Defence and Marine Procurement: Standing Committee on Government Operations and Estimates—March 24, 2021

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National Shipbuilding Strategy

Context

The National Shipbuilding Strategy (NSS) is a long-term commitment to renew the vessel fleets of the Royal Canadian Navy (RCN) and Canadian Coast Guard (CCG), create a sustainable marine sector, and generate economic benefits for Canadians.

Suggested response

• The NSS is about Canadians and Canadian businesses working together to strengthen and renew our Naval and Coast Guard fleets
• So far, we have built 4 ships, and many more are under construction
• We have awarded $17.44 billion in NSS contracts to businesses throughout the country
• These contracts are estimated to contribute approximately $20 billion ($1.81 billion annually) to Canada’s gross domestic product, and create or maintain over 16,845 jobs annually, through the marine industry and its Canadian suppliers and consumer spending, between 2012 to 2022
• The NSS is a long-term investment that is delivering resulting now: ships for the Navy and the Coast Guard and jobs and economic growth for Canada

Progress on current work

• At Seaspan’s Vancouver Shipyards, all 3 offshore fisheries science vessels have been delivered to the CCG, marking the completion of the first class of large ships built under the NSS. Work is ongoing on the first joint support ship. The offshore oceanographic science vessel construction contract was announced with construction expected to begin in March 2021. Early design work for the multi-purpose vessels has commenced
• At Irving Shipbuilding, the first Arctic and offshore patrol ship, the Her Majesty’s Canadian Ship (HMCS) Harry DeWolf, was delivered and accepted by the RCN on July 31, 2020. Three other vessels are currently under construction. Design work on the Canadian surface combatant (CSC) is advancing
• Public Services and Procurement Canada (PSPC) has recently authorized Irving Shipbuilding to acquire design documentation from JSK Naval Support Inc. on the JSK torpedo launcher system selected by Lockheed Martin Canada for incorporation into the CSC design. JSK Naval Support Inc. is located in Pointe-Claire, Quebec
• PSPC is assessing marine infrastructure across the country to ensure the federal fleets can be sustained through the anticipated lifespan of the vessels built under the NSS

If pressed on offshore oceanographic science vessel increased budget (Note: Questions on budget, requirements, timelines, international comparisons, project management should be directed to the Minister of Fisheries and Oceans and the CCG):

• original budgets for this project and other large vessel construction projects were set many years ago and were guided by limited experience and projections. Shipbuilding is highly complex and we continue to build on lessons learned to ensure future project projections are realistic and achievable
• the government is committed to ensuring best value for money. We will continue to work closely with Vancouver Shipyards to manage the OOSV project within the allocated budget

If pressed on CSC project delays (Note: Questions on budget, requirements, estimated timelines, international comparisons, project management should be directed to the Minister of National Defence):

• building a new class of ships is complex, and project timelines evolve as engineering and production schedules are developed during the design phase
• the construction of the first ship is now expected to begin in 2023 to 2024, and the first ship is expected to be delivered in the early 2030s
• we are working closely with our industry partners to find efficiencies and accelerate these timelines

If pressed on the Navantia CSC court challenge:

• with respect to section 38 in the Navantia application for judicial review, this is a statutory obligation and not a discretionary decision by government officials
• beyond this explanation of the application of section 38, we are not able to comment on the matter as it is before the courts

If pressed on COVID-19 impact on shipbuilding:

• the Government of Canada is committed to protecting the health and safety of Canadians and keeping our workforces safe, while ensuring a safe and sustainable economic recovery
• Canada continues to monitor the situation, analyze potential impacts and explore all possible financial measures available to support the marine industry and protect Canada’s long term national security interests
• we are continually assessing the impact of COVID-19 on the delivery of ongoing and future major procurement projects, including those under the NSS

If pressed on the Report from the Office of the Auditor General (OAG) of Canada:

• we welcome the report of the Auditor General, and accept all of the recommendations. As the Auditor General acknowledges, shipbuilding is complex and challenging work, and we continue to seek opportunities to improve the strategy
• we will continue to work closely with our shipyard partners so that ships can be delivered as quickly as possible and important economic benefits and jobs continue to be provided for Canada
• to date, the NSS has delivered 4 large vessels, while contributing an estimated $20 billion to the Canadian economy and creating and maintaining almost 17,000 jobs annually across the country between 2012 and 2022
• we made key decisions to place the NSS on a more viable path. Today, we have a much more evidence-based and reliable understanding of the time, effort and expenditures required to build world-class vessels

If pressed on Parliamentary Budget Officer (PBO) Report (on CSC) (Note: Questions on budget, requirements, estimated timelines, international comparisons, project management should be directed to the Minister of National Defence):

• the PBO’s report on the CSC was published on February 24, 2021
• over the past several years, significant progress has been achieved on the CSC project
• the competitive process used to select CSC has been fair, open and transparent and will ensure not only a capability-to-build that meets the RCN’s needs but also will strengthen Canada’s shipbuilding industry while generating jobs for many decades to come
• since the Canadian surface combatant definition contract was issued to Irving Shipbuilding Inc. in February 2019, the first phase of the design process has been substantially progressed and work continues on the next phase: preliminary design
• progress and successes are being achieved. However, shipbuilding is highly complex, and we must continue to work with shipyards and industry to address ongoing challenges, including costs, estimated timelines and productivity

