2021 annual report: Canada’s National Shipbuilding Strategy

The National Shipbuilding Strategy (NSS) is Canada’s long-term plan to renew the fleets of the Royal Canadian Navy (RCN) and the Canadian Coast Guard (CCG). The NSS is helping rebuild a domestic marine industry and creating sustainable jobs in Canada.

This report provides an update on the NSS from January 1 to December 31, 2021. It details successes and challenges under the 3 pillars of the NSS:

• large vessel construction
• small vessel construction
• vessel repair, refit and maintenance projects

I am pleased to present the 2021 annual report on Canada’s National Shipbuilding Strategy (NSS).

In 2010, the Government of Canada launched the NSS, making a commitment to renew the fleets of the Royal Canadian Navy (RCN) and Canadian Coast Guard (CCG), while rebuilding the marine sector and creating economic opportunities for Canadians.

More than a decade later, we have seen 5 large ships and numerous small vessels delivered to the RCN and the CCG, as well as the completion of dozens of repair, refit and maintenance projects at shipyards across Canada.

The NSS has succeeded in stimulating the Canadian economy. NSS contracts awarded between 2012 and 2021 are estimated to contribute close to $21.26 billion ($1.93 billion annually) to the gross domestic product (GDP), and create or maintain 18,239 jobs annually, through the marine industry and its Canadian suppliers, as well as consumer spending by associated employees, between 2012 and 2022.

Despite these successes, the NSS continues to be met with challenges.

As the Auditor General acknowledged in her 2021 report, shipbuilding is highly complex and challenging work. Delivery of ships has been slower and more costly than originally anticipated, and new supply chain and workforce challenges have emerged over the past few years due to the global pandemic.

The Government of Canada remains firmly committed to the NSS, and continues to work closely with shipbuilding partners to address these challenges and draw upon lessons learned moving forward.

This past year, construction began on the CCG’s offshore oceanographic science vessel. Initial work to prepare for comprehensive construction engineering began on the future polar icebreaker and design work continued for the multi-purpose vessel project at the Vancouver Shipyards. The CCG also took delivery of 2 new search and rescue lifeboats.

The RCN welcomed delivery of their second Arctic and offshore patrol ship, while the third vessel was launched into the water and the cut steel milestone for the fifth vessel was achieved. Construction continued on the Navy’s first joint support ship, and design work on the future Canadian surface combatants progressed.

In 2021, several repair, refit and maintenance contracts were awarded on behalf of the CCG and the RCN, and these have generated significant economic benefits to communities all over Canada.

Finally, we continued our progress towards selecting a third shipyard under the NSS to build 6 program icebreakers and 1 polar icebreaker for the CCG. This is a complex, multi-step qualification process anticipated to be completed in 2022.

Looking ahead to 2022, the Government of Canada will continue to work collaboratively with shipyards and suppliers to address ongoing challenges and ensure the NSS is meeting its objectives.

The Honourable Filomena Tassi, Minister of Public Services and Procurement

In 2021, shipyards continued to face workforce and supply chain challenges resulting from the COVID-19 pandemic. Despite this, progress was made on large and small ship construction projects, as well as ship repair, refit and maintenance projects under the National Shipbuilding Strategy (NSS).

The Government of Canada also made progress towards selecting a third shipyard as a strategic partner under the NSS, to help deliver on the renewal of the Canadian Coast Guard (CCG)’s fleet.

NSS large ship construction contracts awarded between 2012 and 2021 are estimated to contribute close to $10.63 billion ($967.1 million annually) to the gross domestic product (GDP), and create or maintain 9,110 jobs annually, through the marine industry and its Canadian suppliers, as well as consumer spending by associated employees, between 2012 and 2022.

At Irving’s Halifax Shipyards, design work continued on the Royal Canadian Navy (RCN)’s future Canadian surface combatants (CSCs)—the largest and most complex shipbuilding initiative in Canada since World War II.

In September 2021, a contract was awarded to PCL Construction, of Dartmouth, Nova Scotia, to begin consultation and design work on the future land-based test facility. This infrastructure will be critical in testing CSC combat systems and will ensure the new ships are sea-ready once delivered.

