Irving Shipbuilding awarded $288 million NSPS contract

AOPSMARCH 7, 2013 — Canadian Defense Minister Peter MacKay and Public Works Minister Rona Ambrose were on stage at Irving Shipbuilding, Halifax, Nova Scotia today to mark the signing of a  $288 million contract for the design of new Arctic offshore patrol ships as part of Canada's National Shipbuilding Procurement Strategy (NSPS).

Artist rendering of the definition design for Arctic/Offshore Patrol Ships - View forward starboard side (Source: Government of Canada)

Surprisingly (or perhaps not) the press releases put out by the Government and the shipbuilder did not mention the value of the contract signed today. Reporters at the event could not get either minister to say how many of the offshore patrol ships will actually get built. However, CBC reported Ross Langley, Vice Chairman of Irving Shipbuilding, as saying, "The majority of the design will be done in Denmark, but there are a number of other subcontractors and Irving that will participate in the evolution of the design".

Here's the Government press release:

Progress continues under the National Shipbuilding Procurement Strategy with contracts to Irving Shipbuilding Inc.

Halifax, Nova Scotia, March 7, 2013 – The Honourable Rona Ambrose, Minister of Public Works and Government Services and Minister for Status of Women, along with the Honourable Peter MacKay, Minister of National Defence, and the Honourable Kerry-Lynne D. Findlay, Associate Minister of National Defence, today welcomed the signing of the definition contract with Irving Shipbuilding Inc. for the Arctic/Offshore patrol ships project through the National Shipbuilding Procurement Strategy (NSPS).

"The Harper Government created the National Shipbuilding Procurement Strategy to end the boom and bust cycle in Canadian shipbuilding, deliver much needed equipment to the Royal Canadian Navy and Canadian Coast Guard, and support the Canadian economy by building ships right here in Canada," said Minister Ambrose. "Industry analysts have estimated that our shipbuilding strategy will contribute 15,000 jobs from coast to coast to coast and over $2 billion in annual economic benefits over the next 30 years."

"Our Government made the decision to build ships in Canada, while ensuring that the Royal Canadian Navy and the Canadian Coast Guard have the equipment they need to defend and assert our Northern sovereignty," said Minister MacKay. "Our Government is steadfast in its commitment, and these new ships will help us achieve just that."

"The Arctic/Offshore patrol ships represent a new capability for the Royal Canadian Navy that will help them achieve success in their missions—patrolling our three coastlines and protecting our sovereignty," said Minister Findlay. "We are committed to the complex work of rebuilding our Navy's surface fleet, to creating high-quality marine sector jobs, and to getting the job done right."

This is the next contract signed after the ancillary one announced in July 2012 and it will be followed by a construction contract in 2015. This definition contract is a task-based contract divided into seven work packages (or tasks) that could be awarded. With this contract, Irving Shipbuilding Inc. will refine and complete the Arctic/Offshore patrol ships design to production level prior to construction in 2015. The total potential value of the contract is an estimated $288 million and it will support up to 200 jobs.

Once completed, the definition contract will enable Irving Shipbuilding Inc. to know exactly what to build and how to build it. It will ensure that once the build contract is signed, construction of the ships will begin.  At the same time, work will begin on improving and upgrading the Irving Shipyard to begin full ship construction in 2015.

The Harper Government's Atlantic Shipbuilding Action Plan is designed to help businesses address challenges such as innovation capacity, certifications and workforce skills so they can prepare themselves to compete as suppliers or sub-contractors. Through the Atlantic Shipbuilding Action Plan, the Government will continue to work to encourage and support the region's businesses in growing their capacity to become part of the supply chain for the  work to be undertaken by Irving Shipbuilding in Halifax, as well as for other marine and defence initiatives.

The Harper Government is following through on its commitment to build ships in Canada. The NSPS will mean long-term jobs and economic growth for the country, stability for the industry, and vital equipment for our men and women in the Royal Canadian Navy and the Canadian Coast Guard.

"Our Government remains focused on four priorities, as outlined by the Prime Minister, that Canadians care most about: their families, the safety of our streets and communities, their pride in being a citizen of this country, and of course, their personal financial security," added Minister Ambrose.