If pressed on the PBO report (Joint Support Ship) (Note: Questions relating to vessel capabilities should be referred to the Minister of National Defence):

• the Multi-purpose Vessel (MV) Asterix is meeting short-term requirements for basic at-sea replenishment duties, but is not equipped to conduct the full spectrum of military activities required by the RCN
• the joint support ship will be able to carry out at-sea replenishment capabilities as well as the full spectrum of military activities required for the Navy’s operations
• the cost of the MPV Asterix contract covers the provision of service over a limited number of years, and does not represent the cost of purchasing the ship outright
• the contract includes options to purchase, or to extend the MPV Asterix period of service by up to 5 additional 1 year increments. The contractor must be notified at least 180 calendar days before the expiry date of the contract to exercise these options

If pressed on Esquimalt Graving Dock:

• the Government of Canada is committed to renewing vital marine infrastructure to support the long-term growth and development of our coastal communities in British Columbia and across Canada
• Esquimalt Graving Dock is a strategic asset that serves the federal fleet as well as supporting and strengthening the west coast industrial marine sector in a secure, public-owned, open-access, multi-user facility. The government has no plans to build vessels at the facility
• planning is underway to expand the facility so that it can continue to accommodate existing and future federal fleet vessels under the NSS, as well as other tenants that lease space for repair, refit, and maintenance
• the facility supports about 3,000 full-time highly-skilled, high-paying trades jobs, and is an economic generator for the local and regional economies, contributing close to $1 billion dollars of economic output and over $30 million in taxes to all levels of government

Third yard

• Chantier Davie has pre-qualified to become the third strategic partner under the NSS
• Canada and Chantier Davie are now going through the steps of the process which include a third-party assessment of the shipyard’s infrastructure, submission of a formal proposal, and a due diligence process to ensure the shipyard is financially capable of performing the work and making any necessary upgrades to its infrastructure
• Subject to successful negotiations, Canada intends to enter into an umbrella agreement with the third yard in fall 2021
• The third yard will build 6 program icebreakers for the CCG
• The entire invitation to qualify process was overseen by an independent fairness monitor

Opportunities for other yards / Chantier Davie

• Across the country, opportunities exist for Canadian shipyards and businesses to win contracts for small vessel construction, repair, refit and maintenance
• On February 17, 2020, following an open and competitive process, we announced the awarding of a $12.1-million contract to Shelburne Ship Repair for a vessel life extension on the Canadian Coast Guard Ship (CCGS) Edward Cornwallis, a high-endurance multi-tasked vessel and light icebreaker in the CCG fleet. This contract will help create or sustain approximately 100 jobs in Shelburne, Nova Scotia
• On July 21, 2020 the first Royal Canadian Navy frigate arrived at Chantier Davie for repair and maintenance. It is the first vessel to be re-furbished under 1 of the 3 Halifax class docking work period contracts awarded to Chantier Davie (1 of the 3 shipyards selected for the work) in July 2019
• On August 26, 2020, following an open and competitive process, we announced the awarding of a $4-million contract to Heddle Shipyards for dry-docking work on the CCGS Griffon, a high-endurance multi-tasked vessel and light icebreaker in the CCG fleet. This contract will help create or sustain 80 jobs in Hamilton, Ontario
• On November 6, 2020, we announced the awarding of a $182-million contract to General Dynamics Mission Systems–Canada, of Ottawa, Ontario, for in-service support on 6 Halifax-class combat systems. The initial contract amount may increase over the next 6 years as work progresses, and will maintain up to 106 jobs
• An advance contract award notice (ACAN) signaling our intention to enter into a contract with Chantier Davie for required vessel life extension work on the CCGS Louis S. St-Laurent, Canada’s largest icebreaker, closed November 19, 2020. Chantier Davie has been identified as the only facility in Eastern Canada capable of performing this work during the specified time period. Contract award is anticipated for mid-summer 2021 with work scheduled to begin in spring 2022
• On December 24, 2020, the contract with Federal Fleet Services for provision of an interim auxiliary oiler replenishment capability for the Royal Canadian Navy was amended to $691.6 million. This amendment follows a thorough review of the budget forecast, as well as all costs incurred since MPV Asterix was put into service, and remains within the approved budget ceiling for the program. This will provide the Navy the deployed operational support it needs for its assigned missions through the contract’s full 5-year service period
• Since 2012, Chantier Davie has been awarded more than $2.19 billion in NSS contracts. They are presently converting medium icebreakers for the CCG, and are undergoing a process to become the third shipyard under the NSS

If pressed on the polar icebreaker:

• the government is exploring procurement options for construction of the polar icebreaker. No decisions have been taken
• a request for information was issued on February 28, 2020 to obtain information on domestic shipyard capability and capacity to build a polar icebreaker which closed on March 13, 2020
• there is no intention to use the Esquimalt Graving Dock dry-dock to construct the polar icebreaker
• Seaspan’s Vancouver Shipyards infrastructure was modernized at the outset of the NSS for the construction of the vessels in its work package, which—at that time—included the polar icebreaker

If pressed on the Chantier Davie National Icebreaker Center:

• the Government of Canada is not involved with the Chantier Davie National Icebreaker Center, and the center is not a part of the NSS

If pressed on interim icebreaker capacity for CCG:

• the current value of the contract with Davie for the acquisition and conversion of the 3 medium icebreakers is $843 million
• the first vessel began operations in December 2018, the second vessel CCGS Jean Goodwill was delivered to the CCG in November 2020 and the third vessel CCGS Vincent Massey is expected in 2021

If pressed on emergency towing vessels:

• a 3-year contract worth $67 million was awarded to Atlantic Towing Ltd. of Saint John, New Brunswick, for the services of 2 fully-crewed emergency towing vessels
• PSPC is currently reviewing the Federal Court of Appeal judicial decision delivered on February 10, 2021, regarding complaint 5 to the Canadian International Trade Tribunal challenging contract award to Atlantic Towing Ltd
• the contract with Atlantic Towing remains in place given the importance of the services provided by the emergency towing vessels in the context of Canada’s Oceans Protection Plan

Background

Canadian surface combattant: Navantia court challenge

Navantia was an unsuccessful bidder for the competitive Canadian surface combatant request for proposals which was won by Lockheed Martin Canada. Navantia has applied to the Federal Court for a judicial review of the results of the bid evaluation.

Navantia contends the BAE Type 26 ship selected for the Royal Canadian Navy's new fleet failed to meet Canada's requirements.

As part of the judicial process, the Attorney General of Canada received notice under section 38.01 of the Canada Evidence Act that sensitive or potentially injurious information was contained in the certified tribunal record. On January 20, 2021, the Attorney General of Canada filed a confidential section 38 Canada Evidence Act application in Federal Court. When filing this application the Attorney General of Canada expected that the application would be made public.

With respect to section 38 in the Navantia application for judicial review, this is a statutory obligation and not a discretionary decision by government officials.

Section 38.01 requires every participant in a proceeding to advise the Attorney General in writing where there is a possibility of disclosure of sensitive or potentially injurious information.

Beyond this explanation of the application of section 38, the government is not able to comment on the matter as it is before the courts.

Canadian surface combattant: Parliamentary Budget Officer Report

The CSC project represents the largest procurement under the NSS and is part of the work package to be built by Irving Shipbuilding Inc. The 15 CSC will replace the Royal Canadian Navy’s existing fleet of frigates and retired destroyers at an estimated cost of $56 billion to $60 billion.

The PBO reported on the CSC projected costs in 2017 and 2019. In 2017, the PBO estimated the cost of 15 CSCs at $61.82 billion. In 2019, the PBO revised the cost to $69.8 billion. While the final design and build strategy is yet to be completed, the PBO observed that project delays would further increase the cost of the project.

The PBO published a report on February 24, 2021, entitled “The Cost of Canada's Surface Combatants: 2021 Update and Options Analysis” that now estimates the cost of the CSC project at $77.3 billion. The PBO also provides cost forecasts for alternative procurement scenarios that assume a 4-year delay to the overall project should a new design be selected to replace the type 26.

Esquimalt Graving Dock

Other Canada-owned graving docks were divested in the 1990s as part of the effort to divest of over 30 engineering assets and well over 100 marine assets as a result of the Nielsen Report (Government of Canada Program Review) in 1985.

Esquimalt Graving Dock was removed from the 1985 direction to divest in 2008 as it was recognized as a key strategic asset for federal fleet sustainment, as well as for support of the west coast industrial ship repair industry. Tenant ship repair companies at the dock repair and sustain not only Royal Canadian Navy frigates, but cruise ships, domestic barges/tugs, BC Ferry vessels, and cargo tote ships among others.

The purpose of the current expansion is to ensure the federal fleet can be sustained well into the future. With redevelopment, the facility will be able to accommodate existing and future federal fleet vessels under the NSS. The redevelopment will also attract additional tenants and add hundreds of highly-paid, skilled trades jobs, and reduce ‘whole of government’ costs to sustain federal fleets.

An amount of $3 billion for the redevelopment has been quoted in the media in winter 2021—this information is incorrect. The first tranche of the redevelopment (including the east end dock extension to be awarded in winter 2021) is estimated at $218.7 million while the future redevelopment (still at the planning phase) is estimated at $639 million for a total of less than $1 billion.

Contracts under the National Shipbuilding Strategy

From 2012 to the end of 2020, the government signed approximately $17.44 billion in new NSS contracts throughout the country. In terms of economic impacts of the NSS, since its inception, NSS contracts are estimated to contribute approximately $19.97 billion ($1.81 billion annually) to Canada’s gross domestic product, and create or maintain, over 16,845 jobs, annually, through the marine industry its Canadian suppliers and consumer spending, between 2012 and 2022.