In July 2021, Irving delivered the second Arctic and offshore patrol ship (AOPS), the future Her Majesty’s Canadian Ship (HMCS) Margaret Brooke, to the RCN. This was followed by the launch of the third AOPS, the future HMCS Max Bernays, in October 2021. Construction continued on the fourth and fifth AOPS. In addition, extensive design work was done on the seventh and eighth AOPS for the CCG.

In December 2021, the first AOPS, HMCS Harry DeWolf finished a 4-month circumnavigation of North America, completing its first deployment. HMCS Harry DeWolf travelled from Halifax through the Northwest Passage to Vancouver. It returned home to Halifax via the Panama Canal. During the deployment, the AOPS participated in operations in the Arctic, Eastern Pacific, and Caribbean Sea.

At Seaspan Vancouver Shipyards, construction of the RCN’s first joint support ship, the future HMCS Protecteur continued. This project, similar to all NSS projects, extends beyond the shipyard, with several Canadian companies contributing to the effort.

Important milestones were also reached in the CCG’s offshore oceanographic science vessel project. In January 2021, the Government of Canada awarded the build contract to Seaspan, which enabled the yard to transition from the design phase to full construction. Construction of the vessel began in March 2021.

Design work also continued on the CCG’s future multi-purpose vessels. Seaspan will build up to 16 of these vessels, with construction to begin following completion of the joint support ships, the offshore oceanographic science vessel and the polar icebreaker.

In May 2021, the Government of Canada announced its plan to build 2 polar icebreakers for the CCG at 2 Canadian shipyards.

1 polar icebreaker will be built at Seaspan Vancouver Shipyards and the other will be built at Chantier Davie in Lévis, Quebec, pending its successful completion of the process to become a third strategic partner for large ship construction under the NSS.

This procurement approach will help to ensure timely delivery of these much-needed vessels to the CCG, while supporting opportunities for small and medium-sized businesses across Canada.

In support of the polar icebreaker program, in July 2021, the Government of Canada awarded a contract to Seaspan to complete a design check and begin preparation for comprehensive construction engineering.

NSS small ship construction contracts awarded between 2012 and 2021 are estimated to contribute close to $339.4 million ($30.9 million annually) to the GDP, and create or maintain 296 jobs annually, through the marine industry and its Canadian suppliers, as well as consumer spending by associated employees, between 2012 and 2022.

The CCG took delivery of their ninth and tenth search and rescue lifeboats. These vessels were built at Chantier Naval Forillon, in Gaspé, Quebec, and Hike Metal Products Ltd., in Wheatley, Ontario. Each shipyard is building 10 vessels for the Coast Guard.

In addition, the naval large tug project is well underway at Groupe Ocean in l’Isle aux Coudres, Quebec. The shipyard is building 4 new naval large tugs for the Royal Canadian Navy (RCN). These vessels will replace the RCN’s 5 civilian crewed glen-class and 2 fire-class rescue boats.

In December 2021, the RCN announced the names of the future Canadian Forces Auxiliary Vessel tugs:

• Haro
• Barkerville
• Canso
• Stella Maris

These tugs will provide important support to enable warship movements and provide fire protection for the RCN’s Pacific and Atlantic fleets.

NSS repair, refit and maintenance contracts awarded between 2012 and 2021 are estimated to contribute close to $10.09 billion ($917.4 million annually) to the GDP, and create or maintain 8,663 jobs annually, through the marine industry and its Canadian suppliers, as well as consumer spending by associated employees, between 2012 and 2022.

In January 2021, the Government of Canada awarded a $16.5 million contract to Zodiac Hurricane Technologies Inc. from Delta, British Columbia, for inspection, repair and overhaul work on the Canadian Armed Forces’ inflatable rubber boats and rigid hull inflatable boats. The essential maintenance and support services provided by this contract, which will be completed on an as-required basis, will ensure the Canadian Armed Forces’ fleet of inflatable boats remains capable of meeting current and future operational demands.

On February 17, 2021, the Government of Canada awarded a contract to Allied Shipbuilders Limited, from North Vancouver, British Columbia, for reconfiguration work on Canadian Coast Guard Ship (CCGS) Sir Wilfred Grenfell. This contract will help create or sustain 140 jobs at the company. Work continued throughout the year and is expected to be completed in 2022.

