Phases of the National Shipbuilding Strategy
The National Shipbuilding Strategy is being implemented in five phases:
Phase 1: Developing the strategy (complete)
In 2009, the government started a new approach to federal shipbuilding by launching a broad consultation with industry.
These consultations confirmed that Canada needed a more strategic approach to shipbuilding. Industry expressed support for the development of a long-term strategy. Most respondents supported establishing a strategic relationship with two shipyards to build all large vessels, as there was insufficient work to create and sustain employment at more than two locations over the long term.
On June 3, 2010, the Archived - Government announced the National Shipbuilding Procurement Strategy. The strategy is a historic and important shift in shipbuilding procurement, moving from a project-by-project basis to a long-term strategic approach.
The strategy has three components:
Phase 2: Selecting the shipyards (complete)
The National Shipbuilding Strategy’s selection of the two shipyards to rebuild the fleets of the Royal Canadian Navy and the Canadian Coast Guard represents the largest procurement sourcing arrangement in Canadian history.
The principles of extensive industry consultations, along with the establishment of a strong governance structure and the involvement of independent third parties, were applied in a comprehensive and innovative way.
On October 19, 2011, the government announced the Archived - Results of the National Shipbuilding Procurement Strategy to build large vessels for Canada over the next 20 to 30 years.
Irving Shipbuilding Inc. is the selected shipyard for the combat package. Seaspan's Vancouver Shipyards Co. Ltd is the selected shipyard for the non-combat package.
In November 2013, the Auditor General of Canada conducted a review of the National Shipbuilding Strategy and concluded that “the selection of the two shipyards resulted in a successful and efficient process, carried out in an open and transparent manner.”
To learn more, consult Chapter 3 – National Shipbuilding Procurement Strategy of the Auditor General's report.
Phase 3: Establishing relationships with the shipyards (complete)
The Government of Canada's relationship with the shipyards started in February 2012, when it signed long-term agreements, also referred to as umbrella agreements, with selected shipyards under the strategy. This relationship is maintained through interactions between shipyards and National Shipbuilding Strategy governance committees and project teams.
The umbrella agreements define the relationship between the Government of Canada and the shipyards for the next 20 to 30 years and set the parameters for the negotiation of ensuing contracts. The umbrella agreements bring predictability to federal ship procurement and eliminates cycles of boom and bust, providing benefits for Canada’s marine industry.
Since the umbrella agreements were signed, the Government of Canada has negotiated and awarded a number of contracts with the shipyards.
To learn more, consult the February 2012 news release, Archived – Canada Signs Long-term Agreements with National Shipbuilding Procurement Strategy Selected Shipyards.
Phase 4: Designing the vessels and upgrading the shipyards' infrastructure (in progress)
Both large vessel shipyards proceeded with their plans for infrastructure modernization and capability improvements (at no cost to Canada) in order to achieve Target State to build Canada's vessels efficiently.
Target State requirements have been established and are being closely monitored and assessed by an independent third party. This will ensure that the shipyards have the capacity, facilities, processes and practices in place to ensure international productivity levels and rates of production are met.
The impartial assessment and objective benchmarking of Irving Shipbuilding Inc. and Vancouver Shipyards Co. Ltd will be repeated at regular intervals to measure the companies' productivity improvement over time. This will ensure value for money for the duration of the long-term strategic sourcing relationship.
A significant element of this phase of the strategy is the use of a "design-then-build" approach. The benefits of this approach include the following:
- Understanding the requirements before starting construction
- Progressing the design to production level before starting construction
- Making informed design/cost trade-offs before starting construction
- Completing simulation and modeling in order to attain a high-fidelity cost before awarding construction contracts
- Reducing unnecessary risk premiums through a risk management approach, allowing risks to be defined and understood throughout the process
Phase 5: Constructing the vessels (in progress)
During this phase, blocks are assembled into modules, modules into mega modules, mega modules into vessels.
Vancouver Shipyards Co. Ltd. has begun construction on the Offshore Fisheries Science Vessels, and Irving Shipbuilding Inc. has begun construction on the Arctic Offshore Patrol Ships.
Many types of large vessels, each with its own set of design and production elements, will be constructed. As the approaches for each type of vessel are developed, principles that have proven successful to date, including ongoing industry engagement, the involvement of independent third party experts, and the employment of a robust governance structure, will be used. By applying these principles, we are taking a proven approach to negotiating contracts that will allow for a design-then-build approach.
There are three contracting phases with the shipyards to construct the vessels:
- Ancillary contracts: These are awarded to understand the requirement and initial design.
- Definition contracts: These are awarded to mature the design so it is ready to be built (also known as construction engineering).
- Build contracts: These are awarded to shipyards to build the vessels (also known as construction).
The phased approach provides less risk and improves the efficiency of the shipbuilding process.
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