Keynote Address from Minister Qualtrough at CANSEC 2018

Speaking Notes for

The Honourable Carla Qualtrough
Minister of Public Services and Procurement

CANSEC 2018 - May 31, 8:30 am
(Paddy O'Donnell Mentorship Breakfast)

Introduction

Good morning everyone.

Before I begin, I would like to recognize that we are meeting on the traditional territory of the Algonquin nation.

I would like to thank Curtiss-Wright Defence for sponsoring this morning’s networking reception, as well as Alion Science & Technology and Seaspan Shipyards for sponsoring this breakfast.

As someone who has been lucky to receive encouragement over the years from people I admired, I am also delighted to be part of an event that is named for an illustrious mentor, one who had a huge impact on the Royal Canadian Air Force and the defence sector.

Lieutenant General Paddy O’Donnell is remembered for his selflessness and helping younger colleagues develop their own careers. The award in his name is a reminder of the positive impact we can have on those around us, if we care enough to take the time and effort.

CANSEC is always a reliable reminder that spring has arrived, and is just about as eagerly anticipated by a lot of people. So I am delighted to be making my first visit to this important event.

Our government deeply appreciates the jobs, R&D, and export activity the defence and security industries generate for Canada. We also value the mutually beneficial working relationship we share with CADSI, your leadership, your staff and your members.

A year ago, my colleague, National Defence Minister Sajjan, released our government’s new vision for defence. Strong, Secure, Engaged. This is the first new defence policy since 2008. It is a transparent, long-term, fully funded plan for the future, built around people.

In support of the policy, yesterday Minister Sajjan announced the release of his department’s new Investment Plan and Defence Capabilities Blueprint, which together provide a clear, forward looking direction on Defence procurement priorities over the next two decades.

My department works in partnership with DND, ISED, Treasury Board and others to deliver the aircraft, ships and other goods and equipment the policy and the Investment Plan call for.

Collectively, we know that our efforts are equipping our brave women and men so that they can protect us and help those in need. We take our roles very seriously, and we’re committed to making defence procurement as effective and efficient as possible.

With that in mind, I want to update you on two things this morning: 

First, I want to outline the progress made by our government over the last three years in advancing some of our major defence and shipbuilding procurements.

Second, I want to talk about some of the ways we are modernizing our processes and improving our practices to shorten timelines while ensuring we get the right equipment for the Canadian Armed Forces, at the right price and with economic benefits for our country.

Fighter Jets Procurement

Let me begin with the purchase of fighter jets – which is the most significant investment in the Royal Canadian Air Force in more than 30 years. Renewing Canada’s fighter fleet is essential for protecting the safety and security of Canadians and meeting our international obligations.

I’m proud to say that this process is in the best place it’s been in many years. 

In December, we launched an open and transparent competition to purchase 88 advanced fighter jets, and we are making substantial progress. 

We said that stakeholder engagement would be an important part of the competitive process. We want all suppliers who can meet our needs to be able to participate on a level playing field.

To that end, in January, we held our first open industry day, attracting over 200 participants from more than 80 companies and 7 countries.

In order to maximize competition and focus on outcomes, we invited interested governments and manufacturers to form teams and to demonstrate their joint ability to meet Canada’s needs, as defined by the Suppliers Invitation List document shared with industry.

In February, we published a list of eligible Suppliers and invited them to participate in the formal supplier engagement, which began in March.

In parallel to this engagement, a few weeks ago officials conducted regional forums in six cities across the country that drew over 600 participants from 200-plus companies.

These information and discussion sessions are meant to make sure Canadian aerospace and defence industries are well-positioned to participate in the contracting opportunities created by the fighter jet procurement.

Businesses were able to meet with potential prime contractors to explore opportunities for partnerships and become better informed about the potential Industrial and Technological Benefits Policy and value proposition objectives.

This is a complex procurement, with the potential for a diversity of solutions. Throughout the last months, and the many months of planning and consultation that preceded the launch of the competition, we have maintained an open dialogue to ensure clarity around challenges and timelines. And we will continue to do so.

Over the next few months, we will begin sharing draft solicitation documents with eligible suppliers. Government officials will visit suppliers’ facilities, and eligible suppliers will visit major CAF bases to see the existing infrastructure and operations.

This engagement will continue into spring 2019, when we anticipate formal solicitation documents will be released to eligible suppliers.

A contract award is anticipated in 2021 to 2022, with delivery of first replacement aircraft in 2025.

These busy last five months have created enormous momentum.