Defence and Marine Procurement: General accomplishments and project status

Context

Suggested responses and background information is provided on defence and marine procurement accomplishments and status of projects.

Suggested response

• Canada’s defence policy: Strong, Secure, Engaged, reaffirms the government’s commitment to ensure that Canada has an agile, multi-purpose military and that members of the Canadian Armed Forces are well equipped. We are delivering on this commitment
• Over the last 18 months, significant progress has been achieved on major defence and marine procurement projects and activities
• Over two thirds of projects under Canada’s defence policy: Strong, Secure, Engaged are completed or underway
• For example, National Defence has provided the Canadian Army with medium support vehicle systems which are currently deployed in Latvia
• Additionally, the Royal Canadian Navy’s Halifax-class frigates have been modernized and deployed overseas

Most recently:

• on September 10, 2020, we awarded a $155-million contract to purchase the Motor Vessel (MV) Villa de Teror as an interim measure to replace the MPV Madeleine ferry. The vessel was delivered on February 18, 2021 and is expected to enter into service in summer 2021
• on September 25, 2020, the arrival of the first fixed-wing search and rescue (FWSAR) CC295 was celebrated in Comox, British Columbia, and the official name, “Kingfisher”, was announced
• on October 9, 2020, the third and final offshore fisheries science vessel was delivered to the Canadian Coast Guard (CCG)
• on November 6, 2020 we announced a $182-million contract award to General Dynamics Mission Systems–Canada, from Ottawa, Ontario, for in-service support on 6 Halifax-class combat systems (HCCS)
• on November 19, 2020 an advance contract award notice (ACAN) closed signaling our intention to enter into a contract with Chantier Davie for required vessel life extension work on the CCGS Louis S. St-Laurent, Canada’s largest icebreaker. Contract award is anticipated mid-summer 2021 with work scheduled to begin spring 2022
• on November 23, 2020, the second medium icebreaker, the CCGS Jean Goodwill, was delivered to the CCG with the third vessel expected to be in service in 2021
• in December 2020, the 2 new challenger aircraft returned to Canada after completion of the final modifications
• as of February 15, 2021, 11 Royal Australian Air Force F/A-18 Hornet aircraft being acquired under the interim fighter capability project (IFCP) have been delivered to Mirabel, Quebec, to undergo the required Canadian upgrades for integration within the CF-18 fleet
• on February 18, 2021, we announced a $453.8 million (taxes included) build contract award to Seaspan’s Vancouver Shipyards for the construction of one offshore oceanographic science vessel

If pressed on impacts of COVID-19 to budgets and schedules:

• due to COVID-19, several defence procurement projects slowed, including the construction and maintenance of ships
• given the uncertainties associated with the duration of COVID-19 and related strategies, the full schedule impact to projects is not yet fully understood
• that said, we recognize that COVID-19 has impacted the defence sector, and are working closely with industry to mitigate budgetary and schedule impacts of existing procurements
• our government is taking strong action to protect our economy, jobs, and the health and safety of Canadians during the global COVID-19 outbreak
• Canada continues to monitor the situation, analyze potential impacts and explore all possible financial measures available to support the defence and marine industry and protect Canada’s long term national security interests
• we are currently assessing the impact of COVID-19 on the delivery of ongoing and future major procurement projects
• we urge all employers during this critical time to follow the recommendations of public health officials, so that workers are kept safe in this extraordinary situation

If pressed on ‘excusable delay’ requests:

• in order for Canada to consider excusable delays, certain conditions set out in the contracts must materialize, including a requirement for contractors to notify Canada and to submit a work around plan
• therefore, in the specific context of COVID-19, contractors wishing to submit an excusable delay claim to Canada should review their contracts and proceed in accordance with the provisions they contain

If pressed on the status of Defence Procurement Canada:

• the government continues to seek opportunities to enhance defence procurement
• at the same time important progress is being achieved against numerous major defence and marine projects, and key equipment is being delivered including new fixed-wing search and rescue aircraft, the Arctic and offshore patrol ship, fisheries science vessels, the medium support vehicle system and tactical armoured patrol vehicle

Background

Major progress on defence and marine procurements over the last 18 months:

• Canadian surface combatant (CSC) for the Department of National Defence (DND):
  • the CSC project is the largest, most complex procurement undertaken by the Government of Canada, with a total estimated project budget of $56 billion to $60 billion
  • in February 2019, the Government of Canada and Irving Shipbuilding selected Lockheed Martin Canada for the design of 15 new CSC that will be built at Irving Shipbuilding’s Halifax Shipyard. The CSC design will be based on BAE’s type 26 global combat ship
  • on February 7, 2019, the CSC design contract was awarded to Irving Shipbuilding
  • in early November 2019, Irving Shipbuilding and Lockheed Martin Canada were authorized to progress to the preliminary design phase of the design process; the second of the 4 design phases
  • in early November 2020, the United States Congress received notification of the proposed sale of 100 SM-2 surface-to-air missiles to Canada, at a cost not to exceed USD 500 million for the CSC
  • Navantia, an unsuccessful bidder for the competitive CSC request for proposals has applied to the Federal Court for a judicial review of the results of the bid evaluation
  • with respect to the Navantia application for judicial review and the application of section 38 of the Canada Evidence Act: while we cannot speak to specific content at issue in the materials, the Attorney General of Canada received notice that sensitive or potentially injurious information was contained in some of the documents required to be produced to Navantia.
  • the Attorney General has the responsibility, by law, to protect such privileged information from disclosure through section 38 of the Canada Evidence Act, in order to prevent potential injury to national security, international relations or national defence
  • the parliamentary budget officer’s report on the CSC was published on February 24, 2021. Shipbuilding is highly complex, and Canada continues to work with shipyards and industry to address ongoing challenges, including costs, estimated timelines and productivity
• acquisition of 360 light armoured vehicles:
  • on August 16, 2019, in support of Canada’s defence policy: Strong, Secure, Engaged, the Government of Canada announced its intention to acquire up to 360 armoured combat support vehicles (ACSVs) and that it was in the advanced stages of negotiating a contract, through a non-competitive process
  • on September 5, 2019, Public Services and Procurement Canada (PSPC), on behalf of National Defence, awarded a contract to General Dynamics Land Systems—Canada (GDLS-C) valued at approximately $2 billion for 360 ACSVs, initial spare parts, technical manuals, and training
  • in May 2020, production of the first ACSV began in London, Ontario at the General Dynamics Land Systems—Canada manufacturing facilities. These new vehicles will fulfill a variety of combat support roles such as that of troop/cargo vehicle, ambulance, command post, and mobile repair and recovery
  • on December 17, 2020 the first troop cargo vehicle variant came off the production line; a total of 11 vehicles are planned for factory acceptance for fiscal year 2020 to 2021
• 2 Transport Canada ferries to be built at Chantier Davie:
  • on May 22, 2019, an advance contract award notice (ACAN) was issued, signaling the Government of Canada’s intention to enter into a contract with Chantier Davie for the construction of 2 new ferries for Transport Canada. Other interested suppliers had 15 calendar days to submit a statement of capabilities to show they met the requirements laid out in the ACAN. None were submitted
  • on June 19, 2019, the Government of Canada announced that it was entering into contract negotiations with Chantier Davie of Lévis, Quebec, for the construction of the vessels
  • on November 14, 2019, Lengkeek Vessel Engineering Inc. & Knud E. Hansen A/S Naval Architects (joint venture) were awarded a $3.1 million contract to provide expert advice and technical oversight to Transport Canada throughout the project leading to and including the construction
  • in November 2019, the Government of Canada awarded an initial ancillary contract to Chantier Davie to establish a project management office and initiate various studies to support design and construction of the new vessels. As of September 14, 2020 the contract is valued at $3.334 million (tax included)
• interim ferry:
  • on July 2, 2020, the Government of Canada issued an ACAN, signaling its intention to purchase the Motor Vessel Villa de Teror as an interim measure to replace the Motor Vessel Madeleine until the new vessel being built at Davie is ready for service.
  • on July 20, 2020, the ACAN closed, and a $155-million contract was signed for the acquisition of the vessel on September 10, 2020
  • the vessel was delivered and accepted by Canada on February 18, 2021 and is expected to enter into service in summer 2021
• selection of a third Canadian shipyard under the National Shipbuilding Strategy to build 6 program icebreakers for the CCG:
  • to respond to evolving federal shipbuilding requirements, PSPC is carrying out a process to select a third strategic partner shipyard under the NSS. The selected shipyard will build 6 new program icebreakers for the CCG
  • in December 2019, Chantier Davie pre-qualified in the first stage of the process to become the third strategic partner under the NSS. Chantier Davie has moved on to the request for proposal (RFP) and evaluation stage. This will include a third-party assessment of the shipyard’s infrastructure, submission of a formal proposal, and a due diligence process to ensure the shipyard is financially capable of performing the work and making any necessary upgrades to its infrastructure
  • on July 29, 2020, the final RFP was sent to Chantier Davie
  • an umbrella agreement is expected to be in place with a third shipyard in fall 2021
• 16 multi-purpose vessels for the CCG to be built at Vancouver Shipyards:
  • on May 22, 2019, the Government of Canada announced a $15.7 billion investment to renew the Canadian Coast Guard fleet, in order to ensure capacity to deliver important services for Canadians. This includes building up to 16 multi-purpose vessels (MPVs)
  • construction of the MPVs is expected to start in the mid-2020s, following the completion of the second joint support ship (JSS)
  • a run of up to 16 vessels will provide an opportunity for Vancouver Shipyards to generate efficiencies and economies of scale, as well as ensure greater workforce stability and minimize gaps in production
  • in August 2020, the MPV ancillary contract was awarded, which will progress early design work on the vessels
• seventh and eighth Arctic and offshore patrol ships for the CCG:
  • on May 22, 2019, the Government of Canada announced a $15.7 billion investment to renew the Canadian Coast Guard fleet, in order to ensure capacity to deliver important services for Canadians. This includes building 2 Arctic and offshore patrol ships (AOPS) for the CCG
  • the 2 new AOPS (7 and 8), to be built by Irving Shipbuilding, will be adapted for the CCG to perform a range of critical missions, including Northwest Atlantic Fisheries Organization patrols
  • on November 1, 2019, the first contract relating to these ships was awarded. This contract is to have Irving Shipbuilding make the changes required to modify the AOPS design to satisfy CCG’s unique requirements
  • acquisition and conversion of 3 medium icebreakers for the CCG:
    • in December 2018, the CCG accepted into service the first of the 3 medium icebreakers being refit by Chantier Davie, the CCGS Captain Molly Kool
    • on November 23, 2020, the second medium icebreaker, the CCGS Jean Goodwill, was delivered to the CCG with the third vessel, the CCGS Vincent Massey, expected to be in service in 2021
• invitation to qualify for the Future Aircrew Training Program:
  • through an open and transparent competition, the Government of Canada is taking the necessary steps to renew its existing aircrew training services
  • the Future Aircrew Training (FAcT) Program has been put in place to develop and implement a new and cohesive training program that replaces the Canadian Armed Forces’ current pilot, air combat systems officer (ACSO), and airborne electronic sensor operator (AES Op) training systems
