OTTAWA ANNOUNCES NATIONAL SHIP PROCUREMENT STRATEGY
By ALEX BINKLEY
June 14, 2010
A tag team of cabinet ministers announced the Harper government’s new shipbuilding strategy on June 3 with lots of promises but no firm commitments on when work would actually begin on new navy or Canadian Coast Guard ships.
Peter Cairns, president of the Shipbuilding Association of Canada, said in an interview that while it could take two years before any contracts are let, “We think this is a significant announcement because it comes from a bunch of ministers.”
Even a two-year time frame for creating shipbuilding centres of excellence on both coasts is understandable, but the government has to stick to its schedule, he said.
That’s where the test of patience and faith comes in for builders that have downsized and retooled and adopted other suggestions from successive governments with little reward in terms of orders for new ships.
It’s not like the navy doesn’t need Arctic patrol boats, promised by the current government; supply ships, promised in the Chrétien years; and a start on a new generation of frigates. The coast guard has been promised a new icebreaker for the Arctic by 2017 by the Conservatives, and the need to replace its aging fleet of major ships has been raised in reports by the Senate and the auditor general.
It’s estimated that Ottawa will have to spend at least $35 billion over numerous years to replace upwards of 50 vessels. Whether it’s willing or can afford to do that under the current austerity situation remains to be seen.
Meanwhile, Great Lakes ship operators are waiting to see if the announcement of the shipbuilding strategy will be followed by Ottawa’s removal of the 25-per-cent duty on imported vessels. Last fall, the Finance Department collected views from interested parties, creating an expectation that an announcement would be made early in 2010. We’re now at midyear and everyone is still waiting.
Regarding the shipbuilding strategy, Mr. Cairns said the government is expected to issue a statement of interest this summer. It will select two builders based on how they propose to build the ships.
He said the design of the Arctic patrol ship is fairly well advanced. The navy has been busy redefining its requirements for the supply ship after Public Works rejected bids last year on a more elaborate version.
Last year, the government let a design contract for a new coast guard oceanographic vessel. It also finally awarded a contract for offshore patrol boats originally promised in the wake of the 2001 terrorist attacks. And it used the economic stimulus program to refit a lot of the coast guard’s mid-sized vessels.
Among the ministers listed in the shipbuilding announcements were Rona Ambrose, of Public Works and Government Services; Peter MacKay, of National Defence; Gail Shea, of Fisheries and Oceans; and Denis Lebel, of the Economic Development Agency of Canada for the Regions of Quebec.
Mr. MacKay said the strategy “will bring predictability to federal ship procurement and eliminate cycles of boom and bust, providing benefits to the entire marine industry.” Its three streams cover large ship construction, small ship building, and repair, refit and maintenance projects.
During the next two years, the government “will establish a long-term strategic relationship with two Canadian shipyards for the procurement of the large ships (more than 1,000 deadweight tons) – one to build combat vessels, the other to build non-combat vessels such as the navy supply ships,” a government release said. “The selection of the two shipyards will be done in a competitive, fair, open and transparent manner.”
These yards won’t be able to bid on smaller vessel contracts. And actual orders will be based on negotiations with the navy and coast guard.
Mr. Cairns is hopeful that the actual contract negotiations with the shipyards can be completed in less than two years because of the amount of preparatory work that’s already been done.
Competitive tendering will be used for smaller ships, and repair, refit and maintenance of government ships. The two companies that get the lead roles to build the large combat and non-combat vessels “will have to subcontract vast amounts of work to the broader marine industry and suppliers of this industry,” the government release said.
The government announcement acknowledges that Ottawa hasn’t ordered any major ships since the mid-1990s. The resulting erosion of “Canada’s shipbuilding capacity, combined with worldwide increases in shipbuilding costs, could severely hinder Canada’s ability to build complex ships cost-effectively, resulting in delays to federal fleet renewal,” a government backgrounder said.
“(The shipbuilding strategy) will create and maintain an effective and efficient long-term shipyard capability in Canada. It represents an historic and important shift in shipbuilding procurement, moving from a project-by-project basis to a long-term approach.
“It is in Canada’s interest to have a vibrant and progressive marine and shipbuilding sector.”