CANSEC Trade Show
The Honourable Judy M. Foote
Minister of Public Services and Procurement
CANSEC Trade Show
May 25, 2016
Check against Delivery
Good afternoon. It is a pleasure to be here at one of the most important events of the year for the defence and security industries.
Thank you to the Canadian Association of Defence and Security Industries for hosting today’s event, and for your ongoing support to the Government of Canada initiatives.
Our government recognizes the critical role you play in protecting Canadians, creating skilled jobs, and making a strong contribution to our economy.
As Minister of Public Services and Procurement one of my priorities is on government procurement, and as you are aware, much of this is military-based.
My colleague, the Minister of National Defence, spoke to some of the challenges of military procurement this morning. Our government is committed to supporting the defence and security industries and we believe collaboration is critical to ensuring the Canadian Armed Forces gets the equipment they need in a timely manner, that long-term economic benefits are secured, and we continue to find opportunities to streamline the defence procurement process.
We are also committed to ensuring that Canadian industry benefits from defence procurement. The Minister of Innovation, Science and Economic Development, regrets that he cannot be here today. On behalf of Minister Bains, I assure you that the Government will continue to use its Industrial and Technological Benefits Policy to stimulate investments that support research, technological development, and innovation; foster exports; and promote the development and growth of Canadian-based suppliers, in particular small and medium-sized enterprises.
Collaborating with industry in developing Value Propositions is key to meeting our economic objectives. Your feedback on economic opportunities to support and grow Canadian industrial capabilities is critical in the design of Value Propositions tailored to the unique economic potential of each procurement.
In keeping with this government’s commitment to results and enhancing transparency, Minister Bains recently published information about the significant investments defence contractors have made to date in meeting their economic obligations to Canada. These are real commitments by contractors to invest in Canada. This information helps Canadian firms to position themselves to promote their businesses and develop partnerships with defence contractors. This information will be updated annually to ensure Canadian industry continues to benefit from defence procurement in the future.
Our Government is committed to delivering government services that reflect modern best practices and public expectations around transparent, open and client-centred government. Engaging stakeholders in a thoughtful and constructive manner is key to making informed decisions.
And, in my mandate letter the Prime Minister identified the modernization of procurement as one of my top priorities. We are simplifying government purchasing, and cutting red tape for both clients and suppliers, to make it easier to do business with our Government. That is why we are moving to a web-based e-procurement model that brings information and services online, allows suppliers and buyers to complete transactions electronically, and supports green practices. And we are not wasting time. A contract for this tool is expected to be awarded later this year.
In addition, we are already seeing the benefits of innovative procurement practices, like the two-step process for evaluating bids. Instead of having their bids disqualified for relatively minor errors and omissions, bidders are now sent a preliminary evaluation with an opportunity to provide additional information and comply with the requirements. This represents a win-win, an open dialogue with bidders and a more transparent and competitive process with positive results for both government and industry.
We are also working with you and our government partners to make further improvements and to develop new tailored approaches, rather than one-size-fits-all. In time, these new approaches can be applied to all contracts, whether for legacy equipment and maintenance, or for new projects.
We have also been looking at our approach to the Canadian Surface Combatant project and we expect to be able to say more about this project in the coming weeks.
The goal of all this modernization is to ensure that we equip our men and women in uniform as quickly as possible so that they have what they need when they need it. This means doing things differently and more efficiently, and it requires departments to work together at each and every step of the process. We will be open with our industry partners as we work with them in fostering innovation and job creation.
Therefore, I am happy to update you on the National Shipbuilding Strategy, its achievements and challenges, and outlining some of the ways we plan to improve the implementation of the Strategy.
Canada’s shipbuilding industry has a unique place in our nation’s history. After all, we are a maritime nation, from coast to coast to coast. Canadian shipbuilding is one of our oldest industries, but its history has been also known for its “boom and bust” cycles. In the first years of our nationhood, Canadian timber was the material of choice for vessels around the world, and the reputation of Canadian shipyards and shipbuilders was second to none. Canada was then the fourth largest ship-owning nation in the world.
Shipbuilding again peaked during the Second World War. From 1941 to 1945, Canadian shipyards produced 403 merchant ships, 281 fighting ships, 206 minesweepers, 254 tugs, and 3,302 landing craft. No small feat, to be sure. By war’s end, Canada had one of the largest navies in the world.
This tempo slowed to the more normal pace of peace-time. Those same shipyards later built the world class icebreakers and frigates that are still in our fleets.
Other than a few small projects, the Canadian industry has not had substantial new orders from the federal Government, since the mid-1990s.
As a result, the industry has shrunk considerably. Canadian companies lost much of their capabilities to support the shipbuilding requirements of the Navy and the Coast Guard.
