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

Progress on current work

If pressed on OOSV 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):

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):

If pressed on the Navantia CSC court challenge:

If pressed on COVID-19 impact on shipbuilding:

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

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):

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

If pressed on Esquimalt Graving Dock:

Third yard

Opportunities for other yards and Chantier Davie

If pressed on the Polar icebreakers:

If pressed on the Chantier Davie National Icebreaker Center:

If pressed on interim icebreaker capacity for CCG:

If pressed on emergency towing vessels:

Background

Canadian Surface Combatant: Navantia court challenge

Navantia was an unsuccessful bidder for the competitive CSC 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 combatant: 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 RCN’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 RCN frigates, but cruise ships, domestic barges/tugs, BC Ferry vessels, and cargo tote ships among others.

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

In parallel with planning and decisions to be made regarding redevelopment, PSPC is again examining the fee structure—both leases and dock charges under the Esquimalt Graving Dock (EGD) Regulations—which it reviews periodically, to ensure the rates are fair and contribute to a financially sustainable facility. An independent study will provide options for the revenue model to PSPC in early 2022. Once an option is selected, PSPC will launch a full consultation process, review rates and undergo the regulatory process. The review is expected to take 3 years to complete.

An amount of $3 billion for the redevelopment has been quoted in the media in winter 2021; however, this information is incorrect. The cost of the redevelopment is under assessment.

Contracts under the National Shipbuilding Strategy

From 2012 to the end of 2020, the government signed approximately $17.49 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 $20 billion ($1.82 billion annually) to Canada’s gross domestic product, and create or maintain, more than 16,930 jobs, annually, through the marine industry its Canadian suppliers and consumer spending, between 2012 and 2022.

Table 1: National Shipbuilding Strategy contracts awarded from 2012 to the end of 2020
Irving Shipbuilding Vancouver Shipyards Chantier Davie Other shipyards / companies
$5.11 billion $4.41 billion $2.19 billion ‎$5.78 billion
Table 2: National Shipbuilding Strategy contracts awarded by province to the end of 2020
Province Total contract value % of grand total contract value
Alberta $22,528,362 0.129%
British Columbia $5,708,632,291 32.633%
Manitoba $701,877 0.004%
Newfoundland and Labrador $216,917,382 1.240%
Northwest Territories $1,731,755 0.010%
Nova Scotia $5,418,361,632 30.974%
Ontario $3,618,548,097 20.685%
Quebec $2,505,914,515 14.325%
Grand total $17,493,335,911 100%
Table 3: Project budgets and delivery dates
Vessel Delivery date Budget
OFSV 1 June 27, 2019 $788.5 million
OFSV 2 November 29, 2019 $788.5 million
OFSV 3 October 9, 2020 $788.5 million
JSS 1 2023 $4.1 billion
JSS 2 2025 $4.1 billion
OOSV 2024 $966.5 milliontable 3 note 2
AOPS 1 July 31, 2020 $4.3 billion
AOPS 2 Summer 2021table 3 note 1 $4.3 billion
AOPS 3 Spring 2022table 3 note 1 $4.3 billion
AOPS 4 Winter 2023table 3 note 1 $4.3 billion
AOPS 5 Winter 2024table 3 note 1 $4.3 billion
AOPS 6 Fall 2024table 3 note 1 $4.3 billion
AOPS 7 Summer 2025table 3 note 1 $1.5 billion (estimate)
AOPS 8 Spring 2026table 3 note 1 $1.5 billion (estimate)
CSC 15 CSCs beginning early 2030s $56 to 60 billion (estimate)
Multi-Purpose Vessel (MPV) Up to 16 MPVs starting in late 2020s $14.2 billion (estimate)

Table 3 Notes

Table 3 Note 1

Incorporates current estimated delays due to COVID-19. For AOPS 2 to 6, there is also a 3-month risk window in addition to these targets due to continued uncertainty surrounding the pandemic.

Return to table 3 note 1 referrer

Table 3 Note 2

Includes $453.8 million for OOSV build contract, announced February 18, 2021.

Return to table 3 note 2 referrer

National Shipbuilding Strategy’s economic and social impacts

The National Shipbuilding Strategy is a long-term commitment to renew the vessel fleets of the Royal Canadian Navy and Canadian Coast Guard, create a sustainable marine sector, and generate economic benefits for Canadians. From 2012 to the end of 2020, the government signed approximately $17.49 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 $20 billion ($1.82 billion annually) to Canada’s gross domestic product (GDP). The NSS also creates or maintains more than 16,930 jobs annually, through the marine industry, its Canadian suppliers and consumer spending, between 2012 and 2022.

Table 4: National Shipbuilding Strategy contracts awarded by province to the end of 2020
Province Total contract value % of grand total contract value
Alberta $22,528,362 0.129%
British Columbia $5,708,632,291 32.633%
Manitoba $701,877 0.004%
Newfoundland and Labrador $216,917,382 1.240%
Northwest Territories $1,731,755 0.010%
Nova Scotia $5,418,361,632 30.974%
Ontario $3,618,548,097 20.685%
Quebec $2,505,914,515 14.325%
Grand total $17,493,335,911 100%
Table 5: Economic impacts of National Shipbuilding Strategy contracts
Contract type Total GDP contributiontable 5 note 1 Annual GDP contributiontable 5 note 1 Job creationtable 5 note 2
Large ship construction $9.58B $871.7M 8,115
Small ship $288M $26.2M 240
Repair, refit, and maintenance $9.9B $908.2M 8,400
Service $199.1M $18.1M 165

Table 5 Notes

Table 5 Note 1

Estimated GDP contributions based on contracts awarded from 2012 to 2020 (All values are over the listed figures)

Return to table 5 note 1 referrer

Table 5 Note 2

Jobs created or maintained annually, through the marine industry and its Canadian suppliers between the years of 2012 to 2022 (All values are over the listed figures)

Return to table 5 note 2 referrer

Socio-economic performance of under-represented groups

Irving Shipbuilding Inc.

