Defence and marine procurement: Standing Committee on Government Operations and Estimates—May 29, 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 March 31, 2023, Canada has awarded approximately $23.89 billion in contracts under the NSS, to businesses across the country. Of these contracts, $1.24 billion went to small businesses with less than 250 employees
• NSS contracts awarded between 2012 and 2022 are estimated to contribute more than $25 billion ($2.1 billion annually) to Canada’s gross domestic product, and create or maintain more than 18,800 jobs annually between 2012 and 2023
• The NSS is a long-term investment that is delivering results now: ships for the Navy and the CCG and jobs and economic growth for Canada

If pressed on economic benefits:

• The NSS is generating economic benefits
• In 2022 alone, the Government of Canada awarded approximately $2.72 billion in new contracts to Canadian companies under the Strategy, including approximately $238.1 million to small and medium businesses with fewer than 250 full-time employees
• Contracts awarded in 2022 are estimated to contribute approximately $1.838 billion annually to Canada’s gross domestic product, and will create or maintain close to 8,303 jobs annually, over the 2022 to 2023 period

If pressed on the Third Yard:

• Following successful negotiations, the Government of Canada signed an umbrella agreement on April 4, 2023, with Chantier Davie Canada Inc. and announced that it has become the third strategic shipbuilding partner, joining Irving Shipbuilding Inc and Seaspan’s Vancouver Shipyards
• This was a complex and multi-step qualification process, and it was imperative to get it right
• This agreement between the company and federal government marks the start of negotiations for contracts to support Canada’s future shipbuilding needs and create good jobs, which includes the construction of 6 program icebreakers and 1 of 2 polar icebreakers for the CCG
• The exact build schedules and costs will be negotiated and finalized during the individual contract negotiations

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

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 1 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 US 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 RCAF 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
• Under the National Shipbuilding Strategy, 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, and the remaining 3 are under construction
  • 2 Arctic and offshore patrol ships for the Canadian Coast Guard 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 Canadian Coast Guard to expand its patrol capability into the low Arctic
  • 2 polar icebreakers and 6 program icebreakers for the Canadian Coast Guard 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 RCAF, 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

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 (DND) 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; 1 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 was made public on March 27, 2023 via the Public Service and Procurement Canada newsroom website. On the same day, journalists covering defence-related subjects and the respondents to the Canadian multi-mission aircraft request for information (RFI) were also contacted to inform them of this publication.

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 RCAF’s requirements
• A RFI was released in February 2022 to obtain information from industry
• The government is also engaging its allies to explore all available options

Arctic and offshore patrol ships costs

Context

The Arctic and offshore patrol ships (AOPS) project has the objective to deliver 8 ice-capable offshore patrol ships that will be used by the RCN and CCG to conduct sovereignty and surveillance operations in Canada's waters, including the Arctic. The AOPS project is acquiring ships, integrated logistics support products, jetty infrastructures in Halifax and Esquimalt as well as a berthing and fuelling facility at Nanisivik, Nunavut as part of the NSS.

Project, contracting and expenditure authority updates for AOPS 1 to 6 for DND and AOPS 7 and 8 were received prior to the end of December 2022, and these updates have attracted media attention and questions as to the reason for increases beyond previously released information.

Suggested response

• So far, 3 AOPS have been delivered, and 3 more are under construction for the RCN, with 2 more to follow for the CCG for a total of 8 AOPS
• We will continue working closely with industry to manage cost and schedule and ensure the best value is provided to Canadians throughout the duration of the AOPS project
• As of November 30, 2022, the Arctic and offshore patrol shipbuilding project budget for AOPS 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
• Canada and the shipyard have overcome numerous challenges attributed to COVID-19 impacts, and are now seeing increased efficiencies and higher quality combined with shorter construction times for the ships

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 AOPS are being addressed by in-service support contracts for AOPS 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
• AOPS 3 repairs are being conducted under warranty and mitigations are being implemented to ensure that similar issues do not occur on AOPS 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 AOPS program has been $4.6 million, with the cost and number of warranty issues generally decreasing significantly on each successive ship

If pressed on safety on potable water quality on ships:

• As part of Canada’s regular maintenance routines, the water quality is tested onboard its vessels to ensure that it is compliant with all regulations and is safe for consumption
• Measures are being introduced, at the shipbuilding and acceptance stage, to the AOPS to filter the water and ensure that it meets or exceeds requirements. A review of supply chain materials has also identified the requirement to replace components to ensure that contaminants are not introduced into drinking water. Other mitigation measures are in place in the meantime
• Canada has accepted a proposal to address the potable water issue identified in ships 1 to 3 with the approved solution of filtering the water to be implemented on ships 1 to 4 and design updates to be included for the remainder of the AOPS yet to be delivered

Document navigation for "Standing Committee on Government Operations and Estimates: May 29, 2023"

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