Getting the fleet back on course
The f ederal government’s National Shipbuilding Procurement Strategy, considered a political tour de force when it was unveiled by the Harper Conservatives in 2011, is falling apart. And that may not be a bad thing.
Immediately upon taking office last November, Defence Minister Harjit Sajjan and Public Services and Procurement Minister Judy Foote were set the task of untangling the Byzantine, politically fraught system by which this country obtains big- ticket equipment for its military and security services.
That review, now also comprising a full cabinet committee led by Natural Resources Minister Jim Carr, is proceeding apace. Increasingly, it appears all aspects of the NSPS are under active discussion — including not only the $ 26- billion eastern tranche allotted to Halifaxbased Irving Shipyards, but the $8-billion portion granted to Vancouver- based Seaspan.
There’s “blood on t he f l oor,” a senior i ndustry source said of procurement meetings that occurred in Ottawa on Tuesday and Wednesday this week.
Speaking in the Senate on Wednesday, Sajjan stressed that speeding delivery is a key objective. That is most pressing in the case of the planned ships, not only for strategic reasons — the Canadian Navy is rusted out and in dire need of new capacity — but because of inflation.
Early in December, James Cudmore, then a CBC correspondent and now working in Sajjan’s office, reported the projected cost of just one portion of Irving’s build — 15 new warships to replace the Navy’s Halifax- class frigates and retired Iroquois- class destroyers — had doubled to $ 30 billion. The longer construction is delayed, the more costs escalate.
On Tuesday, the Ottawa Citizen’s David Pugliese reported the government has merged previously separate tenders for vessel design and combat system integration for the warships into single bids. In theory, this will reduce the time and cost to delivery. Last September, the Irving yard began work on the first of up to six Harry DeWolf-class Arctic Offshore Patrol Ships, scheduled for delivery in 2018. Ir ving, named prime contractor for the surface combatants in 2015, has been reaffirmed in that role by the new government.
The thornier problem, both in real and political terms, is the “non- combat” portion of the NSPS, now in Seaspan’s hands.
Its North Vancouver yard has begun work on the first of three small Coast Guard science vessels. But costs are rising quickly. The company has approached the new government for a funding increase for its planned Coast Guard oceanographic research vessel, now projected to cost $440 million, up from $ 144 million, according to the senior industry source. The status of that request remains unclear.
Then there’s this: Seaspan’s small yard, which can only build ships in sequence, is years away from beginning construction on either the two planned massive naval supply ships, which it would have to build in segments, or the three- season polar icebreaker John G. Diefenbaker. Supply ships are critical to the Navy’s ability to project power beyond Canada’s coastal waters. The icebreaker is to be a linchpin of Canada’s sovereignty over the Arctic Archipelago, at a time when Vladimir Putin’s Russia is re- militarizing its polar reaches at breakneck speed.
Quebec’s Davie shipyard is at work now on an oiler stopgap, a tanker conversion, intended to temporarily meet most of the Navy’s needs. But the much larger looming question is whether the Liberal government will seize on the most obvious fix to its timeline- and- capacity problem, and re- apportion the biggest vessels now planned — the two supply ships and the icebreaker, for a start — to the Davie yard, outside Lévis, Que.
The Quebec yard was insolvent in 2011 and thus was left out of the NSPS. It is now a going concern, under new ownership. The Shipbuilding Association of Canada, without mentioning any yard by name, is pressing for Davie’s full integration into a revamped process.
“By overburdening two shipyards with more work than they can manage, the government is doing a great injustice for the entire domestic shipbuilding industry,” the association said in a news release Feb. 17.
The economic argument is that, in creating big multiyear bottlenecks at two yards while leaving one de facto out in the cold, the NSPS is impeding the growth of the latter while making the former inordinately reliant on non-commercial work.
“It is not too late to correct the flaws in the previous strategy,” the release says pointedly. “The remaining umbrella agreements are non- binding and Canada has a free hand in shaping the future of domestic shipbuilding.”
The crux, given the foregoing, will be this: Can the Trudeau government stickhandle its way out of part of an $8-billion commitment to British Columbia, in a reboot that directly benefits Quebec, without igniting a regional tug of war and backlash akin to the Bristol- Aerospace-Bombardier fiasco of 1986?
That was no small thing; it was instrumental in the creation of the Reform Party. Adjusting the NSPS to deliver more ships sooner at lower cost would seem to make eminent sense. Whether this government has the skill to pull it off, without sparking an epic regional bun fight, is the open question.