  • in December 2018, Canada established a list of qualified suppliers that demonstrated their ability to meet Canada’s needs, as defined in the invitation to qualify
  • on December 16, 2020 a draft request for proposal (RFP) was released to the 3 qualified suppliers
  • in summer 2021, the formal RFP is expected to be released
  • industry engagement will continue until release of the final RFP
• invitation to qualify for the Victoria-class in-service support contract II:
  • through an open and transparent competition, the Government of Canada is renewing the in-service support contract for the Royal Canadian Navy’s Victoria class submarine fleet
  • Canada has a fleet of 4 submarines that were purchased, used, from the United Kingdom (UK) in the early 2000’s
  • an invitation to qualify closed January 8, 2020 from which 5 bidders qualified:
    • BAE Systems (Canada) Inc
    • Babcock Canada Inc
    • Serco Inc. and Chantier Davie Canada Inc. in a joint venture carrying on business as the Canadian Submarine Alliance
    • Naval Group
    • Thales Canada Inc. and Thales Australia Ltd. in a joint venture
  • these successful respondents of the invitation to qualify will be part of the industry consultation group that will lead to the finalization of the RFP. First industry engagements with the prequalified bidders took place in September 2020 and will continue into 2021
  • Babcock Canada Inc. is the current prime contractor and the current contract will remain in place until June 2023, if all option years are exercised. Victoria Shipyards Limited of Victoria, BC is one of the principal subcontractors to Babcock
• invitation to qualify for remotely piloted aircraft systems:
  • through an open and transparent competition, the Government of Canada is taking the necessary steps to procure an armed medium altitude long endurance remotely piloted aircraft system (RPAS)
  • this new capability will provide intelligence, surveillance, target acquisition, reconnaissance and precision strike capabilities to the Canadian Armed Forces in support of operations domestically and abroad
  • in May 2019, Canada established a list of qualified suppliers that demonstrated their ability to meet Canada’s needs, as defined in the invitation to qualify
  • industry engagement will continue until spring 2021 to refine the requirements
  • the initial draft RFP was released to the qualified suppliers on November 16, 2020
  • in spring 2021, the formal RFP is expected
• invitation to qualify for logistics vehicle modernization project:
  • through an open and transparent competition, the Government of Canada is taking the necessary steps to revitalize and replace Canada’s light and heavy logistics vehicle capabilities 
  • in July 2019, Canada established a list of qualified suppliers that demonstrated their ability to meet Canada’s needs, as defined in the invitation to qualify
  • currently, the draft RFP is being released incrementally to qualified suppliers under the review and refine requirements (RRR) phase and industry engagement activities will continue up to the end of winter 2021
  • in summer 2021, the formal RFP is expected
• delivery of offshore fisheries science vessels:
  • the first 2 offshore fisheries science vessels, the CCGS Sir John Franklin and CCGS Capt. Jacques Cartier, were delivered to CCG in 2019. The final vessel, the CCGS John Cabot, was delivered in October 2020 marking the completion of the first class of large ships built under the NSS
• offshore oceanographic science vessel:
  • the offshore oceanographic science vessel (OOSV) will be capable of multi-tasking oceanographic, fishery, geological and hydrographic survey missions, and will contribute to Canada’s understanding of the oceans and the impacts of climate change
  • in February 2021, a $453.8 million (taxes included) build contract was awarded to Seaspan’s Vancouver Shipyards. Construction of the OOSV is expected to begin in March 2021 with delivery of the vessel in 2024
  • the OOSV project budget is currently $966.5 million
• Halifax-class frigates work period contracts awarded:
  • the Royal Canadian Navy currently operates 12 Halifax-class ships:
    • 7 ships are assigned to Maritime Forces Atlantic
    • 5 are assigned to Maritime Forces Pacific. The Navy intends to continue operating these ships for approximately another 2 decades, until the Canadian surface combatants are delivered
  • in 2016, extensive industry engagements, along with market survey processes, identified 3 Canadian shipyards capable of performing the level of maintenance services needed to support the frigates through to the end of life
  • in November 2018, advance contract award notices were issued to Irving Shipbuilding, Chantier Davie, and Seaspan’s Victoria Shipyards
  • in July 2019, 2 contracts totaling $1 billion were awarded to Victoria Shipyards and Chantier Davie. In August 2019, a $500-million contract was awarded to Irving Shipbuilding. The contracts are expected to rise in value to over $7.5 billion as additional work packages are added
  • in August 2020, maintenance work on the first frigate, HMCS St. John’s commenced at Chantier Davie
• joint support ship (JSS):
  • the JSS project will deliver 2 support vessels to the Royal Canadian Navy to supply other ships with fuel, ammunition, spare parts, food and water. These ships, which are being built by Seaspan’s Vancouver Shipyards, will also provide a home base for maintenance and operation of helicopters, a limited sealift capability, and support to forces deployed ashore
  • the JSS build contract was awarded in June 2020. This contract will allow the construction, testing, commissioning and delivery of the 2 JSS
  • construction of the first JSS is underway. Delivery of the first ship is expected in 2023. The second ship will begin construction in late 2021 / early 2022, and delivery is expected in 2025
• interim fighter capability project (Note: All questions related to capability gap should be answered by the Minister of National Defence):
  • Canada is acquiring up to 25 F/A-18 Hornet aircraft (18 flyable and 7 non-flyable) from the Royal Australian Air Force (RAAF)
  • the first 2 were flown to 4 Wing Cold Lake, Alberta, by RAAF aircrew
  • aircraft 3 to 7 were delivered to the CF18 third line depot at Mirabel, Quebec via RCAF CC177 Globemaster transport aircraft
  • on August 25, 2020, a transportation contract was awarded to Momentum Decisive Solutions Canada Inc. to transport the remaining aircraft to Canada via commercial carrier
  • aircraft 8 to 11 were delivered to the CF18 third line depot at Mirabel, Quebec via commercial carrier
  • in mid-March 2021, aircraft number 12 and 13 will be delivered to Mirabel via commercial carrier
  • of the 11 Australian F18 aircraft delivered to Canada, the Royal Canadian Air Force has integrated 3 into regular service. National Defence will continue to integrate the Australian F-18 Hornet aircraft into service at regular intervals, until the final aircraft is integrated by December 2022
  • by summer 2021, all IFCP aircraft are expected to be delivered
• Canadian Armed Forces pistols:
  • the Department of National Defence currently has a requirement for a firm quantity of 8,000 pistols and holsters for the army plus additional options of up to approximately 8,500 pistols and holsters for other potential users within the CAF
  • the draft request for proposal was posted on February 26, 2021 and closes on March 12, 2021. Its purpose is to solicit feedback from Industry. A final request for proposal is planned to be issued by the end of March
  • on February 11, 2021, Colt Holding Company LLC (Colt) announced that it executed a definitive agreement to be acquired by Czech small arms manufacturer CZG—Česká zbrojovka Group SE. The agreement also covers Colt Canada, Canada’s designated small arms supplier under the Munition Supply Program. The change of ownership of Colt has to go through standard regulatory approval in both Canada and the United States before being confirmed. No immediate impacts are expected upon Colt Canada employees or their domestic suppliers

