National Shipbuilding Strategy report: Standing Committee on Public Accounts—May 25, 2021

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Overview: Report 2—National Shipbuilding Strategy

The Office of the Auditor General (OAG) notified Public Services and Procurement Canada (PSPC) on August 23, 2019 that it would be conducting an audit of the National Shipbuilding Strategy (NSS).

The objective of the audit was to determine whether the Government of Canada managed the NSS in a manner that supported timely renewal of the federal large vessel fleet. The OAG examined whether risks to timely delivery were identified and assessed, whether risk mitigation measures were defined and implemented, and whether the implementation of these measures was monitored and reported.

The federal entities included in the audit’s scope were National Defence (DND), Fisheries and Oceans (DFO), Innovation, Science and Economic Development (ISED), and PSPC.

The audit’s scope spanned from January 1, 2018 until January 31, 2020. The report was tabled on February 25, 2021.

The audit recommends that PSPC implement mechanisms to obtain reliable shipbuilding schedules, improve risk management tools, and consider past experiences when determining a schedule for achievement of target state for the third shipyard.

Ministerial action plans (MAP) have been prepared for each of the OAG’s recommendations.

Office of the Auditor General recommendations

The Canadian Coast Guard (CCG), DND, and PSPC should implement mechanisms to:

PSPC should improve risk management tools at the NSS’s management level to enable:

PSPC should consider the experience of the first 2 shipyards in determining a schedule to achieve target state for the third shipyard.

Public Services and Procurement Canada detailed action plan

Table 1: Response to the recommendation from the Office of the Auditor General audit of the National Shipbuilding Strategy (Auditor General of Canada, Spring Report 2021)
Report reference number Office of the Auditor General recommendation Departmental response Description of final expected outcome/result Expected final completion date Key interim milestones (description and dates) Responsible organization/ point of contact (Name, position, telephone number) Indicator of achievement  
Paragraph 36 Recommendation 1   The Canadian Coast Guard, National Defence, and Public Services and Procurement Canada should implement mechanisms to:  
  • obtain complete, current, and reliable schedules to support shipbuilding projects
 
  • ensure that progress toward forecast targets and delivery timelines is monitored to enable timely decision making
Agreed.   Fisheries and Oceans Canada (the Canadian Coast Guard), National Defence, and PSPC agree that having complete, current, and reliable schedules is essential for decision making and management of the shipbuilding projects. Departments will continue to work together and with shipyards to improve delivery and accuracy of schedules and ensure more disciplined reporting of progress toward targets. Current tools, such as the shipyard-produced integrated project schedules, and approaches, including earned value management, will be further matured to ensure that cost and schedule are properly managed and to support oversight by governance committees at all levels. Receipt of evidence-based shipbuilding project schedules that are complete, current and reliable.   Fourth quarter (Q4) 2021 to 2022 [for currently existing contracts] Key interim milestone A:   Enhanced project performance through detailed schedule analysis. Continue to leverage the world-class earned value management (EVM) project management methodology that integrates schedule, costs, and scope to measure project performance. This will enable schedule and cost forecasting, identification of windows of opportunities to address potential issues, and adjustment of project parameters in a timely and effective manner. Work with client departments to confirm capability to perform detailed EVM analysis, or contract on their behalf to obtain third-party expert support to do so. Use the EVM analysis to evaluate windows of opportunities within the project/program schedules. Link integrated EVM data to risk management discussions (see recommendation 2).   Date of completion:
  • EVM clauses in key build contracts: completed
  • implementation across all governance: 50% now, 100% by first quarter (Q1) 2022
  Key interim milestone B:   Comprehensive review and adjustment of contracts. Review existing contracts for EVM and schedule-related obligations and deliverables. Assess the adequacy/acceptability and completeness of these obligations and deliverables and re-enforce and/or adjust specific clauses as required. Leverage the established National Shipbuilding Strategy governance to consider proposed contract amendments aimed at ensuring use of EVM schedules, other shipyard-related schedule obligations, and deliverables are included as part of shipbuilding contracts. Lessons learned from the review of existing contracts will be applied to new contracts.   (Note: There have been no new contracts issued since the release of the audit report but some are expected in 2021 and 2022).   Date of completion:
  • third quarter (Q3) 2021 to 2022
  • for new contracts: as required
Key interim milestone C:   Focused governance reviews and decision-making. Establish a dedicated, recurring agenda item for the review of integrated schedule information (including EVM data and long-term project and programme schedules) at assistant deputy minister (ADM) and deputy minister (DM)-level governance committees. This recurring agenda item will have direct linkages to the risk management information and be reviewed in a consolidated and timely manner so that project and program schedules can be comprehensively discussed and decision-making can be effectively enabled.   Date of completion:
  • focused governance: completed
  • decision making with risk management tool: Q3 2021 to 2022
 
