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June 4, 2010

Canada announces shipbuilding procurement strategy

The Government of Canada yesterday announced the National Shipbuilding Procurement Strategy, describing it as "a long-term plan that will create good jobs in high-tech industries across Canada and provide much needed ships for the Canadian Navy and the Canadian Coast Guard."

The strategy, which was developed after consultations with industry stakeholders, has three streams:

large ship construction,

small ship construction, and

repair, refit and maintenance projects.

The government will establish a long-term strategic relationship with two Canadian shipyards for the procurement of the large ships - one to build combat vessels, the other to build non-combat vessels. The selection of the two shipyards will be done in "a competitive, fair, open and transparent manner." A fairness monitor and independent third party experts will participate in the process.

The construction of smaller ships will be set aside for competitive procurement among other Canadian shipyards. The repair, refit and maintenance of ships in the Government fleet will continue to be sourced through competitive tendering.

The strategy promotes the regional distribution of work and opportunities to shipyards across the country. Shipyards that are selected to build the combat and non-combat packages will have to subcontract large amounts of work to the broader marine industry and suppliers.

Under the strategy, shipbuilding projects that are similar in nature will be grouped together to reduce production costs. This type of strategic sourcing is aimed to create the conditions for the effective and efficient delivery and support of the federal fleet over the long term.

Among those welcoming the announcement was Davie Yards. Despite still being under protection from creditors under the Companies' Creditors Arrangement Act (CCAA), Davie still sees itself as "well positioned to become one of the two dedicated shipyards" for the construction of the large ships included in the federal fleet renewal program.

On May 21, 2010, Davie Yards reported it had gotten a court order extending its protection under the CCAA to September 15, 2010. It said the extension would allow it to continue its restructuring efforts, to negotiate with potential investors, and to develop and eventually submit a plan of arrangement to its creditors under CCAA. It also reported that it had notified the Quebec Minister of Employment and Social Solidarity that the layoffs it made earlier this year may exceed a period of six months.

Be all that as it may, President and CEO Gustav Johan Nydal proclaimed yesterday that "Davie is the only yard with the existing facilities to build the largest vessels such as the Joint Support Ships for the Navy and the large icebreakers for the Coast Guard."

"The federal fleet renewal program supports a promising future for Davie," he continued. "We expect that this announcement [of the National Shipbuilding Strategy] will assist the company in its restructuring process by enhancing its attractiveness to potential new investors."

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