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Defence and marine procurement: Standing Committee on Government Operations and Estimates—March 4, 2022

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National Shipbuilding Strategy

Key messages

Key data points

Background

Large ships and their status

Marine services and small vessels

Third Yard

Key messages

Key data points

Background

In May 2019, Canada identified the need to select a third Canadian shipyard under NSS. The selected yard will build 6 program icebreakers and 1 polar icebreaker for the CCG.

Following the invitation to qualify, Chantier Davie was the only shipyard that pre-qualified to the next stage of the selection process (request for proposal stage). Before Chantier Davie can be confirmed as the third shipyard, it must be successful in its response to the request for proposal, meeting all the evaluation criteria, including a financial due diligence process and technical requirements (plans) to achieve target state.

Chantier Davie will continue work under programs such as medium icebreakers conversions, Halifax class docking work period contract and Transport Canada ferries, in parallel with the third yard selection process.

Polar icebreakers

Key messages

Key data points

Background

On February 28, 2020, the Government of Canada issued a request for information, open to all Canadian shipyards, seeking information on domestic shipyard capability and capacity to construct and deliver a Polar-class icebreaker.

The request for information closed on March 13, 2020 and Public Services and Procurement Canada received 4 responses.

On May 6, 2021, the government announced its intention to move forward with the construction of 2 Polar icebreakers.

This procurement approach is the best path for ensuring that at least 1 of the Polar icebreakers is delivered by 2030 when the Canadian coast guard ship (CCGS) Louis S. St-Laurent needs to be retired from service.

As the Government of Canada progresses through the various contracting and design phases, a project budget that includes all costs associated will be determined and publicly disclosed.

Canadian surface combatant

Key messages

Key data points

Background

The Canadian surface combatant project will replace both the Iroquois-class destroyers and the Halifax-class multi-role patrol frigates with a single class of ship capable of meeting multiple threats on both the open ocean and the highly complex coastal environment. The CSC project is the largest and most complex shipbuilding initiative in Canada since World War II.

Navantia was an unsuccessful bidder for the competitive Canadian surface combatant request for proposals which was won by Lockheed Martin Canada. Navantia has applied to the Federal Court for a judicial review challenging the award to Lockheed Martin and the evaluation of its bid. Navantia contends the BAE Type 26 ship selected for the Royal Canadian Navy's new fleet failed to meet the requirements of the request for proposal and that their bid was improperly evaluated.

As part of the judicial review, Navantia sought disclosure of documents that contained sensitive or potentially injurious information. The Attorney General of Canada objected to the production of certain sensitive information and filed a section 38 Canada Evidence Act application in Federal Court on January 20, 2021.

With respect to section 38 in the Navantia application, the Attorney General of Canada had a statutory obligation to file, and it was not a discretionary decision by government officials. Section 38.01 requires every participant in a proceeding to advise the Attorney General in writing where there is a possibility of disclosure of sensitive or potentially injurious information.

Background by Shipyard

Seaspan’s Vancouver Shipyards Co. Ltd.

All 3 offshore fisheries science vessels have been delivered to the Canadian Coast Guard, marking the completion of the first class of large ships built under the NSS. In addition, work is ongoing on the first joint support ship and construction of 1 offshore oceanographic science vessel began in March 2021. Finally, early design work for the multi-purpose vessels and the Polar icebreaker has commenced.

Irving Shipbuilding Inc.

Canada’s lead Arctic and offshore patrol ship, the Her Majesty’s Canadian Ship (HMCS) Harry DeWolf, was delivered and accepted by Canada on July 31, 2020 and the ship was commissioned into the RCN on June 26, 2021. The second Arctic and offshore patrol ship, future HMCS Margaret Brooke, was delivered and accepted by the RCN on July 15, 2021, followed by the launch of the third Arctic and offshore patrol ship, future HMCS Max Bernays, on October 23, 2021. Two other Arctic and offshore patrol ships for the Royal Canadian Navy are currently under construction and design work on the Canadian surface combatant is advancing. Finally, design work on Arctic and offshore patrol ships 7 and 8 for the Canadian Coast Guard is also advancing.

Chantier Davie Canada Inc.

Chantier Davie is converting 3 medium icebreakers for the Canadian Coast Guard. The first vessel, CCGS Captain Molly Kool, began operations in December 2018, and the second vessel, CCGS Jean Goodwill, was delivered to the Canadian Coast Guard in November 2020. The third vessel, CCGS Vincent Massey, is expected to be in service in 2022.

An advance contract award notice (ACAN) signalling our intention to enter into a contract with Chantier Davie for required vessel life extension work on the CCGS Louis S. St-Laurent, Canada’s largest icebreaker, closed November 19, 2020. Chantier Davie has been identified as the only facility in Eastern Canada capable of performing this work during the specified time period. Contract award is anticipated in early 2022 with work scheduled to begin in spring 2022. Finally, on July 21, 2020 the HMCS St. John’s arrived at Chantier Davie for repair and maintenance. It is the first vessel to be re-furbished under the Halifax class docking work period contract awarded to Chantier Davie in July 2019. Work is expected to be completed in spring 2022.

Future Fighter Capability Project

Key messages

Key data points

Background

An industry day was held in January 2018 with suppliers, foreign governments and Canadian industry to inform them about the solicitation process and to provide participants an opportunity to network.

