Speaking notes for technical briefing on Canadian Surface Combatant streamlined procurement approach

Ottawa, ON
June 13, 2016

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Good afternoon.

We will try to be as brief as possible as we want to give you enough time to ask questions.

As you know, the National Shipbuilding Strategy is now in its fifth year, and we've celebrated great achievements in terms of job creation and milestones.

We have established long-term strategic relationships with two shipyards that have together invested more than $500 million to modernize their infrastructure, at no cost to the Government of Canada. These two world-class shipyards are currently building ships for our Canadian Coast Guard and Royal Canadian Navy. Some of you have had the opportunity to visit the yards. Those who have not, I invite you to do so. It changes your perspective on the magnitude of what has been accomplished to date. Yes, we've celebrated achievements, but more work is required to ensure the success of the National Shipbuilding Strategy.

We have acknowledged budgets were set early in the process and estimates will need to be revisited. Delays on our projects and our overall performance in reporting to Canadians have also been identified as areas for improvement.

As Minister Foote mentioned this morning, this is why we are looking at ways to:

We are committed to improving the strategy and looking for opportunities to continuously enhance specific projects as we move forward. That's exactly why we are here today. Under the streamlined Canadian Surface Combatant procurement approach announced today, we will use a single competition to select an existing warship design and, to a large extent, its original systems and equipment to be incorporated into the ship. This will reduce integration and schedule risks and bring greater cost certainty. By holding an open, competitive procurement process, the government will ensure that the Royal Canadian Navy gets the vessels it requires and obtains best value for Canadians, while maximizing innovation and efficiency.

Although we streamlined our procurement approach, we remain committed to leveraging economic benefits from the Canadian Surface Combatant project by creating opportunities for Canadian content on the vessels and high value investments in other sectors of Canada's economy.

As you know, an important objective of the government is to ensure we leverage economic benefits to Canada from defence procurement. Nowhere is this more important than in the case of the Canadian Surface Combatant, given the sheer size of the opportunities related to procurement of this scale.

Under the revised procurement approach, competition will remain an important driver, not only to get the best vessel at the best price, but also to maximize economic benefits to Canada.

On this last point, bidders will be required to submit a Value Proposition, which outlines their plans to undertake work and invest in Canada. These plans will be evaluated, alongside price and technical considerations, to determine the winning bid.

In keeping with the Industrial and Technological Benefits Policy, the winning bid team will be contractually bound to invest an amount in Canada, equal to the value of the contracts they secure to design and build surface combatants, and they will be contractually bound to deliver their Value Proposition commitments.

We expect this project to create design, engineering and integration work for Canadians; to increase Canada's existing capacity to produce the systems and equipment needed for surface combatants; and to generate other long-term, high-quality investments in Canada's marine sector and other sectors of the economy. This project will generate significant opportunity for Canadian companies across Canada, including small and medium-sized businesses.

In addition to these expected outcomes, a significant amount of work will go to Canadians working in the shipyard and Canadian-based commodity suppliers, in keeping with Irving Shipyard's obligations under the Industrial and Technological Benefits Policy.

The Royal Canadian Navy has completed a very detailed initial requirements review with the support of various international organizations and National Defence.

The net effect is that the procurement can move forward to select an existing design as a point of departure. There will still be a requirement for some design changes in all of the existing warships; for example, to accommodate the Cyclone helicopter.

Once selected, the design will then be subject to a controlled design change process to modify it to meet the final reconciled requirements of the Royal Canadian Navy.

As you can appreciate, it will be faster and less risky to select an existing warship design through a single competitive process, instead of developing a custom design through two separate competitive procurement processes to select the Warship Designer and the Combat Systems Integrator. This will not only simplify the procurement process, but it may also enable us to start construction sooner and eventually deliver the ships earlier.

While we continue to advance the Canadian Surface Combatant project, other ship projects key to the recapitalization of the Royal Canadian Navy continue to progress: 9 of the 12 Halifax-Class ships have now completed the major upgrades and several have been deployed and have demonstrated exceptional operational capability; construction of the first Arctic Offshore Patrol Ship is well underway, and construction of the second ship will start later this year; the work to complete the design and acquire key components for the Joint Support Ships is now underway, and construction will begin in 2018.

Also worthy of mention on the Canadian Surface Combatant front is that last fall we conducted the pre-qualification competition to identify the firms that meet our experience requirements to participate in subsequent phases of this procurement. We have consulted with these 12 firms and our Canadian Surface Combatant Prime Contractor, Irving Shipbuilding, as we developed the streamlined procurement approach.

Working closely with Irving Shipbuilding, we will now intensify those consultations as we develop the Request for Proposals to select the warship design. We expect that these firms will use the knowledge they gain through this industry dialogue process to identify firms that will be part of their bid teams.

Once industry consultation is complete, Irving Shipbuilding will issue the Request for proposals (RFP) to the qualified firms for them to prepare and submit their proposals. Our intent is to work with industry to release the RFP as soon as possible, with a target release by the end of the summer.

Canada and Irving Shipbuilding will then work together to evaluate the bids and select the proposal that provides the best value.

As some time has passed since we completed the Canadian Surface Combatant pre-qualification process, we will reopen pre-qualification. Any additional firms that meet the requirements for pre-qualification, which will be unchanged from last fall's process, will also be provided with the RFP and have an opportunity to submit a bid. Firms that have already pre-qualified will not have to requalify. We plan to publish the pre-qualification notice in the next few days.

Industry consultation has been key in drafting the requirements and maximizing Canadian content, and, I would like to emphasize that we will continue to consult industry leading up to the release of the Request for Proposals scheduled for this summer.

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