In March 2021, the Government of Canada also awarded a $20.7 million contract to St. John’s Dockyard Limited (Newdock), for vessel life extension work on 2 ships: the CCGS Cape Roger and the CCGS Cygnus. Work under this contract began shortly after the contract award, and will continue into 2022.

In July 2021, the Government of Canada awarded a $2.2 million contract to Canadian Maritime Engineering for inspection, survey, and general refit of the CCGS Samuel Risley.

In August 2021, the Government of Canada awarded a $55 million contract to General Electric Canada Aviation Marine, for in-service support on the RCN’s Halifax-class LM2500 gas turbines. This contract will ensure the ongoing maintenance of the gas turbines until the arrival of the Canadian surface combatants.

In September 2021, a $12 million vessel life extension contract for the icebreaker CCGS Amundsen was awarded to Heddle Shipyards. The work will be completed at their Port Weller Dry Docks, in St. Catharines, Ontario.

In December 2021, the Government of Canada announced 4 contracts totalling $77 million for vessel life extension services for the fleet of 36 motorized lifeboats for the CCG. The contracts were awarded to:

• Hike Metal Products Ltd., Wheatley, Ontario
• Industries Ocean Inc., Saint-Bernard-sur-Mer, Quebec
• ABCO Industries Inc., Lunenburg, Nova Scotia
• Ocean Pacific Marine Store and Boatyard, Campbell River, British Columbia

Also in December 2021, the Government of Canada announced the award of 7 contracts for refit and vessel life extension on CCG ships. These contracts, valued at a total of over $28 million, awarded to shipyards on the east and west coasts, as well as in the Great Lakes and Quebec regions, provided for maintenance and life extension work on 7 CCGSs:

• Amundsen
• Sir Wilfred Laurier
• John P. Tully
• Des Groseilliers
• Leim
• Ann Harvey
• Sir John Franklin

This refit work helps ensure that the ships remain in good working order and are in compliance with Canadian maritime regulations.

In addition, work continued in support of the Victoria class submarine in-service support contract (VISSC). The HMCS Corner Brook’s undocking was completed on June 13, 2021. This undocking marked the return of Corner Brook to Vancouver Island waters for the first time in almost a decade. It is also the first in a series of milestones required for returning the submarine to operational service. For Canada’s fleet of 4 submarines, VISSC provides:

• program management
• maintenance
• engineering
• integrated logistics
• records support

VISSC has directly supported the Canadian marine industry, with maintenance work on the submarines being largely performed by domestic companies.

The Government of Canada continued work in 2021 to add a third Canadian shipyard under the NSS. Additional shipbuilding capacity is required in Canada to renew the RCN and CCG fleets, while supporting economic opportunities for the Canadian marine sector.

The third shipyard will build up to 6 new program icebreakers and a polar icebreaker for the CCG, increasing Canada’s capacity to deliver new vessels in a timely manner.

The competitive process to select a third National Shipbuilding Strategy shipyard is similar to the 1 used to select Seaspan and Irving in 2011. In response to an invitation to qualify issued in 2019, Chantier Davie was the only prequalified supplier to proceed to the request for proposal stage.

In July 2021, Chantier Davie submitted their response to a request for proposal. As of December 31, 2021, the evaluation team was continuing to assess Chantier Davie’s proposal, with the final results expected in 2022.

In 2021, Chantier Davie continued its work to refine the individual designs for 2 new Transport Canada ferries, 1 for each of the Îles de-la-Madeleine, Quebec, to Souris, Prince Edward Island (PEI), route and the Wood Islands, PEI, to Caribou, Nova Scotia, route. The design work on the 2 vessels is ongoing and the delivery of the first vessel is anticipated in 2027.

While work on this project continues, the Government of Canada has acquired an interim replacement vessel for the Îles de-la-Madeleine to Souris route. The Motor Vessel (MV) Villa de Teror, renamed the MV Madeleine II, entered into service on June 1, 2021. It will serve as an interim solution until the new MV Jean Lapierre is delivered.

The National Shipbuilding Strategy (NSS) continues to revitalize Canada’s marine sector, creating jobs, and generating socio-economic benefits and prosperity in communities across the country.

