Ministers Briefed on NSPS

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Ministers Briefed on NSPS

Postby JK » Thu Nov 26, 2015 4:43 am ... -1.3336604

The government's massive $39-billion national shipbuilding procurement strategy (NSPS) is in need of repair, with costs for some projects soaring by as much as 181 per cent and others on the cusp of being cancelled, according to briefing materials prepared for some Liberal ministers.

CBC News has learned Defence Minister Harjit Sajjan and Public Services Minister Judy Foote were warned the government needed to institute a four-point "action plan" to get the program back on track.

They were told budgets set under the procurement strategy process were out of line and "did not adequately account for risks and uncertainty."

As a result, the government would have to "review costing for all NSPS projects and seek funding decisions where budgets are aligned with cost estimates."

That suggests the $39-billion program could be set to grow even larger, or that parts of it could be cancelled.

The briefing material, obtained by CBC News, was presented to Sajjan and Foote earlier this month. It was dated November 2015 and was classified secret.

It suggested the price for three coast guard science vessels to be built under the government program had ballooned from an estimated $244 million in 2009 to $687 million in 2015, an increase of 181 per cent.

That project was awarded to the Seaspan's Vancouver Shipyard. The briefing assigned no blame but suggested there were improvements the B.C.-based shipbuilder could make.

"Vancouver Shipyards needed to find skilled staff, establish capability to increase design work and learn how to use new facilities," the briefing material said.

But several sources within industry and government circles suggest there is plenty of blame to be cast at the government's shipbuilding bureaucracy. They say the price assigned to the science vessel was always too low for the capability requested.

There was also a warning that another planned coast guard ship, the offshore oceanographic science vessel (OOSV), would need to have its funding envelope increased, as would the multi-billion-dollar replacement program for Canada's frigates.

The frigate program is for up to 15 so-called Canadian surface combatants (CSC) and has a rough budget of $26.2 billion. Those ships are to be built at the Irving Shipyards Inc. facility in Halifax.

No design has been selected for those vessels and the government has not decided on their intended capabilities. The warning of cost increases so early in development suggests there is some problem other than design.

The OOSV is a one-off design to replace the now 53-year old CCGS Hudson. The venerable science vessel's replacement was once expected to have been in service by 2014.

It's not clear why its cost is expected to rise but the briefing warns the government will soon need to make a decision on whether to proceed with the more expensive program.

"Government will be asked to make some significant decisions soon, including one on whether to approve the [increased] funding of OOSV and additional funding for CSC," the document said, even though neither program has resulted in a completed design.

"In the event of poor shipyard performance off ramps are available," the ministers were told, but the costs of such a major action would vary according to the yard and project affected.

The briefing warned the government needed to hire new staff to increase its capacity to manage the massive shipbuilding program, and to "hire a senior shipbuilding expert" to advise the government.

It laid out plans to begin to brief Parliament annually and to create new semi-annual reports to the public on the shipbuilding program's progress. Ministers were apparently told the first of those semi-annual reports would follow "refresh of project costing and budgets" in the fall of 2016.

The ministers were also apparently briefed on bureaucratic concerns over media coverage of program delays and increasing costs. The briefing suggested there were good news stories that the government should seek to tell.

The government's shipbuilding program is under scrutiny as years pass and budgets grow without ships being delivered.

The program's two main shipyards, Irving and Seapsan, maintain they're on schedule and on budget.

Industry sources suggest there is a difference between the government's budget for a program and what is actually delivered to a yard once contracts are signed.

A source close to one of Canada's large yards said delays and cost overruns could be attributed to the government's overheated expectations.

"Canada as a shipbuilding customer didn't understand because it had been out of the game for decades," the source said. "There was no shipbuilding industry. The government crashed it in the 1980s. The shipbuilding industry has been rebuilt."

That rebuilding has taken time, the source said.

"I don't think that development time is factored in to any government plan," the source said. The government also had trouble accurately determining the potential costs of the programs it was creating.

"It's based on really immature information from a long time ago. And now we're trying to hold industry accountable for decisions that were made ten years ago in a less rigorous environment," the source said.

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Shipbuilding association calls Davie contract for navy supply ship 'fair'

Postby JK » Thu Nov 26, 2015 5:54 am

what makes this interesting is that Davies Shipyard has a fair number of management that worked at Irving Shipyard in Halifax for years before moving to Davies around the same time that upper management in HSY changed.

The industry group that represents Canada's shipbuilders has taken the extraordinary step of chastising a key Canadian shipyard for allegedly overstating its case in a growing spat over a government ship contract.

The Shipbuilding Association of Canada appeared Monday to rebuke Irving Shipbuilding Inc., saying it is surprised and disappointed over Irving's intervention in the government plan to have Chantier Davie build and operate an interim supply ship for Canada's navy.

