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Defence and Marine Procurement: Standing Committee on Government Operations and Estimates—April 29, 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 point

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 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 point

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 one 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. Three Arctic and offshore patrol ships for the RCN are currently under construction, including the third Arctic and offshore patrol ship, future HMCS Max Bernays, which was launched on October 23, 2021. Design work on Arctic and offshore patrol ships 7 and 8 for the Canadian Coast Guard is also advancing. Design work on the Canadian surface combatant is advancing as well.

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. A contract was awarded in March 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. Another Halifax Class frigate is expected to arrive at Chantier Davie for the same type of work later in 2022.

Future fighter capability project

Key messages

Key data points

Background

In June 2017, Canada’s defence policy: Strong, Secure, Engaged, confirmed a fleet size of 88 advanced fighter aircrafts to replace the current CF-18s. The government launched a procurement process for the future fighter aircraft in December 2017. Officials conducted extensive industry engagement with suppliers to maximize the likelihood that Canada received competitive proposals, and with Canadian industry to ensure that they were well positioned to participate in the procurement. 

An independent fairness monitor is overseeing the entire process, to ensure a level playing field for all bidders. An independent third-party reviewer was also engaged to assess the quality and effectiveness of the procurement approach.

In July 2019, the request for proposal was issued to the eligible suppliers.

On July 31, 2020, the bid solicitation phase closed; proposals were received from all 3 remaining eligible suppliers and the process entered the bid evaluation phase.

On December 1, 2021, Canada announced that, following evaluation of the proposals, 2 bidders—Swedish Government and SAAB AB; and the United States Government (Lockheed Martin Corporation),remained eligible under the future fighter capability project competitive procurement process and that it would be finalizing its selection for the next step of the process, which could involve proceeding to negotiations with the top-ranked bidder or entering into a competitive dialogue with both remaining bidders.

On March 28, 2022, following a rigorous evaluation of the 2 remaining eligible proposals, Canada announced it would enter into the finalization phase of the procurement process with the top-ranked bidder United States Government (Lockheed Martin).

During the finalization phase, United States Government (Lockheed Martin) must successfully demonstrate that the resulting contracts would meet all of Canada’s requirements and outcomes, including value for money, flexibility, protection against risks, and performance and delivery assurances, as well as high value economic benefits for Canada’s aerospace and defence industry.

The Government of Canada continues to work towards a contract award in 2022, with delivery of aircraft as early as 2025.

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 Canada’s defence policy: Strong, Secure, Engaged (SSE) 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

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 Canadian International Trade Tribunal found the last complaint valid in part, and recommended, as a remedy, that Public Services and Procurement Canada (PSPC) cancel the pistol solicitation and issue a new solicitation.

In light of the tribunal’s recommendation and the reasons provided, PSPC has decided to cancel this solicitation and worked with the Department of National Defence to issue a follow-up solicitation that would address the tribunal’s concerns.

Remotely piloted aircraft systems

Key messages

Key data points

Background

In June 2017, Canada committed to acquiring remotely piloted aircraft systems as part of Canada’s defence policy: Strong, Secure, Engaged. These aircraft will be integrated into a network of intelligence, surveillance and reconnaissance systems to enable near real-time flow of information essential to the Canadian Armed Forces operations. The aircraft will be piloted by certified Canadian Armed Forces pilots from a remote location and will be capable of carrying and launching precision-guided munitions.

This is a multi-phased procurement. As part of the initial phase, Canada established, in May 2019, a list of qualified suppliers that demonstrated their ability to meet Canada’s need, as defined in the invitation to qualify. The qualified suppliers are L3 Technologies MAS Inc., and the United States Government and General Atomics Aeronautical Systems, Inc. This group of qualified suppliers have been engaged to provide feedback to government, most recently through the release of a draft request for proposal in November 2020. Benefiting from that feedback, the formal request for proposal was released.

To support indigenous procurement objectives, the qualified suppliers will have to provide a draft Indigenous participation plan with their proposal. This plan will detail how the winning contractor will identify the affected Indigenous communities and consult/engage with them, in collaboration with Canada, to obtain long-term, meaningful and sustainable benefits. The winning contractor will also commit up to 5% of the contract value to support Indigenous benefits in Canada. The contractor will be required to finalize its plan no later than 6 months after contract award and will also be required to regularly report on progress in the area of Indigenous participation and deliverables set-out in their plan.

A fairness monitor is engaged to oversee and report on the openness and fairness of the entire procurement process. Once the procurement is completed the fairness monitor’s report will be published.

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2023-10-31