Canada’s marine industry outperformed the broader manufacturing sector between 2018 and 2020. Between 2014 and 2020, Canada’s marine industry recorded 57% growth in sales and 46% growth in employment. This growth is not limited solely to the NSS shipyards contracts awarded by the Government of Canada. 90% of the Canadian marine industry’s firms are small- and medium-sized businesses (SMBs), capturing close to 40% of the industry’s employment and sales.

The National Shipbuilding Strategy (NSS) continues to face considerable challenges in meeting its core objective of renewing federal fleets in a timely and affordable manner.

Since the first build contracts were awarded in 2014, 5 large ships and numerous small vessels had been delivered as of December 31, 2021. However, these milestones were met more slowly and at higher costs than originally anticipated.

Shipbuilding is a highly complex process, and during the early years of the strategy, expertise both at the shipyards and within government was still developing. As Canada was attempting to move beyond the shipbuilding boom and bust cycle observed before the NSS was introduced, entirely new classes of ships were being built by new workforces in upgraded shipyards, resulting in significant learning curves for both Canada and shipyards.

This has led to ongoing challenges with respect to planning, management and oversight.

A number of factors have impacted the timing and execution of projects.

Original delivery schedules were established more than a decade ago, based on projections and guided by limited recent experience in the planning of shipbuilding projects.

It is now recognized that there are risks associated with first of class builds and short production runs in “green” shipyards that needed to be taken into account when setting initial schedules.

As the NSS has evolved, both the shipyards and Canada have gained the experience required to set more realistic schedules, although projects continue to face delays.

Original budgets were set without a standardized approach. Preliminary budgets were based on immature cost estimates, and did not fully consider refinements in build requirements and plans, inflation costs, changes in exchange rates, or labour rates and material costs, which have risen significantly over the last decade.

Pressures on supply chains and the marine sector workforce have been exacerbated over the past 2 years due to the global pandemic. This is anticipated to have further impacts on project budgets in the future.

The Government of Canada has been tracking risks associated with human resources capacity internal to the Government of Canada and at the shipyards for several years. Through the additional analysis of these risks, human resources capacity in the marine industry has been identified as a key risk to the success of the NSS.

The marine industry is facing a number of challenges with respect to human resources capacity, including:

• attracting and retaining workforce
• skills development and capabilities of future workforces
• developing a national-level dialogue on regional differences

The COVID-19 pandemic is an unprecedented situation, forcing all sectors, including the marine industry, to adapt rapidly.

Shipyards have reported some direct delays to projects as a result of the pandemic’s impact on their workforce. Yard shutdowns have occurred, and shipbuilding processes have been disrupted due to absenteeism and adherence to health and safety regulations.

Apart from these direct impacts, the marine industry as a whole is facing significant challenges stemming from COVID-19. Factors such as inflation, commodity pricing and supply chain challenges have impacted the cost and availability of materials, posing further risks to project budgets and schedules.

Canada is working actively with the shipyards to properly assess the impacts of the pandemic and identify solutions.

To address these challenges, significant enhancements have been made to strategy management over the years. These enhancements include:

• a governance structure to provide oversight and to support the execution of the strategy
• engagement of senior shipbuilding advisors to provide key advice to decision makers
• engagement of third party experts to support specific areas of the strategy including cost estimation and shipyard capability assessment
• increased capacity in support of project management; the development of a Performance Monitoring Framework to monitor progress towards National Shipbuilding Strategy (NSS) objectives
• efforts to streamline defence procurement and standardize contract terms and conditions

Public Services and Procurement Canada (PSPC), the Department of National Defence and the Canadian Coast Guard are working together to improve risk management tools to ensure that a comprehensive collection of risk-related information, including mitigation strategies, is available to support decision-making going forward.

PSPC is also increasing the number of dedicated individuals engaged in risk management efforts to actively identify risks and develop mitigation strategies, expanding engagement with shipyards on risk, and increasing transparency through more detailed reporting to NSS governance committees.

The Government of Canada is actively engaged with NSS shipyards to address issues related to overall performance.

These efforts continue to focus on improved delivery and accuracy of schedules, more disciplined reporting of progress towards targets, and monitoring and reporting on performance improvement at shipyards.

