Defence and marine procurement: Standing Committee on Government Operations and Estimates:—March 22, 2023

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National Shipbuilding Strategy

Context

The National Shipbuilding Strategy (NSS) is a long-term commitment to renew the vessel fleets of the Royal Canadian Navy (RCN) and Canadian Coast Guard (CCG), create a sustainable marine sector, and generate economic benefits for Canadians.

Note: Questions on budget, requirements, timelines, international comparisons, and project management should be directed to the Minister of Fisheries and Oceans and the CCG or the Minister of National Defence, as appropriate.

Suggested response

• The NSS is about Canadians and Canadian businesses working together to strengthen and renew our Naval and Coast Guard fleets
• So far, 6 large vessels and numerous small ships have been delivered, and many more are under construction across Canada
• We will continue working closely with industry to manage costs and schedules, and ensure the best value is provided to Canadians throughout the duration of these projects

If pressed on contract amounts:

• As of September 30, 2022, we have awarded approximately $22.48 billion in contracts under the NSS to businesses across the country and of these, $1.07 billion went to small businesses with less than 250 employees
• NSS contracts awarded between 2012 and 2021 are estimated to contribute close to $21.26 billion ($1.93 billion annually) to Canada’s gross domestic product, and create or maintain 18,239 jobs annually between 2012 and 2022
• The NSS is a long-term investment that is delivering results now:
  • ships for the Navy and the CCG
  • jobs and economic growth for Canada

If pressed on economic benefits:

• The NSS is generating economic benefits
• In 2021 alone, the Government of Canada awarded approximately $2.86 billion in new contracts to Canadian companies under the strategy, including approximately $106 million to small and medium businesses with fewer than 250 full-time employees
• Contracts awarded in 2021 are estimated to contribute approximately $1.987 billion annually to Canada’s gross domestic product, and will create or maintain close to 9,280 jobs annually, during 2021 and 2022

If pressed on the third yard:

• Canada is currently negotiating with Chantier Davie to become the third strategic shipbuilding partner. Pending successful negotiations, an umbrella agreement is expected to be in place with the shipyard by the end of winter 2023
• The third shipyard will build 1 of 2 polar icebreakers and 6 program icebreakers for the CCG, and 2 ferries for Transport Canada will be negotiated following the signature of an umbrella agreement
• This is a complex, multi-step qualification process and it is imperative that we get it right, therefore we are making every effort to finalize this process while ensuring value for the Government of Canada and all Canadians

If pressed on the polar icebreakers:

• On May 6, 2021, the Government of Canada announced its intention to move forward with the construction of 2 polar icebreakers
• Seaspan’s Vancouver shipyards will engineer and construct one vessel while the other vessel will be engineered and constructed at Chantier Davie, pending the successful completion of the selection process for the third strategic partner under the NSS

If pressed on Esquimalt Graving Dock:

• The Government of Canada is committed to renewing vital marine infrastructure to support the long-term growth and development of our coastal communities in British Columbia and across Canada
• Esquimalt Graving Dock is a strategic asset that serves the federal fleet as well as supporting and strengthening the west coast industrial marine sector in a secure, public-owned, open-access, multi-user facility
• The government has no plans to build vessels at the facility
• Planning is underway to assess a potential expansion of the facility so that it can continue to accommodate existing and future federal fleet vessels under the NSS, as well as other tenants that lease space for repair, refit, and maintenance
• The facility supports about 3,000 full-time highly-skilled, high-paying trades jobs, and is an economic generator for the local and regional economies, contributing close to one billion dollars of economic output and over $30 million in taxes to all levels of government

Future fighter capability project

Context

As part of the Government of Canada’s reaffirmed commitment to invest in Canada’s military, as announced in the 2017 defence policy, Strong, Secure, Engaged, the government launched an open and transparent competition in December 2017 to permanently replace Canada’s fighter fleet with 88 advanced jets—the Future fighter capability project.

On January 9, 2023, the Government of Canada announced that following an open, fair and transparent competition, Canada had finalized an agreement with the United States (US) government and Lockheed Martin with Pratt & Whitney for the acquisition of F-35 fighter jets for the Royal Canadian Air Force (RCAF).