This contrasts with three years ago, when the effort to replace our country’s fighter fleet was at a complete standstill.

Interim Australian Jets Procurement

Our end game is the procurement of a new fighter fleet, but we’re also taking action to fulfill shorter-term needs.

We are now ironing out the details to take delivery of 18 existing Royal Australian Air Force F-18s and spare parts to complement our existing fleet, while the replacement jets are being procured.

Since the Australian jets are similar to our existing CF-18s, they will be easily integrated into the fleet.

We are currently working with Australia to develop a delivery plan and secure necessary approvals to finalize the agreement. We expect to take delivery of the first two jets in 2019.

Maritime Helicopter Project

We are also making progress toward achieving another important milestone for the Maritime Helicopter Project.

We have already taken delivery of the first two Block 2 CH-148 Cyclone maritime helicopters. These Block 2 aircraft incorporate the second last configuration upgrades, and the full complement of 28 final configured Cyclones are expected to be delivered by the end of December 2021.

The CH-148 Cyclone helicopters are developed for operation aboard the Royal Canadian Navy’s Halifax-class frigates, and future surface combatant ships and Joint Support Ships. A little sidebar, my son is in the Navy. He could be in these ships. I’m super proud of that actually.

These new aircraft are replacing Canada’s Sea King helicopters, which have served Canada in the maritime role for the past 50 years.

With the retirement of Canada’s Sea King helicopters in December this year, the cyclones are being integrated into service and operational roles.

National Shipbuilding Strategy

I could talk about many other army and air force procurements underway, but let me turn now to the projects to equip the Royal Canadian Navy and the Canadian Coast Guard under the National Shipbuilding Strategy.

On the west coast in December, Seaspan as was said, launched the first large vessel built under the National Shipbuilding Strategy: an Offshore Fisheries Science Vessel. Another two vessels are under construction.

The first of three Arctic and Offshore Patrol Ships currently being built at Irving is expected to enter into trials and testing for the Royal Canadian Navy later this year, with final delivery expected in 2019.

But it’s not just the large shipyards that are delivering under the National Shipbuilding Strategy.

Chantier Naval Forillon of Gaspé, Quebec, and Hike Metal Products Limited of Wheatley, Ontario, have delivered 2 of 12 Search and Rescue Lifeboats to the Canadian Coast Guard.

Kanter Marine of St. Thomas, Ontario, has delivered 7 Hydrographic Survey Vessels to the Canadian Coast Guard.

Additionally, last August, Thales was awarded a contract for in-service support for the future Arctic and Offshore Patrol Ships and Joint Support Ships. This contract, valued at up to $5.2 billion over 35 years if all options are extended, ensures we are ready to support the vessels once they are delivered.

In the eight years since its inception, the National Shipbuilding Strategy has not been without challenges.

In the course of building new classes of ships, in new shipyards, with new workforces, we have had to adjust plans and budgets set many years ago. But with every build, we learn more, and we are applying these lessons.

Two years ago at CANSEC, my predecessor Judy Foote announced a renewed shipbuilding strategy, one that put a greater emphasis on accurate planning and budgeting, and open communications with Canadians.

We are already seeing the impact of these course corrections.

Treasury Board Secretariat is leading the development of a robust approach to cost estimates with periodic reviews and regular reporting to Ministers.

And my department, along with DND and the Canadian Coast Guard, continues to work closely with both shipyards to monitor costs and ensure timelines are met. 

JSS Announcement

This close collaboration is critical to ensuring we meet the goals of the Shipbuilding Strategy -- one of which is to ensure a continuous program of work, putting an end to the series of boom-and-bust cycles that plagued our marine industry.

For example, when we learned of potential production slowdowns at Vancouver Shipyards, government officials worked together with Seaspan to arrive at a solution to keep the employees there, on the job -- supporting their families -- while also helping to equip the women and men of the Royal Canadian Navy.

As a result of this collaboration, I am very pleased to announce today that the Government of Canada has signed a contract for the construction of up to 52 blocks of the Royal Canadian Navy’s 2 Joint Support Ships at Vancouver Shipyards.

This is not only good news for the future of the Royal Canadian Navy’s fleet, it will also help to alleviate potential production slowdowns at Seaspan.

This work will begin in June and will advance the delivery of the new ships.

This demonstrates the value of the long-term strategic partnership established between the Government of Canada and Seaspan under the National Shipbuilding Strategy.

More importantly, as an integral part of Canada’s future “Blue Water Navy,” these support ships will deliver fuel and other vital supplies to vessels at sea – ensuring our women and men of the Canadian Armed Forces are able to carry out their missions for decades to come.