Compared to those in other countries, our shipyards were outdated and did not have the required equipment, supply lines, and skilled workers needed for a world class industry. And when we did build ships, we focussed on single projects. Those one-off procurements proved to be both inefficient and unaffordable.
Many studies—including research conducted by your sector—called for a new approach to ship procurement in Canada.
Following a broad consultation with the shipbuilding industry that confirmed support for the development of a long-term strategy, the National Shipbuilding Procurement Strategy was announced in June 2010.
Our Government is fully committed to this approach to shipbuilding, and there are solid reasons for staying with this made-in-Canada approach.
That is why, back in November when he appointed his Cabinet, Prime Minister Trudeau asked me to prioritize the National Shipbuilding Strategy, which means supporting the renewal of the Canadian Coast Guard fleet and ensuring the Royal Canadian Navy is able to operate as a true blue-water maritime force.
The Strategy is a long-term commitment for continuous shipbuilding projects. It not only equips our Navy and Coast Guard, but also rejuvenates our marine industry and brings good middle class jobs and prosperity to many communities throughout the country.
I have seen tangible results of the Strategy first hand at Irving Shipbuilding in Halifax and Seaspan’s shipyards in Vancouver. The shipyards have completed much in three years; they have made significant investments in their infrastructure facilities and their workforces. The results are impressive.
The shipyards were competitively selected as centres of excellence, to build Canada's combat and non-combat vessels. We are committed to working closely with the shipyards to ensure this work progresses efficiently.
By building ships here in Canada, we are re-establishing an industry, supporting Canadian technological innovation, and developing a skilled workforce and project managers.
The lead projects, the first Arctic Offshore Patrol Ship in Halifax and the first two Offshore Fisheries Science Vessels in Vancouver, are well underway.
Hundreds of contracts from the two major shipyards are generating work for small and medium enterprises in Canada, from coast to coast to coast.
It would not be possible to talk about all the companies receiving contracts under the strategy, but the following provide a sample of how benefits are being realized in our communities.
Just two weeks ago, Halifax Shipyard awarded a contract worth $15 million to Bluedrop Performance Learning, a 100% Canadian-owned small business located in St. John's, Newfoundland and Labrador. Their state-of-the-art virtual training and simulation centre in Halifax, with its unique proximity to the Royal Canadian Navy and military bases, as well as universities, is an ideal location for collaboration, field-testing and industry validation.
Bluedrop is going to design training and simulation software to prepare and train the future fleet. Twenty-five employees have been dedicated to work on the project. The work of this company, in developing new learning technology, is a great example of how we are helping industry innovate!
As you know, our Government is committed to working with Aboriginal peoples to increase opportunities for them to contribute to the modernization of our fleets.
Halifax Shipyard launched an innovative partnership to provide education funding and job opportunities for 20 women to participate in the welding and metal fabrication programs at the Nova Scotia Community College. This collaborative initiative, also involving government, unions, and Women Unlimited, is focussed on creating pathways for women to enter the shipbuilding industry.
On a recent visit to Vancouver, I met with a group of 40 students and their instructors at ACCESS Trades, a company established to increase training and apprenticeship opportunities in the urban Aboriginal community. Their services are geared for students who become certified in trades such as Welding, Pipefitting and Metal Fabrication. Seaspan has even sent some of its metal fabrication staff to ACCESS for upgrading.
Seaspan also collaborated with the Coastal Aboriginal Shipping Alliance and made a significant investment to facilitate the entry of Indigenous peoples into the marine sector workforce through training programs on the west coast.
Another partnership with an eye to developing future leaders for its centre of excellence, Seaspan Shipyards partnered with the University of British Columbia to create two Chair positions in a new Master of Engineering Leadership program. The one-year program combines graduate engineering courses at the faculty of applied science with business courses.
There are many more stories of Canadians who are benefitting from the Strategy.
In all, the contracts awarded for the large Coast Guard and Navy vessels will contribute nearly $4.4 billion to Canada’s Gross Domestic Product and so far our estimates have up to 5,500 jobs created or maintained over the next decade. And industry analysts have estimated that the number of jobs will triple over the next 30 years.
Clearly there have been important achievements, but it’s not all smooth sailing. I have been in office for seven months now and I have had the opportunity to meet with industry, engage with my colleagues and have in-depth discussions with our departmental officials about the shipbuilding Strategy.
While the Strategy has made progress, its success has been overshadowed by challenges and growing pains, and we have to recognize the ways in which it has fallen short.
I am talking in particular about governance, how decisions were made. I am also talking about costing methodology and budgeting. Changes were needed to improve how we measure achievements against the Strategy’s objectives.
And a better job could be done of informing Canadians about the inherent complexities and challenges of the Strategy, including how to reinvigorate a marine industry that has not produced large military vessels in several decades.
Today, I am sharing with you our Government’s plan to enhance the National Shipbuilding Strategy to address some of these issues.
