MARCH 18, 2016 — Media coverage of Canada’s National Shipbuilding Procurement Strategy (NSPS) continues to stir controversy as it becomes apparent that Canada’s largest shipyard, Quebec’s Chantier Davie Canada, won’t just quietly go away and accept the status quo.
Yesterday a CBC (Canadian Broadcasting Corporation) story by senior correspondent Terry Milewski quoted Alex Vicefield, CEO of Inocea, the corporate parent of Chantier Davie Canada, as calling the plan an “international embarrassment” with a “bizarre” costing regime and “exorbitant” prices, despite producing no ships to date.
Davie was not selected to receive either of the NSPS large ship construction “work packages.” Irving Shipbuilding Inc. was selected to build the combat vessel work package, and Seaspan’s Vancouver Shipyards Co. Ltd. was selected to build the non-combat vessel work package, which includes the Polar Icebreaker.
“It’s been five years and the two shipyards haven’t built a single ship,” the CBC story quotes Mr. Vicefield, as saying. “All we hear are delays and cost overruns which are so high, they are turning the Canadian shipbuilding industry into an international embarrassment.”
Mr. Vicefield told CBC that under the NSPS cost-plus approach, “profits are calculated as a percentage of the costs incurred. This provides no incentive for shipyards to reduce costs when possible.”
The CBC story says that jibes with an analysis by PricewaterhouseCoopers and obtained by CBC News that found that “the regime provides perverse incentives for industry to increase costs … if the profit percentage is fixed, increased costs result in increased profits.”
CBC says Davie was stung by the Liberal government’s apparent rejection of its recent offer to provide Coast Guard ships more quickly, and at much lower cost, than projected under the NSPS. (see earlier story). That proposal involved converting a number of offshore service vessels available at an attractive price because of the downturn in the oil and gas industry.
According to the CBC, those vessels included the “Edison Chouest Aiviq, currently sitting idle in Seattle after Royal Dutch Shell canceled a costly Arctic project.”
The CBC story, which you can read HERE also contains a number of assertions about the NSPS plan and the likely icebreaker gap before a replacement for the aging Louis St-Laurent can be built.
The CBC story provoked the following response from Seaspan:
Seaspan rejects this morning’s CBC story on the National Shipbuilding Strategy (NSS). At no time did Mr. Milewski choose to contact Seaspan for story content, though he is happy to invoke our name and understate our considerable progress since being selected to build vessels for the Canadian Coast Guard and Royal Canadian Navy under the National Shipbuilding Strategy. He also takes at face value the pretentions of Davie’s most recent owner from his home in Monaco.
For the record:
Canada determined that two shipyards were required to effectively manage the rebuilding of Canadian Coast Guard and Royal Canadian Navy fleets with a goal to eliminate the boom and bust cycles that have defined previous federal shipbuilding programs.
Chantier Davie participated in the competition to select those two shipyards through an open procurement process that the Auditor General has described as a “successful and efficient process independent of political influence, consistent with government regulations and policies, and carried out in an open and transparent manner”.
Seaspan and Irving Shipbuilding won the competition and Chantier Davie lost.
The shipbuilding strategy and the sequencing of the vessel build was adopted by the previous government in Ottawa and endorsed publicly by the current government.
Since winning the competition, Seaspan:
- Has invested $170 million of its own money to build the most modern shipyard of its kind in North America, purposely built to manufacture the vessels committed to us under NSS;
- Has 31 of 37 blocks under construction for our first Offshore Fisheries Science Vessel with the second of three ships to begin construction in a matter of weeks;
- Is working under contract with Canada to produce the next vessels under NSS – the Offshore Oceanographic Science Vessel and Joint Support Ships;
- Employs over 700 people for the work we have today and project that number to climb to close to 1,500 at the peak of manufacturing;
- Has awarded supply contracts valued to date at over $380 million to more than 150 Canadian companies with more to come as the program evolves; and,
- We have made significant investments in a BC-based Aboriginal Apprenticeship Training Initiative and recently supported the creation of two Chairs at the University of British Columbia in their naval architecture and marine engineering disciplines as part of our commitments to Canada under NSS.
In contrast, while Chantier Davie complains openly about the pace and performance of NSS and asserts its ability to meet Canada’s maritime needs “more quickly and at a much lower cost,” its own financial and production performance record has yet to find its way into the public discourse.
In the meantime, we’ll build the vessels we have been awarded to build for the Coast Guard and Royal Canadian Navy – including at least one Polar Icebreaker.