Canada’s National Shipbuilding Procurement Strategy

Summary

The National Shipbuilding Procurement Strategy (currently known as the National Shipbuilding Strategy [NSS]) is a long-term project that was developed to renew Canada’s federal fleet, specifically the Canadian Coast Guard (CCG) and the Royal Canadian Navy (RCN). The Department of Public Works and Government Services operates the program, which is divided into three segments – “the combat package, the non-combat package, and the smaller vessel package” (Government of Canada, 2016, para. 1). The strategy was launched on June 3, 2010, but the results for large packages were publicized on October 19, 2011. Canada’s shipbuilding industry had stagnated from the 1990s to the early 21st century, and thus a new strategy was needed to revamp the sector.

In addition, Canada’s shipyards were becoming obsolete coupled with a lack of access to supply lines, equipment, and skilled workers. Therefore, a novel approach was needed to build vessels in the country as a way of supporting the marine industry. The NSS sought to develop a long-term and sustainable shipbuilding plan with numerous benefits to the country. Canadian shipyards would be revitalized through the construction of vessels for the CCG and RCN at the same time. The original valuation of the project was $ 38 billion, but this figure had reached 50 billion by 2016 (Ring, 2016). As such, the NSS project is not only designed to build and maintain the federal fleet but also maximize economic benefits for the country as discussed in the value proposition section.

Value Proposition

As mentioned earlier, the procurement strategy was used to create industrial and regional benefits in Canada. Value proposition evaluation framework will be used to analyze the benefits and it includes sector growth, supplier development, research and development, exports, and skills and training.

Sector Growth

The NSS has both direct and indirect impacts on the Canadian economy. Directly, the contractors selected to execute this strategy agreed to invest 0.5 percent of their NSS contract values in technology development, human resources development, and industrial development as the three major priority areas (Auger, 2015). By the end of 2016, the contracts awarded through the strategy contributed over $7.7 billion to the country’s gross domestic product (GDP).

Between 2012 and 2016, the awarded contracts for the project were worth $6.1 billion with large vessels, small vessels, repair, refit, and maintenance, and services being allocated $3,926, $585, $1,510, and $123 million respectively (Public Services and Procurement Canada, 2016). In 2016, the Canadian government allocated $270.8 million for the construction of the large vessel, $188.6 million for repair, refit, and maintenance, and $12.9 million for small vessel construction. This level of investment stimulates economic growth significantly both directly and indirectly, which is expected to continue on the same trajectory in the coming years.

Additionally, the project is expected to create or maintain, directly and indirectly, 7,350 jobs annually between 2012 and 2022 (Public Services and Procurement Canada, 2018). Therefore, the shipbuilding industry in the country has expanded tremendously after the implementation of the NSS project to support significant GDP growth and offer employment to thousands of Canadians.

Supplier Development

Canadian businesses have benefitted immensely from the NSS project since its launch in 2010. The companies awarded the contracts are Canadian, and they include Irving Shipbuilding Inc. and Seaspan Marine Corp. These companies subcontracted other entities within Canada to supply goods and services for their operations. Small and medium enterprises (SMEs) have an opportunity to become part of the shipyards supply chain and benefit from the multi-billion project.

For instance, in April 2016, Halifax-based Bluedrop Training & Simulation was “awarded a $15 million contract for the design of state-of-the-art virtual training and simulation software and technologies to prepare and train personnel for the Arctic and Offshore Patrol Ships being built under Canada’s National Shipbuilding Strategy” (Public Services and Procurement Canada, 2016, para. 6).

Similarly, Thordon Bearings Inc. has been selected to supply major propulsion equipment, seawater, and corrosion protection materials to Irving Shipbuilding’s Halifax Shipyard at a cost of around $1 million (Public Services and Procurement Canada, 2016). Therefore, the procurement strategy has been used to support local businesses in the country, especially SMEs with the capacity to supply goods and services to the main contractors.

Research and Development

The two main contractors of the NSS project have committed to promoting research and development by funding strategic partners in the country. Every year, the companies select other entities for funding to ensure continued research on ways that could be used to foster development across Canada. For example, Irving Shipbuilding invests 0.5 percent of its contract value in research on ways of creating a sustainable marine sector in the country.

By the time the contract expires, this company will have contributed over $12 million to research and development. Similarly, in 2016, Halifax Shipyard partnered with Nunavut Arctic College to contribute $ 2 million to fund nine research projects aimed at promoting different activities to Canada’s Arctic communities. As such, research and development are central to the NSS project and numerous benefits will be realized with the continued implementation of the strategy.

Exports

The revamping of shipyards through the NSS project has equipped Canadian companies with the requisite capacity to supply both domestic and international markets. The strategy offers local companies a platform to develop their competence by being suppliers of goods and services. As SMEs continue to participate in the project, their experience and reputation increase significantly to become competitive in international shipbuilding markets.

For instance, in 2014, one of the many Irving Shipbuilding subcontractors, Lockheed Martin Canada, won a tender to upgrade New Zealand’s ANZAC-class ship’s combat systems based on its extensive experience with the NSS program. Other companies, such as DRS, Ultra Electronics, Hepburn Engineering, and AutoNav are leveraging the experience gained from the strategy to pursue international opportunities. As such, the NSS project has allowed local companies to gain the relevant experience and reputation to compete with their counterparts for different projects around the globe.

Skills Development and Training

The two main contractors involved in the TSS strategy are engaged in continuous training and capacity-building programs to develop their workforces. The companies use on-site simulators to mimic the vessels’ construction process to ensure that employees gain relevant knowledge on how the system works. This approach allows the companies to have highly trained employees to achieve the set NSS objectives.

The common initiatives include skills training, apprenticeship and mentorship programs, safety and security protocols, supervisory and management training, skills transfer, and evaluation of new hires. Additionally, the Irving Shipbuilding has established a Centre of Excellence at the Nova Scotia Community College whereby two training programs are being undertaken to support underrepresented groups in the shipbuilding industry.

For example, in 2016, 19 indigenous students enrolled at the Nova Scotia Community College to study metal fabrication after which they would work at Irving Shipbuilding on apprenticeship (Public Services and Procurement Canada, 2016). Similarly, in the same year, 17 female students enrolled to study welding and metal fabrication in the same college under the Women Unlimited program (Public Services and Procurement Canada, 2016). Therefore, the NSS program has played a central role in skills development and training in the area of shipbuilding across the country.