Impact of COVID-19 on shipyard operations

Irving Shipbuilding

In response to COVID-19, Irving Shipbuilding Inc. (ISI) suspended most industrial operations as of March 20, 2020, with special measures for working from home or within ISI’s offices implemented where possible. Most of the workforce is now back in the shipyard while also ensuring physical distancing. COVID-19 safety measures have been implemented, including temperature screening for all individuals entering the site.

ISI is working at reduced levels of efficiency due to COVID-19. Construction of the Arctic and offshore patrol ships (AOPS) and maintenance of HMCS Charlottetown has gradually resumed since mid-April. On July 31, 2020, the first AOPS was delivered and accepted by the Royal Canadian Navy. Due to COVID-19 related disruptions and other slippage, ISI has indicated a 6 to 9 month delay to future AOPS, with these timelines at least partly dependent on whether COVID-19 measures are continued or enhanced.

Vancouver Shipyards

Operations at Vancouver Shipyards (VSY) continue during COVID-19 but are being closely monitored. Staff not in direct support of production who had been working from home have begun returning to the office. In keeping with provincial regulations, only 50% occupancy is permitted. Approximately 95% of tradespeople are working in shifts at the shipyard. Measures being taken include following self-isolation guidelines, additional social distancing measures, cancelling large gatherings and increased cleaning. VSY has been working closely with WorkSafeBC in implementing these practices, and has adjusted and escalated actions in response to new regulations and guidance.

