“The envelope please…”

Unless you’ve been hiding under a rock this past day, you are surely aware that the Canadian government has announced the results of their search for two Canadian shipyard to build major vessels, military and civilian (Coast Guard), for the Canadian government. The Conservative government in June 2010 announced a strategy to get much needed shipbuilding underway under the auspice of the National Ship Procurement Strategy (NSPS).

The military “work package” consisting of 21 vessels expecting to cost about 25 billion dollars was awarded to Halifax / Irving Shipyards, on the East Coast of Canada. The coast guard work package of 7 ships, expecting to cost 8 billion dollars, was awarded to Seaspan, on the West Coast of Canada.

This deal does not mean that steel cutting starts automatically, but it does means that that these two shipyards can now draw up plans and contract for each of the ships, without having all the hassles of trying to submit “lowest bids” and dealing with many layers of bureaucracy and politics. It is expected that the contracts for the first batch of ships will be drawn up shortly, by Christmas, for the Arctic Offshore Patrol Ships and the fisheries research vessels.

The government has also set aside 2 billion dollars, for the other shipyards to compete on, to build 116 other smaller vessels for the Navy and Coast Guard, which Seaspan and Irving will not be able to compete for. The deal does not mean it is set it set in stone, but all parties seem to agree that this strategy is, although being much delayed, is a sound one that hopefully will get steel cut quickly and successfully. The process has been applauded for its fairness, with even the federal NDP shipbuilding critic supporting the process, and applauding the government.

There is an additional expectation of the government to spend about $500 million dollars per year on maintenance of the fleets, which all shipyards can compete for, including Seaspan and Irving.

The media was quick to characterize this as a major blow to central Canada in particular Quebec, but lets be real here, Davie shipyard still has three unfinished ships languishing in its yard resulting from their ongoing bankrupcies. No matter what the outcome was going to be, there was bound to be public “outcry” from one region. But as many pundits point out, the bulk of the ships might be built in Halifax or Vancouver, but a great deal of the hull and what goes inside comes from across Canada and in particular from the central region, so it is a good announcement for Canada.

The cost might seem large, and it is, but considering the absence of so many years of shipbuilding foresight, and new ships, led to a major backlog in need. One must also remember the time line of 25-30 years is considerable – so in perspective this might be the one of the single biggest procurement announcement in Canada, but it is for real assets, over a long period of time. I just hope once and for all, the Navy and Coast Guard will have reliable and realistic timetables for ship replacements.

All in all, great news for all of us in the Canadian marine industry, finally a plan that looks to the future where workers and shipyards can make plans on, and government fleets can be replaced on schedule instead of wasting money making patchwork repairs.

Other post on NSPS, reactions here.

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