case where the Canadian government asked bidders to improve their offers. He’s familiar with past competitions in which Ottawa approached bidders to ask more questions about their proposals, but not statements from the government in which they asked for better bids.
Hanwha’s offer to Canada is the KSS-III Batch-II submarine, while TKMS, as part of a joint German-Norwegian project, is offering the 212CD. Both are diesel-electric submarines.
There’s a lot riding on this contract. Ottawa has been pressing submarine bidders in recent months to make big investment and partnership pledges ahead of the March 2 bid deadline.
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It’s a centrepiece of an effort by Prime Minister Mark Carney’s government to demonstrate it is boosting defence spending to meet the expectations of NATO allies – and, equally importantly, that Ottawa is using military procurement to expand Canada’s industrial base.
Canadian government policy requires companies awarded major defence contracts to undertake business activities in Canada equal to the value of the contract.
Hanwha said in a statement that the bid it has already filed meets the objectives of Canada’s defence industrial strategy.
Steve Jeong, head of the Naval Ship Global Business at Hanwha Ocean, said the bid submitted ahead of the March 2 deadline would support an average of 22,500 jobs annually and deliver more than $60-billion in economic benefits to Canada between 2026 and 2044.
He said Hanwha has proposed spending in Canada “that would strengthen Canada’s industrial base across a range of priority sectors, including energy, critical minerals, aerospace, space, shipbuilding, advanced technology, advanced manufacturing and others.”
In a statement Thursday, Germany’s TKMS said it’s confident its proposal already delivers significant value for Canada’s industrial, economic and strategic priorities. The company said the bid is the product of effort it and Canadian partners have invested in comprehensive collaboration agreements.
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The German company welcomed the extra time to adjust its bid, saying it planned to refine certain elements and ensure the TKMS package is aligned with the Canadian government’s ambitions and areas of mutual interest.
The Prime Minister’s response to increasing U.S. protectionism under President Donald Trump has been to try to diversify trade with other countries but also to spend more defence dollars at home.
Philippe Lagassé, an associate professor at Carleton University who researches defence policy and procurement, said he thinks this ask-for-more approach may reflect private-sector tactics from DIA chief executive Doug Guzman, a former senior banking executive who was recruited to help improve military procurement.
“My hunch is that is kind of to be expected when you put somebody more private sector into the defence procurement game,” he said.
He said the civil servant approach to this is very process driven. “‘We’ve given you your date, we’ve told you what we want. Now you give us the bids, and then we evaluate the bids.’”
The private-sector impulse may be to keep up the pressure to extract more, Prof. Lagassé said. “It’s, ‘We’re going to negotiate a little bit to see if you guys can do better’ − the process is a bit more fluid.”
The submarine contract is not the only area where the Carney government has been trying to elicit more from defence contractors, he noted.
Industry Minister Mélanie Joly, for instance, said last fall Canada didn’t receive enough economic benefits when it agreed to buy U.S.-made F-35 fighters. Ottawa has been reconsidering buying its full order of 88 F-35s and Sweden’s Saab has offered a package of benefits if Canada switches to its Gripen fighter. The Globe previously reported that Lockheed Martin has offered to create more jobs in Canada if Ottawa commits to its full F-35 order.
The purchase of up to 12 submarines for the Royal Canadian Navy will be transformative for this country’s military might, making it the first time in history Canada has more than a token presence under water.
Mr. Carney recently said his government expects to pick a winner by the end of June. The DIA’s Mr. Link said a decision on a “preferred supplier” is still on track for “later this year.”