By selecting ThyssenKrupp Marine Systems (TKMS) as the preferred supplier for the Canadian Patrol Submarine Project, the Carney government has settled the largest military procurement in the country’s history. The decision, announced in Halifax on the eve of the NATO Summit, is defensible considering the evaluation criteria the government itself had established. But it must be said plainly: selecting a supplier was the easiest step. The real test, one that will determine whether Canada becomes merely a buyer or a co-producer, begins now and will unfold at the negotiating table.
A Choice Consistent with the Evaluation Criteria
Ottawa evaluated the two finalists (the German-Norwegian Type 212CD and Hanwha Ocean’s South Korean KSS-III) according to a weighting scheme revealed in the bid instructions: in-service support accounted for 50 percent of the score, the platform itself for 20 percent, the bidder’s financial capacity for 15 percent, and strategic and economic partnerships for the remaining 15 percent. The weighting says almost everything: the government was not primarily buying a submarine; it was buying fifty years of operational availability. To be sure, a weighting system only imperfectly reveals a program’s true priorities, which are embedded in the detailed requirements that are rarely made public. When competing bids perform similarly on the most heavily weighted criteria, secondary criteria often determine the outcome. Nevertheless, the weighting remains revealing of the trade-offs Ottawa chose to emphasize publicly. It reflects the hard lesson learned from the Victoria-class submarines, of which only one is currently (and only intermittently) operational.
It was precisely on the dominant criterion that the German proposal enjoyed its greatest structural advantages. TKMS, which supplies roughly 70 percent of the submarines currently in service within NATO, proposed replicating on Canada’s two coasts the maintenance model it is developing with Norway in Bergen, supported by a trilateral program with Germany and Norway in which combat systems, supply chains, and operational doctrines are already standardized within the Alliance. Hanwha could counter this architecture with the scale of its Geoje shipyard, its highly concentrated supply chain, and the expertise of Babcock Canada, which currently holds the Victoria-class support contract. Ottawa’s wager, however, appears to have been that support guaranteed by two allied governments offers greater long-term reliability over half a century than a supply chain concentrated an ocean away.
With respect to the platform itself (20 percent), the 212CD offers significant advantages for Canadian requirements: a non-magnetic steel hull, a diamond-shaped design optimized for acoustic stealth, a proven air-independent propulsion system, and a design specifically intended for operations in cold waters. South Korea, despite the impressive demonstration of the ROKS Ahnmu‘s trans-Pacific voyage to Victoria, could not compensate on the platform criterion for what it conceded on the much more heavily weighted support criterion.
Regarding partnerships (15 percent), TKMS substantially strengthened its proposal after its initial offers were judged insufficient. The company pledged industrial benefits equivalent to the contract’s value, signed around twenty memoranda of understanding with Canadian firms (including CAE and Marmen in Quebec) and proposed related investments ranging from liquefied natural gas to the Port of Churchill. It is worth recalling that this bureaucratic evaluation represented only one stage of the process: the final decision rested with Cabinet. Both Minister Mélanie Joly and Secretary of State Stephen Fuhr emphasized the importance they attached to industrial and technological benefits for Canada.
Finally, the bid instructions required an accelerated delivery schedule: proven production submarines were to be delivered no later than 2035, followed by subsequent deliveries incorporating increasing levels of Canadian content. Berlin and Oslo addressed what had been their principal disadvantage relative to Hanwha through a significant political commitment: transferring submarines from their own production orders to enable delivery of the first four units by 2034. By agreeing to move behind Canada in their own production queue, Germany and Norway provided a concrete demonstration of what it means to belong to a trilateral program.
What Canada Is Giving Up
Every procurement decision involves trade-offs, and this one entails sacrifices that would be dishonest to ignore. The most visible concerns capability. The KSS-III is equipped with a vertical launch system (VLS) featuring dedicated cells for launching long-range cruise missiles. By contrast, the 212CD relies exclusively on its six 533 mm torpedo tubes. A nuance, however, deserves clarification. The platform is designed to launch both anti-ship and land-attack missiles through its torpedo tubes, including the submarine-launched version of the Naval Strike Missile (NSM-SL), capable of engaging both surface vessels and coastal targets, as well as, in the future, the supersonic 3SM Tyrfing missile jointly developed by Norway and Germany. Canada is therefore not abandoning all submarine strike capability but rather its depth of fire. Every missile carried occupies the space of a torpedo within a shared weapons magazine, whereas the Korean VLS provides dedicated launch cells enabling salvo fire—at precisely the moment when allied doctrines increasingly emphasize the dispersion of long-range fires and when Canada’s future River-class destroyers will each carry only twenty-four VLS cells.
This trade-off stems directly from the evaluation framework itself, under which Ottawa assigned only 20 percent of the total score to the platform. It is a deliberate choice by the Carney government, which appears to have prioritized economic benefits over sheer firepower.
The second concession concerns development risk. The KSS-III is already in active service with the Republic of Korea Navy and benefits from a mature, active production line. Although the 212CD is derived from the proven Type 212A, it remains a new design, and no unit has yet been delivered. Canada is therefore accepting a degree of technical and schedule risk that the Korean option would have significantly reduced. This risk is far from theoretical: given the precarious operational state of the Victoria-class fleet, any delays in TKMS’s delivery schedule could interrupt the continuity of Canada’s submarine operations altogether. The accelerated timeline agreed to at the final stage of the competition will have to be closely monitored against the actual production capacity of the shipyards.
