Some fear Canada’s share too small
OTTAWA — The federal government’s vaunted $35-billion national shipbuilding strategy is designed to not only replace the navy’s and coast guard’s fleets, but also turn Canada into a worldclass shipbuilder.
The strategy includes a “built in Canada” requirement, but that is interpreted to mean only constructing the frame of a vessel, and not the high-tech systems, software, sensors and weaponry.
For that reason, there are fears foreign companies will end up doing most of the technical, sophisticated, “value- added” high- tech work, while the main benefit to Canadian industry will be honing their skills as metal workers.
During a technical briefing
“WHAT THEY DID WHEN THEY CREATED NSPS WAS CREATE THE ABSOLUTE INCENTIVE ... TO MAKE SURE THAT WE’RE FOSTERING THE GROWTH OF INNOVATIVE TECHNOLOGY IN CANADA.”
on the national shipbuilding strategy on Wednesday, senior federal bureaucrats confirmed they have not put any restrictions on Irving Shipbuilding in Halifax and Seaspan Marine in Vancouver when it comes to outsourcing work or contracts to foreign companies.
Irving and Seaspan were chosen as the shipbuilding strategy’s main contractors in October 2011.
“We have not provided limitations to the shipyards,” one government official said. “That’s not to say we cannot be involved in a dialogue and a discussion with them, but in general terms when we contract
BRIAN CARTER
with a company, those companies will choose their own subcontractors.”
Instead, the government will require the shipbuilders to undertake an equivalent amount of business activity in Canada as the original contracts are worth — meaning they must make up whatever they outsource to foreign companies in work, supplies and services.
The companies are also required to re-invest a small percentage of the money they receive from the shipbuilding contracts back into local industry.
Irving and Seaspan say those requirements are nothing to scoff at, and that they will ensure benefits to the broader Canadian industry.
“What they did when they created NSPS (the National Shipbuilding Procurement Strategy) was create the absolute incentive and, in a sense, the obligation for these two shipyards to make sure that we’re fostering the growth of innovative technology in Canada,” said Seaspan Shipyards president Brian Carter. “Without those two things, you probably would see quite a bit of offshore capability brought in and assembled in Canada.”
Yet such requirements are not new to defence procurement, and there have been long-standing complaints that such obligations have done nothing to create quality domestic jobs with the billions of dollars spent on military purchases in recent years.
One company, OMX Marketplace, recently estimated that $20 billion in industrial offset requirements incurred by defence companies remain unfulfilled — and that the number is growing.
In a perfect world, Canadian companies would be chosen for all the billions of dollars in high-tech work associated with the shipbuilding industry, but that’s not realistic.
Not only are there many things Canadian companies don’t do, but using Canadian content would often be more risky as the government, shipyards, navy and Coast Guard are under pressure to make sure the vessels roll out on time and on budget.