Nova Scotia Community College Irving Shipbuilding Centre of Excellence

The Nova Scotia Community College (NSCC) Irving Shipbuilding Centre of Excellence was established to provide pathways and equitable access to opportunities, programs and training for people, with a focus on under-represented communities, to effectively work in the shipbuilding industry. Irving Shipbuilding invests $250,000 annually in the centre to support a variety of programs described below.

Pathways to shipbuilding: Women Unlimited Metal Trades Program

In partnership with the Nova Scotia Community College and Women Unlimited, Irving Shipbuilding established the first Women Unlimited—Irving Shipbuilding Metal Trades Program in 2015. The program provides opportunity to 20 diverse women to complete a 14-week career exploration program, and a 2-year welding or metal fabrication diploma at NSCC. Partners provide funding to cover the costs including educational bursaries, tools and safety equipment and other support as needed. Other partners in this program include Women Unlimited, the Canadian Welding Association Foundation, Unifor, Praxair, Walter Surface Technologies, the Government of Nova Scotia, and the Government of Canada.

In September 2017, 19 women began their studies at NSCC in welding and metal fabrication. They graduated in May of 2019. 40% of the students identify as a member of an under-represented group.

In June 2017, 16 women graduated from the program at NSCC, 1 more student is still completing their studies. Irving Shipbuilding hired 15 graduates from the first graduating class. In May 2019, 16 women graduated from the second class. Thirteen women were hired and are currently working at the Halifax Shipyard.

Pathways to Shipbuilding: Metal Trades Program for Indigenous Students

In partnership with the NSCC, Irving Shipbuilding Inc., GE Canada, Unifor, Nova Scotia Community College Foundation, Indigenous and Northern Affairs Canada (INAC), Employment and Social Development Canada (ESDC), Office of Aboriginal Affairs (OAA), the Nova Scotia Apprenticeship Agency, and Labour and Advanced Education (LAE), the Pathways to Shipbuilding Program for Indigenous Students was established. The program provides opportunity to 20 Indigenous students from across Atlantic Canada to complete a 14-week career exploration and preparation program, and a 2-year metal fabrication diploma at NSCC. Partners provide funding to cover the costs including educational bursaries, tools and safety equipment, living allowances and other support as needed.

The program is complete and 12 students graduated in June of 2018. There were 11 male graduates and 1 female.

All of the graduates were offered employment at Irving Shipbuilding. Ten of the graduates are still employed as apprentices at Halifax Shipyard.

Pathways to Shipbuilding: Welding Program for African Nova Scotians

In partnership with the NSCC, Irving Shipbuilding Inc., Unifor, Nova Scotia Community College Foundation, the East Preston Empowerment Academy, African Nova Scotian Affairs, the Nova Scotia Apprenticeship Agency, and Labour and Advanced Education , the Pathways to Shipbuilding Program for Indigenous Students was established. The program provides opportunity to 20 African Nova Scotian students to complete a 14-week career exploration and preparation program, and a 2-year welding diploma at NSCC. Partners provide funding to cover the costs including educational bursaries, tools and safety equipment, living allowances and other support as needed.

Twenty students were selected and are currently studying at NSCC. The students are expected to graduate in the summer of 2020. (Due to COVID-19 this class’ graduation will be delayed from its previous expected graduation date of June 2020).

Irving Shipbuilding Centre of Excellence entrance bursaries

Entrance bursaries for diverse students from historically under-represented populations (Aboriginal, African Nova Scotian, persons with disabilities, and women in non-traditional occupations) entering shipbuilding-related trades programs at NSCC in September 2015 and again in September 2017. Over $150,000 has been allocated for these bursaries from the Irving Shipbuilding Centre of Excellence.

Twelve award recipients were selected for 2017 to 2019. The diverse students are from 7 NSCC campuses and 4 different programs. The students have self-identified as 4 females, 4 students with disabilities, 2 Aboriginal and 2 African Nova Scotian. All the students started their studies in September 2017.

In 2015, 8 students were awarded bursaries for 2-year diploma programs, and 8 additional students were awarded bursaries for 1-year programs. We do not have the demographics for this group.

Vancouver Shipyards Limited

On the West Coast, Camosun College will receive $300,000 from Seaspan to help increase the number of female skilled tradespeople. This contribution will support the college’s on-going goal to be a gateway for women to enter the trades and capitalize on opportunities in British Columbia

Seaspan is a partner in Aboriginal marine training to employment partnership (AMTEP) , with Aboriginal Community Career Employment Services Society (ACCESS) and Coast Salish Employment and Training Society (CSETS), to support job training, apprenticeship programs and promote employment opportunities for Aboriginal people.

A $300,000 donation from the Dennis & Phyllis Washington Foundation, in conjunction with Seaspan, was provided to BCIT to fund trades training for Indigenous students. This funding will form the ‘Dennis & Phyllis Washington Foundation Open Arms project’.

To encourage Indigenous participation in Canada’s shipbuilding industry as a whole, Indigenous and Northern Affairs Canada is collaborating 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.

National Shipbuilding Strategy value proposition investments

A key component of the NSS, as identified in the NSS request for proposals and re-affirmed in the respective umbrella agreements of Vancouver Shipyards (VSY) and Irving Shipbuilding Inc. (ISI), is the National Shipbuilding Strategy value proposition (NSS VP), which requires large vessel NSS shipyards to make investments in the greater Canadian marine industry. 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 has committed to invest 0.5% of the value of their NSS contracts within 3 priority areas:

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