Finally, Ottawa is foregoing an important instrument of strategic diversification toward the Indo-Pacific. A decades-long partnership with Hanwha would have anchored Canada to Asia’s leading democratic defence industrial power while providing a strong naval foundation for its Indo-Pacific Strategy. The German choice instead reflects a clear hierarchy of theatres of operation: the North Atlantic and North Pacific—that is, the maritime approaches to the continent and the Arctic—take precedence over distant power projection. This prioritization is hardly surprising. It is in the Greenland–Iceland–United Kingdom (GIUK) gap and beneath the Arctic ice that Russia’s submarine threat poses the most direct challenge to Canadian territory. It is also precisely in these regions where Washington, increasingly focused on the Indo-Pacific, expects its allies to assume greater responsibility. By favouring a submarine designed for high-latitude operations over a long-range platform optimized for extended oceanic deployments, Canada is affirming its identity first and foremost as a Northern Hemisphere power. This choice also reflects a hierarchy of political interests as much as operational theatres. Purchasing a European platform also means acquiring political capital with allies from whom Ottawa expects reciprocal benefits, ranging from economic security to participation in Europe’s growing defence-industrial programs.
The consequences must therefore be recognized. Canada’s presence in the Indo-Pacific will rely primarily on its frigates—three warships deployed annually on a rotational basis, meaning that rarely more than one or two will be on station at any given time—along with a limited number of maritime patrol aircraft and diplomatic engagement, rather than on its submarine fleet. This is a signal that Tokyo, Seoul, and Canberra will undoubtedly recognize. Rejecting what many regarded as an unbeatable Korean proposal therefore carries a reputational cost within the region.
These sacrifices are real, but so too are the benefits they purchase: full interoperability with European navies, a platform optimized for Arctic operations, and above all Canada’s integration into the European defence ecosystem at a time when diversifying the country’s strategic dependencies away from the United States has become a national imperative.
The Hardest Part Is Still to Be Negotiated
The government has been clear: TKMS is a preferred supplier, not yet a contracted one. What follows is a negotiation period lasting between six and eighteen months, and it is during this phase that the true value of the decision will be determined. The CEO of TKMS has been unequivocal: submarine production will take place entirely in Germany, at Kiel and Wismar. If Canada accepts this starting point without modification, it will have written the largest cheque in its military history while remaining nothing more than a customer.
Yet the Carney government intends to use this acquisition as an instrument of economic development. The central issue in the negotiations is therefore Canadian content. Nothing guarantees that the final contract will maximize Canadian industrial participation unless Ottawa explicitly requires it. The federal Industrial and Technological Benefits (ITB) policy has demonstrated its limitations. In 2024, the Auditor General found that, despite more than $36 billion in industrial obligations, the policy was being implemented without clear rules and that neither its precise economic benefits nor its overall cost could be accurately determined. Likewise, the Parliamentary Budget Officer observed that nearly half of all ITB transactions bore no relationship to the procurements with which they were associated and that small and medium-sized enterprises captured only a marginal share of the benefits. Caution is warranted all the more because the academic literature on industrial offsets is generally sceptical. Their economic returns frequently disappoint, even though defence investments can generate positive spillover effects in advanced economies such as Canada.
It is therefore essential to reverse the current logic. It should not be up to the supplier to determine where its offset obligations are credited; Canada must specify from the outset, within the contract itself, the capabilities it intends to develop. Scattershot ITBs designed around the contractor’s commercial interests merely purchase compliance, whereas targeted ITBs have the potential to build a genuine industrial base. Two priorities stand out. The first concerns production transfers. Beyond the hull sections already assigned to Marmen and the promised torpedo-related work, Canada must secure an expanding share of work performed domestically while concentrating efforts where success is realistically achievable. Integrating suppliers into an already established production chain once manufacturing is underway is exceptionally difficult. Greater emphasis should therefore be placed on in-service support, mid-life upgrades, and high-consumption items—including munitions—rather than on an artificial division of production work.
The second concerns technology transfers. TKMS’s commitment to making “essential elements” of its intellectual property available under sovereign Canadian arrangements must be translated into comprehensive data rights, licensing agreements, and domestic engineering capabilities. There should, however, be no illusions. The intellectual property that an industrial contractor is willing to transfer is rarely its most valuable, and it is only meaningful if Canada possesses both the capability and the determination to exploit it.
This is where Canada can transform a concession into an advantage. Since we will not be assembling the submarine hulls, we should invest as development partners rather than late-stage subcontractors in the areas that will define the future of undersea warfare—and where Canada’s industrial and scientific base already possesses significant strengths. These areas include autonomous underwater vehicles (AUVs), which are indispensable for the surveillance of the Arctic and Canada’s three oceans; underwater sensors and acoustic monitoring networks, where Canadian expertise in underwater acoustics is internationally recognized; and weapons and missile systems, including the integration—and ultimately licensed production—of the submarine-launched Naval Strike Missile (NSM-SL) and the Tyrfing missile. Kongsberg’s central role within the program provides a natural avenue for Canada to offset, in terms of overall firepower, what the absence of a vertical launch system costs in dedicated launch cells. Canada should also prioritize communications and command-and-control systems based on sovereign artificial intelligence, a prerequisite for preserving national decision-making autonomy even while operating within the Alliance. Investments in these areas would serve Canada in two ways. They would strengthen the defence of Canadian territory while simultaneously positioning Canadian firms within the value chains of the trilateral submarine program and, more broadly, within Europe’s expanding defence rearmament effort.
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The selection of TKMS represents a calculated wager on Europe and the Arctic. But a wager is only as good as its execution. If Ottawa negotiates these contracts with the same determination it displayed while courting bidders, Canada will emerge from this program not simply as the purchaser of twelve submarines, but as a genuine co-producer possessing enduring areas of industrial and technological expertise. That is the standard by which this historic decision should ultimately be judged.
Image Credit: JustSomePics via Wikimedia Commons.
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