This approach has allowed VSY to continue construction at a reduced rate of production for the first joint support ship and final offshore fisheries science vessel, the latter of which was delivered in October 2020.

VSY has experienced more significant COVID-19 impacts during the second wave of the pandemic and has reported impacts on recall rates of labourers and on some subcontractors which is lowering efficiency. VSY continues to experience supply chain challenges, with over 20 delay notices received to date. The availability of engines, cabling, and steel are of particular concern and could impact the achievement of milestones.

Chantier Davie

On March 24, 2020, in response to COVID-19, the Quebec Government published a list of essential industrial sectors, under which Chantier Davie qualified. Chantier Davie has conducted on-site training for dealing with COVID-19, implemented a set of strict directives, and negotiated with their union to maintain intact squads instead of rotating employees through different teams. Nonetheless the workforce numbers and capacity have diminished to accommodate the social distancing measures implemented.

Chantier Davie remains functioning in the 80 to 85% capacity range due to COVID-19. While the company did encounter a surge in positive cases in October 2020, the number of reported cases since mid-November 2020 has been consistently below 3 across the shipyard.

Parliamentary Budget Officer Report: Canadian surface combatants

Context

15 Canadian Surface Combatants (CSC) will be built by Irving Shipbuilding Inc. under the National Shipbuilding Strategy (NSS).

On February 24, 2021, the parliamentary budget officer (PBO) published a report on the CSC.

Suggested response

• The PBO’s report on the CSC was published on February 24, 2021
• Over the past several years, significant progress has been achieved on the CSC project
• The competitive process used to select CSC has been fair, open and transparent and will ensure not only a capability-to-build that meets the RCN’s needs but also will strengthen Canada’s shipbuilding industry while generating jobs for many decades to come
• Since the CSC definition contract was issued to Irving Shipbuilding Inc. in February 2019, the first phase of the design process has been substantially completed and work is progressing on the next phase, preliminary design
• Progress and successes are being achieved. However, shipbuilding is highly complex and we must continue to work with shipyards and industry to address ongoing challenges, including costs, estimated timelines and productivity

Background

The CSC project represents the largest procurement under the NSS and is part of the work package to be built by Irving Shipbuilding Inc. The 15 CSC will replace the Royal Canadian Navy’s existing fleet of frigates and retired destroyers at an estimated cost of $56 billion to $60 billion, figures that are exclusive of taxes.

The PBO reported on the CSC projected costs in 2017 and 2019. In 2017, the PBO estimated the cost of 15 CSCs at $61.82 billion inclusive of taxes. In 2019, the PBO revised the cost to $69.8 billion inclusive of taxes. While the final design and build strategy is yet to be completed, the PBO observed that project delays would further increase the cost of the project.

The PBO published a report on February 24, 2021, entitled “The Cost of Canada's Surface Combatants: 2021 Update and Options Analysis” that now estimates the cost of the CSC project at $77.3 billion. The PBO also provides cost forecasts for alternative procurement scenarios that assume a 4-year delay to the overall project should a new design be selected to replace the type 26.

Strategic tanker transport capability project

Context

As part of the Government of Canada’s reaffirmed commitment to invest in Canada’s military, as announced in the 2017 Canada’s defence policy: Strong, Secure, Engaged, the government launched an open and transparent competition in December 2020 to replace Canada’s CC-150 Polaris fleet—the strategic tanker transport capability (STTC) project.

Suggested response

• The government is committed to ensuring that members of the Canadian Armed Forces have the equipment they need to do their jobs and protect Canadians, while maximizing economic benefits for the country
• The government delivered on its promise to launch an open and transparent competition to replace Canada's CC-150 Polaris, and we are making great progress
• On December 17 2020, Canada published a draft invitation to qualify to solicit comments from industry on the qualification requirements for the upcoming invitation to quality
• On February 12, 2021, an invitation to qualify was published to identify qualified suppliers to be invited to participate in the subsequent procurement process

Background

In June 2017, the Government of Canada (GC) articulated within the strategic vision of the new Canada’s defence policy: Strong, Secure, Engaged (SSE) that Canada needs an agile, multi-purpose, combat-ready military. In response to SSE Initiative number 47, the STTC project is the means to recapitalize the next generation strategic air-to-air tanker-transport capability, and replace the CC-150 Polaris fleet.

Aligning with the SSE requirement to enhance interoperability with Canada’s allies, the Minister of National Defence has a mandate to renew Canada’s strong commitment to the North American Aerospace Defence Command (NORAD) and the North Atlantic Treaty Organization (NATO), acting in multiple theatres simultaneously, while also bolstering disaster relief, search and rescue, contributing to peace operations and capacity building.

The STTC platform will be equipped to support and contribute to these renewed commitments through delivery of air-to-air refueling of Canadian, allied and coalition aircraft, strategic Government of Canada transport, aeromedical evacuation, personnel and equipment transport.

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Date modified:

2021-07-22