Without question, the Strategy is good for Canada, but it can be made better. And we intend to improve the Strategy in several areas.
These improvements will be based on the experience gained over the last five years since the Strategy was launched, best practices being used elsewhere, and ongoing discussions with the shipyards and industry stakeholders.
First we need to rebuild the expertise and oversight gap that arose over the decades in which Canada was largely out of the shipbuilding business. Decision making has been largely ineffective, because of years of inactivity in the shipbuilding industry and more expert advice was needed to guide decision-makers.
We have already engaged Steve Brunton, a retired Rear Admiral from the United Kingdom’s Royal Navy to assist with the implementation and management of the Strategy. Mr. Brunton is providing advice on many facets, including risk and program management, construction benchmarking and competitiveness. He is also advising on performance and operational improvements.
In addition, the involvement of multiple departments had created a lack of clarity, with respect to responsibilities and accountabilities, and we are working closely with our partners to ensure that our approaches are aligned to deliver on the expectations of Canadians.
The new ad-hoc cabinet committee, of which I am a member, is bringing more rigorous governance and oversight to defence procurement. We are tracking progress on our government’s priorities and assessing the effectiveness of our strategies to deliver results for Canadians.
Second, we are investing in building and developing teams, and increasing our capacity by adding and training staff within the public service to manage the various aspects of the shipbuilding Strategy such as building and maintaining relationships with industry and monitoring progress of the various projects. The number of employees dedicated to shipbuilding had been reduced since the last large vessels were produced in the mid-1990s.
Not only were Government shipbuilding teams too small, they also lacked sufficient expertise to deliver on such a complex, long-term endeavour. A program of this size and importance deserves to be properly resourced. Within my own department, we are going to double the number of employees working on the Strategy.
The third area we intend to improve is budgeting. It makes no sense to establish a budget today for a project that will not start for years, even a decade. In the past, budgets were set and publicized without a standardized approach, and these preliminary figures were never updated to reflect refinements in requirements and plans, inflation, and changes in exchange rates and material costs, which have been significant over the last decade.
This is the main reason why projects appeared to be vastly over-budget when actual contracts were signed. Economic conditions change, requirements and technologies evolve, and the Government must be agile enough to review its financial commitments. Work is underway now to develop a new costing approach, but we are taking the appropriate time needed to make sure our budgets are accurate and reliable for the duration of the Strategy. In addition, we will not be announcing a new cost estimate for the Canadian Surface Combatant until we have signed a build contract. Given the number of variables that can change and the very long planning periods involved, we have seen how these estimates cause confusion. In the future, we will be developing procedures to ensure that accurate and timely costing information is provided to Canadians.
You cannot improve what you do not measure, so the fourth area for enhancement is performance monitoring. New indicators are being developed, for instance, Seaspan has a process to track progress and to anticipate and identify risks. This approach allows the shipyard to correct course before problems arise. Such indicators help ensure that projects are completed in a timely and affordable manner; that we have the sustainable marine sector that meets Canada’s needs; and that these projects generate economic benefits for Canadians.
We expect both shipyards to achieve the objectives set-out by the Strategy that will put them in the top 25 per cent of the world’s most productive shipyards in terms of facilities, processes and practices.
Our Government is committed to being open and transparent, and the National Shipbuilding Strategy is no exception. Therefore, the fifth area of improvement concerns how we communicate the Strategy’s successes and challenges.
We are determined to be straightforward with Canadians about the progress of individual projects, shipyard investments, contract awards and other pertinent data. And today we are releasing a report that provides this information for the first three years of the Strategy. And to ensure a predictable flow of information to Canadians, updating Parliamentarians and Canadians more frequently on our projects going forward is a priority. Information will be regularly posted on a new National Shipbuilding Strategy Website and we plan to hold regular briefings with media and interested stakeholders.
Canadians deserve to know how their money is being invested and the impact it is having on our Navy and Coast Guard, and our country’s economy.
We are committed to providing the level of capability required by the Royal Canadian Navy and the Canadian Coast Guard to maximize their operational effectiveness. And we will continue to look for ways to further improve our strategy to achieve value and benefits for Canadians.
The National Shipbuilding Strategy is good for Canada and is worth getting right. We are determined to renew Canada’s reputation as a major shipbuilding country.
In charting a new course for shipbuilding in Canada, we also foster and harness the skills, know-how and ingenuity of Canadians. Because, as we know, this spirit of innovation is essential to keeping our economy strong and sustainable in the years ahead.
Today’s decisions on shipbuilding will affect Canadians for the next three generations. Refinements and improvements as we go along are to be expected. They are not the end of the story, but rather part of a journey.
Our government is committed to collaborating with stakeholders to ensure that the men and women who serve at sea, on land and in the air have the best equipment and support they need to do their important work.
They deserve nothing less.
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