Possible Production Slowdown at Irving

Planning is also underway to address a projected production slowdown at Irving, between construction of Arctic and Offshore Patrol Ships and the Canadian Surface Combatants.

We expect to have a better sense of potential options later this year, once we have selected the Canadian Surface Combatant design.

Canadian Surface Combatant Update

With respect to the Canadian Surface Combatant project, the Government and Irving Shipbuilding Inc. are currently evaluating bids.

The Canadian Surface Combatant is the largest, most complex procurement undertaken by the Government of Canada. These ships will form the backbone of the Royal Canadian Navy.

Given the magnitude and importance of this project, we are employing innovative procurement practices to ensure we have maximum competition. We also want to ensure that we are picking from the best possible solutions bidders can put forward.

This is why the evaluation plan provides bidders with an opportunity to adjust their proposals if they have not demonstrated compliance or conformance with the RFP requirements.

This step is referred to as the Cure Process. This week, the evaluation team began providing bidders with feedback on areas that need attention.

Once the Cure Process is complete and we receive the financial component of the bids, we will proceed to the next, and final, step in the evaluation process.  Once the evaluation is complete we will announce the selection of a preferred bidder. Contract awards will follow later in 2018, and the start of ship construction remains scheduled for the early 2020s.

As with all projects under the National Shipbuilding Strategy, we remain committed to providing updates as this important procurement progresses.

Icebreakers Update

We also recognize the need to remain agile to respond to interim requirements.

In this vein, we are continuing discussions with Chantier Davie to support the Canadian Coast Guard’s requirement for interim icebreaking capability.

We remain committed to supporting the Canadian Coast Guard in carrying out its crucial work on behalf of all Canadians.

How we are improving military procurement

I am proud of the progress we have made in military procurement. But I also want to talk about how we are doing things differently.

We aim always to ensure that all our military procurements are fair, open and transparent, and provide best value and benefits for Canadians.

Beyond that, we are also working hard to improve our procurement processes and strategies, so that we ‘deliver the goods’ more efficiently and effectively, increase transparency and competition and reduce the burden on suppliers.

In general, we are developing better vendor management tools to improve contractor performance and behaviour, particularly in large scale procurements.

And we’re publishing clear metrics to measure government performance on the competitiveness, and timeliness of procurements.

Canada’s pricing framework is undergoing renewal, and contract clauses and templates are being simplified and standardized.

Our Sustainment Initiative is a major undertaking aimed at improving how we balance the principles of performance, value for money, flexibility and economic benefit to Canada.

Finding more efficient ways to sustain the military equipment that can be directly reinvested back into the military we procure is critical.

We also want to be as open as possible with you, our industry partners, as we work together to foster innovation and job creation. Industry engagement is key, and as you can see from the fighter jets procurement, we are practicing what we preach.

To streamline smaller procurement processes, as of this year, DND has a delegated contracting authority of up to $1 million for goods and $2 million for services. DND’s authority will also increase to $5 million for both goods and services by 2019.

Economic Benefits

All of this work is creating jobs and economic growth across the country.

Contracts related to the National Shipbuilding Strategy alone between 2012 and 2017 are contributing $8.9 billion, or $812 million a year, to Canada’s GDP, and creating or maintaining 8,800 jobs a year. 

Congratulations to all of you, those are fantastic numbers!

More than half of these businesses are small- or medium-sized enterprises. The thousands of workers involving are building skills and pushing innovation forward.

In addition, partnerships are being developed with schools, research centres and First Nations joint-venture companies.

In all of our procurements, military and otherwise, we are also looking at ways to ensure opportunities for businesses owned or led by Canadians from under-represented groups, such as women, Indigenous Peoples, and persons with disabilities.

Under an Irving Shipbuilding Centre of Excellence program launched in April, for example, 20 African Nova Scotians have the opportunity to study welding at Nova Scotia Community College and secure careers with Halifax Shipyard.

Under the Women’s Entrepreneurship Strategy announced in Budget 2018, my department will work with women-owned small and medium-sized businesses to increase their participation in the federal procurement process supply chain from 10% to 15%.

Conclusion

We know much more remains to be done. But the message I want to leave you with today is how far we have come over the last three years.

We are meeting our commitment to transparency and openness, to improving procurement processes, and to ensuring defence procurement generates innovation, jobs, and opportunities for Canadians.

Above all we are ensuring the women and men of the Canadian Armed Forces have the equipment they need to handle the serious challenges they face in the course of the very important jobs.

Thank you.