Some thoughts on the National Shipbuilding Procurement Strategy

Has anyone ever asked if the National Shipbuilding Procurement Strategy is the right one or do the votes outweigh any kind of dialogue at all? 

For those of you may have forgotten what it is. 

The National Shipbuilding Procurement Strategy is a Government of Canada program operated by the Department of Public Works and Government Services. The National Shipbuilding Procurement Strategy (NSPS) was developed by the Conservative Stephen Harper government in an effort to renew the fleets of the Royal Canadian Navy (RCN) and the Canadian Coast Guard (CCG). The strategy was broken into three sections; the combat package, the non-combat package and the smaller vessel package. The smaller vessel package was not able to bid on by those companies who won one of larger ship packages

$30 billion for 21 combatant (warships) vessels to serve in the RCN

  • 5-6 vessels from the Arctic Patrol Ship Project
  • up to 15 vessels from the Single Class Surface Combatant Project: It is known that the Canadian Forces are seeking to build a single new class of frigates or destroyers to replace both the Iroquois-class destroyers and Halifax-class frigates under what the Royal Canadian Navy has called the Single Class Surface Combatant Project (SCSCP).

$8 billion for 8 non-combatant vessels to serve in the CCG and RCN

On 20 January 2015, it was announced that Irving Shipbuilding had been named the prime contractor for the program. The total cost of the program including the single class surface warships is $26 billion CAD. The role of the lead contractor gives Irving Shipbuilding overall control of the project, and the company had already won the right to build the vessels at its yard in Halifax. This led to questions concerning the bidding process and the awarding of the contracts. In the fall of 2015, it was reported that there were high increases in costs, more than doubling to $30 billion from $14 billion for the new warships. The total cost of the naval ship building program rose from $26.2 billion to $42 in this new study. This put in jeopardy the number of ships that could be produced and raised the prospect of ships with reduced capabilities.

Here are some thoughts

  1. The other goal was to rebuild ship building in Canada.  At the time of the competition, Irving Shipbuilding didn’t have a lot in terms of new orders, Davie Shipbuilding is a shell company that bought the assets of a shipbuilding yard in Quebec just so it could get a piece of the action.  When it didn’t win, it was sold to a Monaco based company.  Seaspan Marine, a division of a larger ship servicing company has no large orders on it’s list.  The Canadian ship building industry is more or less non existent.  It’s going to take a lot of money just to bring it up to capacity.
  2. Capacity is a huge thing in ship building.  Recruiting and training the tradespeople to build ships and then keeping them employed (with new orders) is a big thing.  Like all people, they get better at their jobs the more they do them which is why U.S. Naval vessels tend to become cheaper and better quality the more ships that are made.    If you read about the Littoral Combat Ships, the US Navy has this problem as well.
  3. If you aren’t constantly building ships, you lose capacity for shipbuilding and even repair.  This is why we can’t keep our subs underwater very long.  We went decades without building any or even really repairing them.  It’s a mess every time we have to fix one of them because that capacity has retired or left the country.   This will happen unless we commit to building enough ships to keep both the Seaspan and Irvine shipyards busy.
  4. The jobs aspect is the weirdest part of this.  Yes jobs are important and you don’t want to export jobs to other shipyards because the political cost would be insane but if the goal is to get the best ship for your money, then it does make sense to order from a U.S. shipyard that has experience in building warships.  As a matter of fact, why not just order a U.S. warship that is already designed, worked the bugs out, and is proven?  That is the cheapest way.
  5. Of course that will never happen because those jobs matter and supporting Canadian industry is a big part of this.  Having two functioning shipyards is important if God forbid, we do find ourselves in a conflict in Russia or China.  A base on each coast could become vital if one is disabled and it is the exact reason why the U.S. builds it’s warships in multiple shipyards.   That being said, let’s accept that these are long term subsidies for both shipyards and it is going to cost more to build Canadian than elsewhere.  Not only that but we are going to have to keep building here for a long time to keep those jobs and expertise working and so it doesn’t leave at the first extended lull and layoffs in our yards.
  6. We won’t have to nationalize those yards but accept that they will need Government of Canada support in terms of business to keep open.  This isn’t a short term project but a long term process to keep them open.

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