Simon Page   Assistant Deputy Minister, Defence and Marine Procurement Branch (DMPB)   873-455-3834   For committee use only
Paragraph 46 Recommendation 2   PSPC should improve risk management tools at the NSS’s management level to enable:  
  • thorough risk analysis
  • specific, time-bound, and measurable risk mitigation action plans
  • better monitoring of the implementation of risk mitigation measures
Agreed.   PSPC will improve risk management tools used to support the management of risks. These risk management tools will ensure that all relevant information is available to decision makers and ensure clarity and transparency. Through increased levels of dedicated resources, and the introduction of required software, enhance the overall capability and efficacy of the NSS risk management process. To ensure continued improvement engage third party expertise to enable process reviews and to integrate recommendations.   Q4 2021 to 2022 Key interim milestone A:   Resources and tools. Engagement of a fully dedicated team and acquisition of supporting software/tools to increase risk management capacity. The software will allow for a coherent and integrated approach to the evaluation of risks across all programmes including identification and reduction of systemic risks, the measurement of these risks, and recurring problems analysis.   Date of completion: Q3 2021 to 2022   Key interim milestone B:   Comprehensive mitigation strategies. To ensure clarity and transparency, ensure completeness of mitigation strategies for all NSS risks and implement approaches to track and report on progress. The degree of control on each of the mitigation strategies will also be analyzed. Integrate risk mitigation strategies into the ADM and DM-level governance meetings and ensure linkages with key project/program parameters such as cost and schedules (EVM) are established and monitored.   Date of completion: 40% now, completion by Q4 2021 to 2022   Simon Page   ADM, DMPB   873-455-3834 For committee use only
Paragraph 49 Recommendation 3   PSPC should consider the experience of the first 2 shipyards in determining a schedule to achieve target state for the third shipyard. Agreed.   The target state requirement is an important facet of the NSS. PSPC is applying to the third shipyard the lessons learned from the first 2 strategy shipyards in terms of the timing of assessments within the target state process.   From the experience related to timing of target state assessments for the initial NSS shipyards, develop an approach that leverages these lessons learned to support a timing for assessments for the third NSS shipyard.   Q4 2021 to 2022   Key interim milestone A:   Target state evaluation approach. Review current approaches with regards to timing and expected results of target state assessments. Show specific linkages between target state and shipyards’ ability to build the ships within their programme of work. Extract best practices and develop alternative methodology for the NSS third shipyard target state assessment process. Continue to focus on a milestone based approach to assessment thereby allowing full demonstrability of elements; use of interim assessment efforts to provide supportive direction in advance of final assessments; provision of a comprehensive guide regarding target state assessment process inclusive of roles and responsibilities and associated timelines   Date of completion: second quarter 2021 to 2022   Key interim milestone B   Target state lessons learned.   Based on lessons learned from initial NSS umbrella agreements, integrate into the third NSS shipyard’s umbrella agreement timing for target state assessments.   Date of completion: Q4 2021 to 2022   Simon Page   ADM, DMPB   873-455-3834   For committee use only

Government of Canada responds to Auditor General’s report on National Shipbuilding Strategy

Statement

Gatineau, Quebec, February 25, 2021—Through the National Shipbuilding Strategy, the Government of Canada is delivering ships to the Canadian Coast Guard and the Royal Canadian Navy, strengthening Canada’s marine sector and creating jobs for Canadians across the country.  

Since the launch of the strategy, 4 large ships have been delivered and several small vessels have been built. A number of repair, refit and maintenance projects are underway across the country. Contracts awarded to support this work have contributed an estimated $20 billion to the Canadian economy and supported almost 17,000 jobs.

Given the importance of the strategy, we welcome the Auditor General of Canada’s report 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.

During the early years of the strategy, initial plans and projections were not yet informed by actual build experience at the shipyards, and expertise in industry and government was developing. Many decisions taken during this period led to the establishment of schedules that we now know to be unrealistic. Today, we have a much more evidence-based and reliable understanding of the time, effort and expenditures required to build world-class vessels.

As noted in the report, the government has made several key improvements to place the strategy on a more viable path. We addressed important risks and developed better schedules, therefore increasing the prospect of the federal large vessel fleet being renewed in a timely manner.

While we have made progress, the strategy is a decades-long initiative and ongoing enhancements will be needed. We will keep working closely with our shipyard partners so that ships can be delivered as quickly as possible and important socio-economic benefits and jobs continue to be provided for Canada.

Contacts

Media Relations
Public Services and Procurement Canada
819-420-5501
media@pwgsc-tpsgc.gc.ca

Report 2: National Shipbuilding Strategy

The full version of Report 2—National Shipbuilding Strategy is available online.

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