An eligible supplier list was established in February 2018, which was followed by extensive supplier engagement leading up to the release of the formal request for proposals (RFP) in July 2019. Suppliers were engaged on Canada’s requirements and evaluation criteria, were provided 2 versions of the draft RFP for their review and feedback, and were generally pleased with the level of engagement.

The RFP was released in July 2019. A rigorous assessment of mandatory requirements was conducted prior to the release of the RFP to ensure these requirements were appropriate, reasonable and would lead to competition.

Canada extended the bid closing date by a total of 3 months as a result of requests from eligible suppliers and received 3 proposals in July 2020. By submitting a proposal, suppliers agreed to have their offers assessed against the evaluation criteria set out in the RFP.

The proposals have been evaluated against mandatory and rated requirements on capability including security, cost and economic benefits.

Mandatory requirements are the criteria that a bidder must meet in order to be compliant and be considered for a contract award. The rated criteria determine score and ranking of the bidder.

The RFP includes a phased bid compliance process which is designed to prevent a proposal from being rejected if it did not meet mandatory criteria and the bidders are given an opportunity to address any non-compliance related to their proposal.

An independent Fairness Monitor Team has been engaged to review, observe and monitor the procurement activities including the mandatory and rated criteria evaluation and phased bid compliance process. The interim report from the fairness monitor, dated November 26, 2021, concluded that the procurement was conducted in a fair, open and transparent manner.

In accordance with the Future Fighter Capability Project (FFCP) RFP, and following proposal evaluation, Canada has to make a selection for the next phase and can either implement a dialogue with the 2 remaining eligible bidders or proceed directly to finalization with the top ranked bidder.

Parliamentary Budget Officer Report: Canadian Surface Combatants

Key messages

Note

Questions on budget, requirements, estimated timelines, international comparisons, project management should be directed to the minister of National Defence.

Key data points

Background

The CSC project represents the largest procurement under the NSS and is part of the work package to be built by Irving Shipbuilding Inc. The 15 CSC will replace the Royal Canadian Navy’s existing fleet of frigates and retired destroyers at an estimated cost of $56 billion to $60 billion, figures that are exclusive of taxes.

The PBO reported on the CSC projected costs in 2017 and 2019. In 2017, the PBO estimated the cost of 15 CSCs at $61.82 billion inclusive of taxes. In 2019, the PBO revised the cost to $69.8 billion inclusive of taxes. While the final design and build strategy is yet to be completed, the PBO observed that project delays would further increase the cost of the project.

The PBO published a report on February 24, 2021, entitled “The Cost of Canada's Surface Combatants: 2021 Update and Options Analysis” that now estimates the cost of the CSC project at $77.3 billion. The PBO also provides cost forecasts for alternative procurement scenarios that assume a 4-year delay to the overall project should a new design be selected to replace the type 26.

Analysis has continued since the PBO report was published in February 2021 to examine the key differences between the Department of National Defence (DND) estimate and the PBO estimate. One area of significant difference was the inclusion of provincial taxes (included in the PBO estimate but not included in the DND estimate). It has been determined that the removal of provincial taxes from the PBO estimate of $77.3 billion would generate a more pertinent comparison. Removal of the provincial tax amount results in a PBO estimate in the range of $70 billion and brings it closer to the DND cost estimate of $56 to 60 billion.

Strategic tanker transport capability project

Key messages

Key data points

Background

In June 2017, the Government of Canada articulated within the strategic vision of the new Strong, Secure, Engaged (SSE) Defence Policy that Canada needs an agile, multi-purpose, combat-ready military. In response to SSE initiative #47, the strategic tanker transport capability (STTC) project is the means to recapitalize the next generation strategic air-to-air tanker-transport capability, and replace the CC-150 Polaris fleet.

Aligning with the SSE requirement to enhance interoperability with Canada’s allies, the minister of National Defence has a mandate to renew Canada’s strong commitment to the North American Aerospace Defence Command (NORAD) and the North Atlantic Treaty Organization (NATO), acting in multiple theatres simultaneously, while also bolstering disaster relief, search and rescue, contributing to peace operations and capacity building. The STTC platform will be equipped to support and contribute to these renewed commitments through delivery of air-to-air refuelling of Canadian, allied and coalition aircraft, strategic Government of Canada transport, aeromedical evacuation, personnel and equipment transport.

Military pistol procurement

Key messages

Key data points

Nil.

Background

The current Browning High-Power 9mm pistol has been in use across the Canadian Armed Forces for 70 years. Due to serviceability and reliability issues, the Browning pistol needs to be replaced.

A request for proposal was published on May 3, 2021 and 2 complaints were filed with the Canadian International Trade Tribunal by Rampart International Corporation, the Canadian distributor of a pistol made by Glock, an Austrian company.

On November 10, 2021, the tribunal found the complaint valid in part, and recommended, as a remedy, that Public Services and Procurement Canada cancel the pistol solicitation and issue a new solicitation.

The tribunal’s statement of reasons was received November 30, 2021. The tribunal had determined that a small number of requirements were written as design specifications without the words “or equivalent” as required under the Canadian Free Trade Agreement. In light of the tribunal’s recommendation and the reasons provided, PSPC has decided to cancel this solicitation and work with the Department of National Defence to issue a follow-up solicitation that addresses the tribunal’s concerns. The disputed requirements have been written as performance specifications in the follow-up solicitation.

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