Status of defence procurement projects: Committee of the Whole—July 8, 2020
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Context
Due to COVID-19, several defence procurement projects have halted or slowed, including the construction and maintenance of ships.
Note
All questions related to the challenger jets will be referred to the minister of National Defence.
Suggested response
- our government is taking strong action to protect our economy, jobs, and the health and safety of Canadians during the global COVID-19 outbreak
- Canada will continue to monitor the situation, analyze potential impacts and explore all possible financial measures available to support the defence and marine industry and protect Canada’s long term national security interests
- we are currently assessing the impact of COVID-19 on the delivery of ongoing and future major procurement projects
- we urge all employers during this critical time to follow the recommendations of public health officials, and to go above and beyond standard health and safety measures to make sure that workers are safe in this extraordinary situation
If pressed on the budget, delays and impact:
- procurements are proceeding as planned, barring any issues faced by industry, which we will examine with companies on a case-by-case basis
- Canada will work through the contractual and financial implications of these circumstances to find resolutions acceptable to both Canada and industry
- we will work with the defence and shipbuilding industry to mitigate any budgetary and schedule impacts of the COVID-19 response
- given the uncertainties associated with the duration of COVID-19 and related strategies, it is premature to assess the overall schedule impact to projects
If pressed on challengers:
- on June 5, 2020, Public Services and Procurement Canada (PSPC) awarded a $75 million US (plus applicable taxes) non-competitive contract to Bombardier Inc. for the acquisition of 2 new challenger 650 aircraft including initial training, publications, maintenance equipment, spare parts to sustain 3 years of in-service support, and additional operational equipment. The contract does not include options to support the aircraft’s full life-cycle costs or any additional scope that would increase the value of the contract in the future
- these aircrafts will replace the Royal Canadian Air Force’s 2 oldest challenger jets, which are facing obsolescence. Procured in the early 1980s, they served multiple purposes for the Government of Canada, such as medical evacuation, and military transportation, and have assisted on multiple humanitarian relief and disaster assistance operations
- following changes to international airspace regulations that began in January 2020, these 2 older aircraft are no longer compliant with certain regulations. As such, operation of these aircraft outside of Canada requires additional efforts to seek exemptions or reroute flights
If pressed on the challenger contract:
- the challenger 650 aircraft were acquired on a non-competitive basis, factors considered in this decision included commonality with the existing fleet, timeliness in delivery and operational readiness of the challenger fleet
- to ensure that Canada obtains value for money, PSPC conducted a thorough cost analysis using supporting information from Bombardier as well as a third party market analysis
If pressed on the sale of Light Armoured Vehicles (LAVs) to Saudi Arabia:
- Canada has taken firm action to strengthen our export controls system by passing legislation that enshrines the United Nations Arms Trade Treaty assessment criteria, including human rights, into our export laws
- experts from across the Government of Canada evaluate every export permit application on a case-by-case basis to determine what the goods or technology will be used for, where they will be used and by whom, among other factors
- permits will not be issued where the minister of Foreign Affairs determines there to be substantial risk that they could be used to commit or to facilitate serious violations of international humanitarian law, international human rights law, or serious acts of gender-based violence
If pressed on the sole-source of armoured combat support vehicles or LAVs to General Dynamics Land Systems Canada:
- the exception to the default competitive procurement approach was justified by the operational advantages of having a common LAV 6 platform with the majority of the Canadian Army’s existing vehicles, maintaining a strategic source of supply and supporting key industrial capabilities in Canada
- this approach leverages the existing supply chain, facilitates training for the Canadian Army and fully meets the operational requirements of new armoured combat support vehicles
If pressed on the third yard:
- Chantier Davie has pre-qualified to become the third strategic partner under the National Shipbuilding Strategy