Existing tools and processes, such as the integrated project schedules produced by the shipyards, and budget and schedule oversight tools, such as earned-value management, to measure performance and progress, are being enhanced to support better oversight by governance committees at all levels.

With regard to pandemic-related delays, the Government of Canada has an open dialogue with the shipyards on their response to COVID-19, and has engaged third party expertise to examine COVID-related expenses.

The goal is to leverage lessons learned and identify future mitigation strategies that could be implemented while continuing to ensure the health and safety of the workforce.

To address the complexity of NSS, in particular as it relates to the level of available infrastructure for all shipbuilding and marine/naval sustainment activities in the short and long term, the Government of Canada has launched a Maritime Infrastructure Strategy. The strategy includes industry outreach and execution of independent studies.

The Government of Canada is actively engaged in developing an NSS Human Resources (HR) Strategy that aims to mitigate risks associated with labour shortages by ensuring that the marine industry and the Government of Canada have access to the skills and labour required to support NSS projects.

Progress to date includes establishing a forum for industry stakeholders and federal partners to share information about HR opportunities and launching a series of presentations to facilitate information sharing to and from program officials in the federal government.

Furthermore, the NSS HR Strategy Secretariat is coordinating the implementation of action plans built around the following pillars:

In February 2021, the Auditor General of Canada tabled a report on the National Shipbuilding Strategy. The report found that the federal fleet renewal has experienced many delays in design and construction and that while key decisions improved the prospects of timely fleet renewal, there is little room for further delay.

At a glance: Report 2—National Shipbuilding Strategy (Office of the Auditor General of Canada)

Given the importance of the strategy, the Government of Canada welcomes the Auditor General of Canada’s report and accepts all of the recommendations. As the Auditor General acknowledges, shipbuilding is complex and challenging work, and Canada continues to seek opportunities to improve the Strategy.

Statement: Government of Canada responds to Auditor General’s report on National Shipbuilding Strategy

As the Auditor General also acknowledges, the Government of Canada has made several key improvements to place the Strategy on a more viable path, and while progress has been made, the Strategy is a decades-long initiative and ongoing enhancements will be required.

Looking ahead to 2022, the Government of Canada will continue to work with its partners and shipyards to improve the timely renewal of the federal fleet.

Although this report lays out a series of measures being taken to seek to mitigate ongoing challenges, the Government of Canada recognizes the risks inherent to an initiative of this size, scope and scale, and there will continue to be pressures on schedules and costs.

Our efforts this year will focus on improved accuracy of schedules and ship delivery, reporting of progress towards targets and monitoring shipyard performance. This will include assessing the full impacts of COVID-19 on projects, including continued supply chain delays, and recalibrating project schedules and budgets as required.

In terms of projected milestones for the coming year, there are a number on the horizon.

The process to select a third shipyard as a strategic partner under the National Shipbuilding Strategy (NSS) will continue, with the intent of having an agreement in place in 2022.

As for upcoming milestones at the shipyards, steel cutting for the Royal Canadian Navy (RCN)’s second joint support ship is planned for 2022 at Seaspan’s Vancouver Shipyards. Irving Shipbuilding is also expected to cut steel on the sixth Arctic and offshore patrol ship for the RCN.

The Canadian Coast Guard (CCG) anticipate taking delivery of their 11th through 14th search and rescue lifeboats, which would bring them past the halfway mark in that project. RCN is also expected to take delivery of the first 2 of 4 large naval tugs.

In addition, Chantier Davie is expected to finish conversion work on the Canadian Coast Guard Ship Vincent Massey, the Coast Guard’s third medium icebreaker. This vessel will carry out icebreaking duties in Atlantic Canada, the St. Lawrence River, and Arctic regions, and will backfill for other icebreakers while they undergo vessel life extension work.

The acceptance and purchase of a light icebreaker for the CCG will occur in early 2022. This vessel, following conversion, will also serve as an important interim measure by providing backfill capacity as vessels are taken out of service for vessel life extension and refit work. Throughout 2022 and beyond, the NSS will continue to stimulate the Canadian economy, in addition to supporting jobs from coast to coast to coast.

If you would like more information about the NSS, please consult: