Generating economic benefits—National Shipbuilding Strategy: 2016 annual report

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Contracts awarded

It is estimated that contracts awarded through the National Shipbuilding Strategy to date will contribute close to $7.7 billion of gross domestic product (GDP)Footnote 1 and close to 7,350 jobs per year on average will be created or maintained between 2012 and 2022.

Figure 1: Contracts awarded from 2012 to 2016 ($6.1 billion)
Contracts awarded from 2012 to 2016 ($6,114 million) - Description below
Text version for Figure 1 of contracts awarded from 2012 to 2016 ($6.1 billion)

The above pie chart shows the dollar value of contracts awarded from 2012 to 2016 in 4 areas:

  • Large vessels: $3.9 billion
  • Small vessels: $123 million
  • Repair, refit and maintenance: $1.5 billion
  • Services: $585 million

The total dollar value of contracts awarded from 2012 to 2016 was $6.1 billion.

In 2016, the Government of Canada signed $472.3 million in strategy contracts, including large vessel construction ($270.8 million), small vessel construction ($12.9 million) and repair, refit and maintenance ($188.6 million).

Figure 2: Contracts awarded in 2016 ($472.3 million)
Contracts awarded from 2012 to 2016 was $6,114 million - Description below
Text version for Figure 2 of contracts awarded in 2016 ($472.3 million)

The above pie chart shows the dollar value of contracts awarded in 2016 in 3 areas:

  • Large vessels: $271 million
  • Small vessels: $13 million
  • Repair, refit and maintenance: $189 million

The total dollar value of contracts awarded in 2016 was $472.3 million.

In addition to new contracts signed during 2016, over $1.2 billion of on-going contracted activity was undertaken during the year across all 3 pillars of the National Shipbuilding Strategy. Of these expenditures, small ship construction during the year accounted for $13 million, in support of the construction of Search and Rescue vessels for the Canadian Coast Guard. This total will increase in the coming years with the full realization of the build contracts for the delivery of these vessels by Hike Metal Products and Chantier Naval Forillon and the construction of Channel Survey and Sounding Vessels by Kanter Marine of St. Thomas, Ontario.

Repair, refit and maintenance work accounted for over $660 million, including $512 million by the Department of National Defence in support of contracts for Kingston and Orca class vessels, and the auxiliary fleet of small boats, barges, tugs and diving tenders, Halifax Class Modernization multi-ship contracts and submarines. Approximately $150 million supported vessel life extension and vessel maintenance activity for the Canadian Coast Guard.

Impact of the National Shipbuilding Strategy

Ongoing National Shipbuilding Strategy activity had a significant impact on the Canadian economy, both in terms of GDP and employment. While the current and on-going values of National Shipbuilding Strategy contracts are significant, overall economic benefits will continue to grow over time as new contracts are awarded by the Government of Canada for projects under the strategy.

As well, through the application of Canada’s Industrial and Regional Benefits and Industrial and Technological Benefits policies, and required shipyard-driven investments into the Canadian marine industry through the National Shipbuilding Strategy Value Proposition, additional economic benefit will continue to be leveraged. Both the offset and Value Proposition requirements are set out and defined in the National Shipbuilding Strategy umbrella agreements.

National Shipbuilding Strategy in action: Working with small businesses

In April 2016, Fleetway Inc., an engineering, technical and logistics company, and Irving Shipbuilding's Halifax Shipyard awarded a $15 million contract to Halifax-based Bluedrop Training & Simulation 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.

Currently, Bluedrop’s Halifax office has 25 full- and part-time employees dedicated to the Arctic and Offshore Patrol Ships project, including 8 positions that were created as a direct result of the National Shipbuilding Strategy contract.

In 2016, there was significant growth in the number of suppliers engaged in strategy contracts by both Halifax Shipyard and Seaspan’s Vancouver Shipyards. Over this period, 129 new Canadian suppliers were engaged by the shipyards to support their National Shipbuilding Strategy-respective activities. Of these Canadian suppliers, 99 were small or medium-sized enterprises (SMEs). Over the period $243.8 million in new contracts were issued by the shipyards, of which $185.5 million were awarded to SMEs.

Export opportunities

Through the active participation in domestic National Shipbuilding Strategy projects, Canadian companies are developing and demonstrating required competence to not only support domestic shipbuilding efforts, but to position themselves for export opportunities now and in years to come.

Historically, Canadian marine-industry firms such as AutoNav, Curtiss-Wright/Indal, Hepburn Engineering, L3 MAPPS, Ultra Electronics and DRS have leveraged their domestic shipbuilding work to pursue competitive opportunities internationally. In 2014, Lockheed Martin Canada, a subcontractor for Irving Shipbuilding, was selected as the prime systems integrator to upgrade the combat systems on New Zealand’s ANZAC-class ships, given its proven track record in combat systems integration methodology on Canadian marine platforms, including the Arctic and Offshore Patrol Ships.

National Shipbuilding Strategy Value Proposition: Benefiting the greater marine industry

A unique element of the National Shipbuilding Strategy is the Value Proposition, designed to benefit the greater Canadian marine industry and help ensure its long-term sustainability.

In exchange for a long-term commitment from the Government of Canada to build ships at Irving Shipbuilding’s Halifax Shipyard and Seaspan’s Vancouver Shipyards, each shipyard is committed to investing 0.5% of the value of their National Shipbuilding Strategy contracts towards 3 priority areas: human resources development, technology investment and industrial development. These investments will help to strengthen and grow Canada's marine industry as a whole.

Both shipyards have been active in realizing their commitments over the past year, with Irving Shipbuilding’s Halifax Shipyard and Seaspan’s Vancouver Shipyards investing $4 million and $1.1 million respectively in National Shipbuilding Strategy Value Proposition activities in 2016.

National Shipbuilding Strategy in action: Funding arctic research

In October 2016, Halifax Shipyard announced the recipients of a new funding commitment of $2 million in partnership with the Nunavut Arctic College for nine applied research projects focused on areas of importance to Canada’s Arctic communities and the marine industry.

The $2 million commitment is being made as part of Halifax Shipyard’s Value Proposition commitment under Canada’s National Shipbuilding Strategy. Irving Shipbuilding is committed to spending 0.5% of contract revenues with the aim of creating a sustainable marine industry across Canada. This will amount to approximately $12 million over the duration of the Arctic and Offshore Patrol Ships contract.

"This initiative, made possible by Halifax Shipyard and the National Shipbuilding Strategy, will develop Arctic community capacity to engage in research," said Joe Kunuk, President of Nunavut Arctic College. "We look forward to supporting innovative proposals designed to develop and enhance marine safety."

Industrial and regional benefits

Canada's Industrial and Regional Benefits Policy is playing an important role in leveraging Canada’s defence spending to generate economic benefits to Canada. The policy requires Irving Shipbuilding’s Halifax Shipyard and Seaspan’s Vancouver Shipyards and their major suppliers to undertake business activities in Canada equal to the value of the contracts they are awarded by the Government of Canada. The policy also requires Canadian industry participation directly on the vessels, ensures work with Canadian small and medium businesses, and encourages the distribution of opportunities across Canada.

The economic impact of the National Shipbuilding Strategy work is generating significant benefits throughout the Canadian economy. From 2012 to 2016, over $791 million of Industrial and Regional Benefits commitments have been completed, including $410 million in 2016. Approximately one-third of that work was performed by small and medium-sized enterprises, with much of that work focused on design, construction engineering and production. In addition, $984 million of contracts are now underway, including $155 million of new contracts signed during the reporting period.

National Shipbuilding Strategy in action: Working with Canadian companies

Thordon Bearings Inc. is the world’s leading manufacturer of oil- and grease-free polymer bearing and seal solutions. Established in 1911, Thordon Bearings is a privately owned Canadian company located in Burlington, Ontario.

As part of the Arctic and Offshore Patrol Ships project, Thordon Bearings was selected as the key supplier for major propulsion equipment. Thordon Bearings provided the complete shaftline bearing solution to Irving Shipbuilding’s Halifax Shipyard, and ultimately the Royal Canadian Navy. Thordon Bearings also provided water quality packages to supply conditioned and monitored seawater to lubricate the shaft bearings. In addition, Thordon Bearings will be supplying corrosion protection for the propeller shaft.

This complete package represents over $1,000,000 in revenue for Thordon Bearings. All the products supplied for this project are manufactured in Canada.

Training and capacity building

The active workforce at both Halifax Shipyard and Seaspan’s Vancouver Shipyards is comprised of both non-production workers and tradespeople. Both shipyards are actively engaged in the training and development of their respective workforces. Through the use of on-site simulators that replicate the vessels under construction and the development of employee learning and advancement initiatives, the shipyards are ensuring that they have and will continue to develop a highly trained and capable workforce to deliver on National Shipbuilding Strategy projects. These initiatives include:

  • mentorship programs
  • skills training
  • apprenticeship programs
  • safety and security procedures
  • management development and supervisory training programs
  • new hire evaluations
  • quarterly apprentice reviews
  • support to skills transfers, including service training to their respective workforces

National Shipbuilding Strategy in action: Training future shipbuilders

As part of the strategy, Irving Shipbuilding’s Halifax Shipyard has invested in training and education programs to develop 21st century shipbuilders by providing $250,000 per year to the Nova Scotia Community College to develop and sustain Irving Shipbuilding’s Halifax Shipyard Centre of Excellence. The centre provides bursaries to individuals interested in shipbuilding careers with a focus on growing opportunities for underrepresented groups.

Through this initiative, two successful programs, Women Unlimited and Pathways to Shipbuilding, have been designed to provide training and employment opportunities for 20 female students and 20 Indigenous students, respectively, in areas of welding and metal fabrication.

Irving Shipbuilding’s Halifax Shipyard

In terms of staffing, between January and December 2016, Irving Shipbuilding’s Halifax Shipyard hired 187 individuals bringing the total number of staff situated across Irving Shipbuilding’s Halifax Shipyards, Woodside Industries and Marine Fabricators to 522. During this same time period over 276 new tradespeople were hired, bringing the active total of tradespeople to 1,006.

As well, through the Irving Shipbuilding Centre of Excellence at the Nova Scotia Community College, two successful training programs are underway for groups currently underrepresented in the shipbuilding industry:

Women Unlimited

In 2016, 17 female students enrolled in Welding and Metal Fabrication Programs at the Nova Scotia Community College as part of the Irving Shipbuilding Women Unlimited pilot program. It is anticipated that after they complete the two-year program in June of 2017, the students will come and work at Irving Shipbuilding as Welders or Metal Fabricators and pursue their apprenticeship, assuming positions are available and they meet Irving Shipbuilding requirements. Recruitment for a second program will start in spring 2017.

Pathways to Shipbuilding

In partnership with the Government of Canada, the Government of Nova Scotia, Mi’kmaw Native Friendship Centre, Nova Scotia Community College, GE Canada, and Unifor, there were 19 Indigenous students enrolled in 2016 in the Metal Fabrication Program at the Nova Scotia Community College through the Pathways to Shipbuilding Program. It is anticipated that after this 2-year program, the students will work at Irving Shipbuilding’s Halifax Shipyard as metal fabricators and pursue their apprenticeship, assuming positions are available and they meet Irving Shipbuilding requirements.

Seaspan’s Vancouver Shipyards

In 2016, Seaspan’s Vancouver Shipyards hired 326 tradespeople, bringing their active total of tradespeople to 650. Further, Seaspan’s Vancouver Shipyards filled 164 staff positions, of which 128 were new hires, bringing the total number of staff to 1,070.

During the reporting period, Seaspan’s Vancouver Shipyards invested in employee training and human resources development to support building capacity in Canada’s marine sector by:

Investing in the future of British Columbia shipbuilding

In June 2016, Seaspan and the Dennis and Phyllis Washington Foundation, announced a multi-year, multi-million dollar investment in the future of British Columbia’s marine industrial sector.

The commitment totals $2.9 million and includes a 3-year, $900,000 donation by the Dennis and Phyllis Washington Foundation to 3 institutional trades training programs in Canada. Recipients include the British Columbia Institute of Technology to support Aboriginals in trades, Camosun College to support women in trades, and the Canadian Welding Association Foundation for both new welding equipment and teacher professional development. The investment is a direct result of Seaspan’s Vancouver Shipyards Industrial and Regional Benefits obligations under the strategy.

In addition, the commitment also consists of $2 million investment by Seaspan’s Vancouver Shipyards to support innovative teaching and research for the Naval Architecture and Marine Engineering programs at the University of British Columbia’s Faculty of Applied Science. The investment is a direct result of Seaspan’s Vancouver Shipyards Value Proposition obligations under the strategy.

Apprenticeships

Apprenticeship continues to be an extremely important facet creation of a long-term sustainable, Indigenous pool of qualified professionals and tradespeople to manage the production of ships in Canada for generations to come. Over the course of the reporting period, the number of apprentices at Irving Shipbuilding grew by 96 to a total of 294, of which 36 have graduated to journeyman status. During the reporting period, Seaspan’s Vancouver Shipyards employed 57 apprentices on-site, an increase of 22.

Indigenous participation in the National Shipbuilding Strategy

To encourage Indigenous participation in Canada’s shipbuilding industry as a whole, Indigenous and Northern Affairs Canada collaborated with other federal departments and agencies, provinces, Irving Shipbuilding’s Halifax Shipyard, Seaspan’s Vancouver Shipyards and Indigenous partners to develop strategies that address gaps and strengthen Indigenous participation in the strategy.

This collaborative effort resulted in approximately 700 Indigenous persons receiving training on the east coast, with 32 persons returned to school for additional training and 316 employed in various jobs, including work as electricians, iron workers, pipefitters, paint/blasters, riggers, welders, engine fitters, sheet metal fabricators, crane operators and machinists. On the west coast, approximately 783 Indigenous persons were trained, 31 returned to school for additional training and 250 were employed in various jobs, including boiler makers, sheet metal fabricators, pipefitters, procurement, administration, marine supply chain, material management. Furthermore, as reported by Seaspan’s Vancouver Shipyards, $22.2 million in contracts have been awarded to Indigenous businesses since the advent of the National Shipbuilding Strategy.

Both shipyards are assisting in developing Indigenous capacity in various aspects of shipbuilding, which will allow Indigenous businesses to enter into many shipbuilding contracts with or without partners.

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