Here's the Irving Shipbuilding press release:

Irving Shipbuilding Moves Forward with Detailed AOPS Design, Preparing for Construction in 2015

Halifax, NS, March 7, 2013:  Irving Shipbuilding welcomed the Honourable Rona Ambrose, Minister of Public Works and Government Services Canada, and the Honourable Peter MacKay, Minister of National Defence to Halifax Shipyard today to mark the start of the Definition (Design) phase of work for the first set of new naval combat vessels for Canada, the Arctic Offshore Patrol Ships (AOPS).

Under the Definition Contract Irving Shipbuilding will refine and complete the AOPS vessel design to the high degree of detail for Canada and for those who will cut steel, assemble, complete and test the ships, as well as complete various phases of design review, analysis and testing, plan how to integrate all of the complex systems and equipment on the ship, and do detailed cost estimates for the build phase of the project; all tasks required in order to be ready to start the build of the AOPS vessels in 2015 and to meet Canada's specifications.

"Our focus over the next 30 months is on producing a detailed ship design that delivers best value to Canada, while ensuring we meet the government's 2015 deadline to cut steel for the first ship – this is vital to our customer, our current workforce and their families," said Ross Langley, Vice Chairman of Irving Shipbuilding.

The Definition Contract will be managed by a team of highly-skilled, well paid professional positions located in Halifax, developing combat shipbuilding design and planning capacity and experience in Nova Scotia.  This team will manage the many specialist subcontractors and material suppliers, as well as the integration of the various complex systems that make up each ship. Recruitment for this team of engineers, supply chain leaders, program managers and technical specialists has been underway for some time now.  It is anticipated this team will reach a peak of 90 professionals in the Spring of 2014.

Completion of a test production module to verify design, engineering and systems integration plans will allow for more efficient production of the ships and employ an estimated 110 additional workers, bringing the Irving Shipbuilding AOPS team to 200.  Eighty percent of the high-value jobs associated with the AOPS design contract will be in Canada (including Tier 1 suppliers).

As Canada's Prime Contractor for the AOPS project, Irving Shipbuilding has selected a team of exceptional, experienced subcontractors to fulfill the mandate of the design phase including Lockheed Martin Canada as Command and Surveillance Systems Integrator, GE Canada as Integrated Propulsion System Integrator, Lloyd's Register Group as Classification Society, Odense Maritime Technology (OMT) as Marine Engineering and Naval Architecture Provider, and Fleetway Inc. as Integrated Logistics Support Provider.  Together these companies employ almost 8,000 people across Canada, and an estimated 75 professionals from these suppliers will be dedicated to the AOPS project.

The signing of the AOPS Definition Contract allows contracts to be finalized with these individual organizations and work to begin on the competition and selection of the subsequent subcontractors and businesses required to fulfill the mandate of the AOPS design phase.

 "Together with our experienced partners, we are committed to maximizing opportunities and benefits for Canadians and Nova Scotians through additional subcontracting, employment and the generation of investment and benefits within the broader marine industry," said Langley.  "We will be looking for qualified Canadian suppliers of goods and services that deliver best value to Canada while meeting the schedule established by the customer.  Every dollar we must spend outside of our country will be offset, dollar for dollar, with equal value inside Canadian borders."

Canada's Industrial and Regional Benefit (IRB) Policy ensures that Irving Shipbuilding will deliver business activities in Canada at 100% of the value of the contract.  IRB's can occur inside and outside the shipbuilding sector, benefitting innovation, research and business development here in Nova Scotia and across Canada.

Long term yard infrastructure investments - estimated to be about $300 million - are already underway and are designed to ensure Halifax Shipyard is ready to undertake production when cut steel is scheduled for the AOPS vessels in 2015, as well as the larger combatant ship contract currently scheduled to begin production in 2020. The build phase for each of these projects is where the bulk of the direct employment generation is anticipated. Infrastructure plans to efficiently meet the needs of the national shipbuilding program have been reviewed by 3rd party international experts First Marine International (FMI).

 "We expect to be contracting key elements of the site upgrade within the next 3-6 weeks," said Langley.  "This is a project that will result in significant work for local contractors."

"Our proven history of successfully building Canada's frigates, Maritime Coastal Defence Vessels, and Mid-Shore Patrol Vessels on time and within budget, combined with the combatant vessel projects in the shipyard today and now AOPS, have and continue to demonstrate our capability as the most qualified Prime Contractor of the larger CSC ships. We recognize our responsibility along this 30-year program to generate opportunities for shipbuilding trades, suppliers, marine professionals and knowledge building partners in Nova Scotia and across Canada," concluded Langley.  "We are determined to deliver on that commitment."

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