The roughly $700-million contract with the Lévis, Que., shipbuilder has been finalized and was due for cabinet approval by the end of the month.

But as CBC News reported last week, a federal cabinet committee stalled the unconventional deal, postponing any decision for 60 days. That followed an intervention from one of Davie's fiercest competitors, Irving Shipbuilding, which operates the Halifax Shipyard.

James D. Irving, the firm's co-chief executive officer, accused the government of pursuing a sole-source contract with Davie, despite an offer from Irving and partner Maersk Lines to provide a different and potentially lower-cost option.

"This was done on a non-competitive basis without transparency and without a full evaluation of cost, delivery schedule, capability and risk associated with the Irving-Maersk proposal," the letter dated Nov. 17 alleges.

The cabinet committee met just two days later and decided to push back the Davie deal, at a potential cost to taxpayers of some $89 million.

That letter became controversial, and Irving eventually felt it necessary to offer an explanation. On Saturday it sent out a press release highlighting some of the details and capabilities of its own interim supply ship offer.

"Our request has and continues to be for an open, merit-based evaluation of all proposals to ensure the best solution for the navy and best value to Canadians," reads the statement from Kevin McCoy, president of Irving Shipbuilding.

But it's that clarification that seems to have irked the Shipbuilding Association of Canada, whose president Peter Cairns in a press release Monday sought to "set the record straight."

Cairns highlighted the process that led to the government signing a letter of intent to go ahead with the deal.

"Following an extensive consultation period lasting for six months and subsequent evaluations by those departments, Canada selected the Davie proposal on its merits ahead of other domestic and international bids."

In short, Cairns suggested Irving had its shot and lost.

"This was a fair process open to all industry, which followed common sense and resulted in one of the most successful shipbuilding procurements for decades. It demonstrated that Canada is indeed able to fast-track programs when vital for national security."

Cairns urged the government to follow through on the Davie deal, which it said had "been awarded fairly and with due process."

"The association strongly recommends that the government … not delay the signing of the contract for this urgent operational requirement."

Not surprisingly, Irving Shipbuilding Inc. disagrees with the assessment.

In an interview with CBC News in Nova Scotia, McCoy said Davie's proposal was risky.

"We looked at a container ship which is proposed by another shipyard [Davie] and we immediately dismissed it as the wrong ship," McCoy said. "It requires too much conversion, it's too risky, too expensive, and it doesn't provide the large interior payload that could be easily accessed by trucks in a humanitarian emergency such as Haiti, where I served and saw first-hand," he said.

The navy's own ability to replenish itself at sea was lost when the 45-year old HMCS Protecteur was written off following a massive 11-hour blaze in 2014 that threatened the lives of 279 crew members and effectively destroyed the ship. Protecteur's sister ship was also retired early after it was found to be too rusty to take to sea.

The government already had plans to build replacement supply ships at the Vancouver Shipyards facility in B.C., but the first of those ships is not due to arrive until 2020 at the earliest.

Chantier Davie came up with the idea of converting an existing civilian cargo ship into a military supply vessel. It came up with a partner to provide the crew and charter the vessel exclusively to the navy.

That $700-million, seven-year deal negotiated by the former Conservative government is now pending cabinet approval.

The government signed the letter of intent in the summer, which allowed Davie to start spending money to fulfil its plan. Davie has hired staff and bought the ship it plans to convert.

It took more than 30 hours last week for the new Liberal government to explain why the Davie deal was postponed.

An official with the Public Services and Procurement Department sent out a statement late Friday:

"Given the importance of this procurement and the fact the Government just took office two weeks ago, the government, working with Chantier Davie Inc., will take the time required to exercise due diligence," Annie Trepanier wrote. "A decision, informed by evidence and analysis of information, will be made as quickly as possible."

It's rumoured the new government is concerned about a change to contracting regulations that was authorized by the Conservative government to allow the Davie deal to go through without the formality of a government bid process.

Davie was frozen out of the government's $39-billion national shipbuilding procurement strategy. Irving, by contrast, was selected to build the so-called combat package of vessels for the navy, including new Arctic patrol ships, and, eventually, new warships to replace Canada's Halifax-class frigates.

There is frustration in some corners of the industry that Irving does not appear to be happy with the roughly $25 billion in business it's been selected for.

The possibility of Davie losing the deal also angered Quebec Premier Philippe Couillard, who told the CBC last week the deal should not be cancelled.

"Let me say that the ship is in the yard. Two hundred and fifty workers are there. Four hundred more are going to be hired in a few days. It's a $700-million investment," he said. "We will simply not accept that there is any change in the plan."

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