- Chantier Davie is now going through the next steps of the process which include a third-party assessment of the shipyard’s infrastructure, submission of a formal proposal, and a due diligence process to ensure the shipyard is financially capable of performing the work and making any necessary upgrades to its infrastructure
- subject to successful negotiations, Canada intends to enter into an umbrella agreement with the third yard in early 2021
- the third yard will build 6 program icebreakers for the Canadian Coast Guard
- the entire invitation to qualify process was overseen by an independent fairness monitor
If pressed on the Future Fighter Capability Program:
- at the request of industry, Canada has granted a one-month extension to the June 30, 2020 proposal submission deadline. Canada has therefore requested that all suppliers inform Canada by July 31, 2020 regarding their intention to submit a proposal
- Canada is actively planning for the upcoming bid evaluation once proposals are received on July 31, 2020, in order to minimize any impact to the project schedule
If pressed on ‘excusable delay’ requests:
- in order for Canada to consider a delay excusable, certain factors set out in the contracts must be met, including a requirement for contractors to notify Canada and to submit a work around plan
- therefore, in the specific context of COVID-19, contractors wishing to submit an excusable delay claim to Canada should review their contracts and proceed in accordance with the requirements they contain
- industry may review their own specific contract and submit an excusable delay request according to the provisions of their respective contract
Background
A number of Canadian defence suppliers have reached out to government officials identifying the need for urgent support, as they are experiencing serious cash flow difficulties resulting from reduced activities in light of the COVID-19 pandemic situation. In collaboration with other government organizations and central agencies, PSPC is currently exploring measures to support the defence industry.
Irving Shipbuilding
In response to COVID-19, Irving Shipbuilding Inc. (ISI) suspended most industrial operations as of March 20, 2020, with special measures for working from home or within ISI’s offices implemented where possible. ISI has since commenced a gradual return-to-work, with a large proportion of production employees now in the shipyard while also ensuring physical distancing. COVID-19 safety measures have been implemented, including temperature screening for all individuals entering the site.
Design work for the Canadian surface combatant continues to progress, along with limited but increasing work on the arctic and offshore patrol ships. ISI intends to continue gradually ramping up the number of tradespeople in the yard provided that physical distancing can be maintained.
Vancouver Shipyards
Operations at Vancouver Shipyards (VSY) continue but are being closely monitored. Staff not in direct support of production are working from home, although return to work planning has begun, while around 95% of tradespeople are working in shifts at the shipyard. Measures being taken include following self-isolation guidelines, additional social distancing measures, cancelling large gatherings and increased cleaning. VSY has been working closely with WorkSafeBC in implementing these practices, and adjusting and escalating actions in response to new regulations and guidance.
This approach has allowed VSY to continue construction of the first joint support ship (JSS) and final offshore fisheries science vessel, albeit at a reduced rate of production.
Current status on joint support ships
The JSS build contract was awarded on June 10, 2020 and announced on June 15, 2020. It allows for the transition to full-rate construction of the first ship (the construction of the early block began in June 2018), and then the second ship.
The impact of COVID-19 on the JSS project has thus far been minimal. Early block construction of the first vessel has continued throughout the pandemic.
Chantier Davie
On March 24, 2020, in response to COVID-19, the Quebec Government published a list of essential industrial sectors, under which Chantier Davie qualified. Chantier Davie has conducted on-site training for dealing with COVID-19, implemented a set of strict directives, and negotiated with their union to maintain intact squads instead of rotating employees through different teams. Nonetheless the workforce numbers and capacity have diminished to accommodate the social distancing measures implemented.
Challengers
To ensure that Canada obtains value for money, PSPC conducted a thorough cost analysis using supporting information from Bombardier as well as a third party market analysis. The price was deemed to be fair and reasonable.
Acceptance and title transfer of the aircraft occurred on June 30, 2020, and July 3, 2020. Both aircrafts will undergo 2 post-delivery retrofit periods, the first in mid-July to mid-August 2020 and the second in December 2020 and January 2021. The Royal Canadian Air Force will be able to operate the aircrafts starting mid-August 2020.
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