Notes:

• All questions related to capability and requirements should be answered by the Minister of National Defence
• All questions related to the Industrial and Technological Benefits Policy and Canadian Industry’s participation on the Joint Strike Fighter Program should be answered by the Minister of Innovation, Science and Economic Development
• All questions related to trade issues should be answered by the Minister of Foreign Affairs

Suggested response

• The government is committed to ensuring that members of the Canadian Armed Forces have the equipment they need to do their jobs and protect Canadians, while also ensuring the best value for Canadians
• We delivered on our promise to launch an open, fair and transparent competitive process to replace Canada's fighter fleet with 88 advanced fighter jets
• The new fleet of F-35 jets will deliver the best fighter capability for our country with an optimal solution in terms of capability, price and economic benefits for Canadians and its acquisition will drive significant work for Canadian industry over a 25-year period
• We will continue to keep Canadians abreast of our progress when information is available to share

If pressed on the selection of the F-35:

• In the spirit of transparency, we have shared as much information as possible since this process was first announced in December 2017
• All proposals were subject to the same evaluation criteria and were rigorously assessed on elements of capability, cost, economic benefits and security, with oversight by an independent fairness monitor
• The F-35 represents the best fighter jet for our country’s needs at the best value for Canadians
• During the finalization phase of the procurement process, the United States government and Lockheed Martin with Pratt & Whitney successfully demonstrated that an agreement to purchase the F-35 fighter jets meets Canada’s requirements and outcomes, including value for money, flexibility, protection against risks, performance and delivery assurances

If pressed on the costs and price for the F-35:

• This is the largest investment in the Royal Canadian Air Force in the past 30 years and the estimated investment for this project remains at $19 billion, which includes associated equipment, initial weapons and ammunition, sustainment set-up and services, as well as the construction of fighter squadron facilities in Bagotville, Quebec and Cold Lake, Alberta
• The price per aircraft will be the same amount as paid for by the other F-35 participating nations for the same aircraft and the same lots

Procurement of Arctic-capable assets

Context

Canada’s defence policy, Strong, Secure, Engaged, reaffirms the Government of Canada’s commitment to ensure that Canada has an agile, multi-purpose military and that members of the Canadian Armed Forces are well-equipped and well-supported.

Suggested response

• We are delivering on the Government of Canada’s commitment to ensure our military is well-equipped and well-supported, which includes enhancing Arctic capability
• As of November 30, 2022, the Arctic and offshore patrol shipbuilding (AOPS) project budget for Arctic and offshore patrol ships 1 to 6 was increased by approximately $780 million
• These additional funds address the costs associated with impacts resulting from COVID-19, reduced skilled labour availability, global supply chain disruptions, increasing inflationary pressures on material, and future risk contingencies
• Under the NSS, the government is delivering a number of Arctic-capable vessels, including:
  • 6 Arctic and offshore patrol ships for the RCN that will conduct sovereignty and surveillance operations in Canada’s waters, including the Arctic
    • 3 of these vessels have been delivered
    • the remaining 3 are under construction
  • 2 arctic and offshore patrol ships for the CCG that will be dedicated to a range of missions, including North Atlantic Fisheries Organization patrols, and will have ice-capable functionality that will allow the CCG to expand its patrol capability into the low Arctic
  • 2 polar icebreakers and 6 program icebreakers for the CCG to ensure a year-round presence in Canada’s North in support of Indigenous Peoples and other northerners, Arctic sovereignty, high Arctic science, including climate change research, as well as the ability to respond to major maritime emergencies
  • 2 joint support ships that will provide the RCN with the ability to increase the range and endurance of naval task group missions, provide facilities for medical and dental services, and provide a home base for helicopter maintenance repair (note that these vessels are only intended to be Arctic-capable during the summer navigable season)
• We have also recently renewed the operation and maintenance contract for the North Warning System which provides continuous aerospace surveillance information and is a vital part of North American defence and Arctic sovereignty
• Following a competitive process, on January 31, 2022, the Nasittuq Corporation was awarded a $592 million contract (effective April 1, 2022, until March 31, 2029) for the operation and maintenance of existing radar stations of the North Warning System
• The government also continues to work towards the acquisition of space-based systems and capabilities for the Royal Canadian Air Force, including:
  • a space system that will provide surveillance of Canada’s Arctic and its maritime approaches, providing an upgrade of the defence capabilities currently provided by the RADARSAT Constellation mission
  • a space system that will provide reliable and secure narrowband and wideband communication capabilities in the Arctic between 65 degrees North and 90 degrees North latitudes

If pressed on repair costs to fix issues on AOPS ships:

• The requirement to repair issues found during the introduction of a new class of vessel is not unique to NSS build projects
• The current technical issues affecting Arctic and offshore patrol ships are being addressed by in-service support contracts for Arctic and offshore patrol ships 1 and 2, which have already been delivered and accepted, and are no longer under warranty. The repair plan for these vessels is underway and costs are not currently available
• Arctic and offshore patrol ship 3 repairs are being conducted under warranty and mitigations are being implemented to ensure that similar issues do not occur on Arctic and offshore patrol ships 4 to 8. These repairs are not yet complete and therefore the final costs are not currently available
• To date, the total warranty cost of the Arctic and Offshore Patrol Ships Program has been $4.6 million, with the cost and number of warranty issues decreasing significantly on each successive ship

Strategic tanker transport capability project

Context

As part of the Government of Canada’s reaffirmed commitment to invest in Canada’s military, as announced in the 2017 defence policy, Strong, Secure, Engaged, the government launched an open and transparent competition in December 2020 to replace Canada’s CC-150 Polaris fleet—the Strategic tanker transport capability project.

Notes:

• All questions related to capability gap, security, interoperability requirements and costs should be answered by the Minister of National Defence
• All questions related to the Industrial and Technological Benefits Policy and the assessment of bidders’ impact on Canada’s economic interests should be answered by the Minister of Innovation, Science and Economic Development

Suggested response

• The Government is advancing work to replace Canada's CC-150 Polaris, which includes an open and transparent competition
• On December 17, 2020, Canada published a draft Invitation to solicit comments from industry on the qualification requirements for the upcoming Invitation to quality
• On February 12, 2021, an Invitation to qualify was published and on April 1, 2021, the result was published with Airbus Defence and Space SA of Madrid, Spain as the sole qualified supplier
• A directed request for proposal to Airbus defence and space SA was sent on May 13, 2022
• Negotiations are ongoing and a contract is expected to be awarded in summer 2023
• Concurrently, to accelerate the delivery of the replacement fleet, 2 used aircraft were acquired in 2023 and a request for proposal has been issued to acquire up to 3 additional used aircraft

Fixed wing search and rescue project

Context

On May 4, 2022, the Department of National Defence announced delays in the fixed-wing search and rescue (SAR) project. The CC295 Kingfisher fleet of aircraft, that will eventually replace existing SAR aircraft, still require significant work, tests, and trials before entering into RCAF service. As a result, initial operational capability (IOC) has been delayed from 2022 to 2025 to 2026.

The new fleet of modern aircraft is equipped with technologically advanced systems and will be able to perform in Canada’s harsh search and rescue environment; one of the most challenging and diverse landscapes in the world.

Note: All questions related to Initial and Full Operational Capabilities, capability gap, security, interoperability requirements and costs should be answered by the Minister of National Defence.

Suggested response

• Canada is building a more agile, better-equipped military, while ensuring the best value for Canadians
• As of December 23, 2022, 15 of 16 aircraft and all training devices have been accepted
• While operationalization of the aircraft will take more time than originally anticipated, Canada expects to remain within the project’s approved budget. The contract is performance-based, therefore payments are made only when equipment and services are delivered, and accepted by Canada
• The firm, fixed-price contract protects Canada from cost overruns for work defined in the contract and incentivizes the contractor to minimize further delays

If pressed on the delay:

• Due to the overall project complexity and the COVID-19 pandemic which created challenges and loss of productivity, the operationalization of the new fleet has experienced some delays. Canada continues to work closely with the manufacturer to reduce the impact of the delays

Canadian multi mission aircraft project

Context

On December 22, 2022, Canada submitted a letter of request to the United States Government regarding P-8A Poseidon aircraft. This information is not yet public and an announcement (via website update or news release) will occur in the very near future.

Notes:

• All questions related to capability and costs should be answered by the Minister of National Defence
• All questions related to industrial and technological benefits should be answered by the Minister of Innovation, Science and Economic Development

Suggested response

• As part of Canada’s defence policy, Strong, Secure, Engaged, the Canadian Multi-Mission Aircraft project has been initiated to replace Canada’s CP-140 patrol aircraft fleet
• The Canadian Multi-Mission Aircraft project is currently in the option analysis phase to determine what option can best meet the Royal Canadian Air Force’s requirements
• A Request for Information was released in February 2022 to obtain information from industry
• The Government is also engaging its allies to explore all available options

Document navigation for "Standing Committee on Government Operations and Estimates: March 22, 2023"

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