Question Period Note: Status of defence procurement projects

Due to COVID-19, several defence procurement projects slowed, including the construction and maintenance of ships.

Note: All questions related to Challenger Jets should be referred to the Minister of National Defence.

• Our government is taking strong action to protect our economy, jobs, and the health and safety of Canadians during the global COVID-19 outbreak
  • Canada continues to monitor the situation, analyze potential impacts and explore all possible financial measures available to support the defence and marine industry and protect Canada’s long term national security interests
  • We are currently assessing the impact of COVID-19 on the delivery of ongoing and future major procurement projects
  • We urge all employers during this critical time to follow the recommendations of public health officials, so that workers are kept safe in this extraordinary situation

If pressed on the budget, delays and impact:

• Given the uncertainties associated with the duration of COVID-19 and related strategies, the full schedule impact to projects is not yet fully understood
• That said, we recognize that COVID has impacted the defence sector, and are working closely with industry to mitigate budgetary and schedule impacts of existing procurements

If pressed on the Future Fighter Capability Project:

• Canada received proposals from all 3 eligible suppliers on July 31, 2020 in response to the request for proposal released in 2019
• Canada is conducting the evaluation in the wake of COVID-19 restrictions and has put in place tools and processes to minimize the impact on the schedule
• Contract award is still anticipated in 2022

If pressed on Challengers (all questions related to Challenger Jets should be referred to the Minister of National Defence):

• On June 5, 2020, Public Services and Procurement Canada (PSPC) awarded a $75 million US (plus applicable taxes) non-competitive contract to Bombardier Inc. for the acquisition of 2 new Challenger 650 aircrafts including initial training, publications, maintenance equipment, spare parts to sustain 3 years of in-service support, and additional operational The contract does not include options to support the aircraft’s full life-cycle costs or any additional scope that would increase the value of the contract in the future
• These aircrafts will replace the Royal Canadian Air Force’s (RCAF’s) 2 oldest Challenger jets, which are facing obsolescence. Procured in the early 1980s, they served multiple purposes for the Government of Canada, such as medical evacuation, and military transportation, and have assisted on multiple humanitarian relief and disaster assistance operations
• Following changes to international airspace regulations that began in January 2020, these 2 older aircraft are no longer compliant with certain regulations. As such, operation of these aircraft outside of Canada requires additional efforts to seek exemptions or reroute flights

If pressed on the Challenger contract:

• The Challenger 650 aircraft were acquired on a non-competitive basis. Factors considered in this decision included commonality with the existing fleet, timeliness in delivery and operational readiness of the Challenger fleet
• To ensure that Canada obtains value for money, PSPC conducted a thorough cost analysis using supporting information from Bombardier as well as a third party market analysis

If pressed on the third yard:

• Chantier Davie has pre-qualified to become the third strategic partner under the National Shipbuilding Strategy (NSS)
• Canada and Chantier Davie are now going through the steps of the selection process which include a third-party assessment of the shipyard’s infrastructure, submission of a formal proposal, and a due diligence process to ensure the shipyard is financially capable of performing the work and making any necessary upgrades to its infrastructure
• Subject to successful negotiations, Canada intends to enter into an Umbrella Agreement with the third yard in -2021
• The third yard will build 6 Program Icebreakers for the Canadian Coast Guard
• The entire Invitation to Qualify process was overseen by an independent fairness monitor

If pressed on ‘excusable delay’ requests:

• In order for Canada to consider excusable delays, certain conditions set out in the contracts must materialize, including a requirement for contractors to notify Canada and to submit a work around plan
• Therefore, in the specific context of COVID-19, contractors wishing to submit an excusable delay claim to Canada should review their contracts and proceed in accordance with the provisions they contain

Irving Shipbuilding

In response to COVID-19, Irving Shipbuilding Inc. (ISI) suspended most industrial operations as of March 20, 2020, with special measures for working from home or within ISI’s offices implemented where possible. Most of the workforce is now back in the shipyard while also ensuring physical distancing. COVID-19 safety measures have been implemented, including temperature screening for all individuals entering the site.

Construction of the Arctic and Offshore Patrol Ships (AOPS) and maintenance of HMCS Charlottetown has gradually resumed since mid-April, though with reduced levels of efficiency. On July 31, 2020, the first AOPS was delivered and accepted by the Royal Canadian Navy. Due to COVID-related disruptions and other slippage, ISI has indicated a 6 to 9 month delay to future AOPS, with these timelines at least partly dependent on whether COVID measures are continued or enhanced.

On October 27, 2020, 90 workers at Irving Shipbuilding’s Halifax Shipyard refused to work after the union alleged that a sub-contractor from Quebec arrived on October 19, and did not self-isolate. The shipyard has stated that the sub-contractor was granted an exemption from the provincial government to the 14-day self-isolation requirement for people entering the Atlantic bubble. Due to the number of personnel involved, the shipyard called the provincial Labour Department to investigate. Following recommendation by the Nova Scotia Labour Department, as of October 28, 2020, all workers have returned to work at the shipyard.

Vancouver Shipyards

Operations at Vancouver Shipyards (VSY) continue during COVID-19 but are being closely monitored. Staff not in direct support of production who had been working from home have begun returning to the office. In keeping with provincial regulations, only 50% occupancy is permitted. Approximately 95% of tradespeople are working in shifts at the shipyard. Measures being taken include following self-isolation guidelines, additional social distancing measures, cancelling large gatherings and increased cleaning. VSY has been working closely with WorkSafeBC in implementing these practices, and has adjusted and escalated actions in response to new regulations and guidance.

This approach has allowed VSY to continue construction at a reduced rate of production for the first Joint Support Ship (JSS) and final Offshore Fisheries Science Vessel (OFSV), the latter of which was delivered in October 2020.

Chantier Davie

On March 24, 2020, in response to COVID-19, the Quebec Government published a list of essential industrial sectors, under which Chantier Davie qualified. Chantier Davie has conducted on-site training for dealing with COVID-19, implemented a set of strict directives, and negotiated with their union to maintain intact squads instead of rotating employees through different teams. Nonetheless the workforce numbers and capacity have diminished to accommodate the social distancing measures implemented.

As of October 29, 2020, there have been multiple COVID cases reported by Chantier Davie and they have invoked, in accordance with local health authority protocols, measures to report on and control the situation. These measures have reduced the number of reported cases from 26 to now just one case and the full impact on the workforce and schedule is being assessed.

Challengers

To ensure that Canada obtains value for money, PSPC conducted a thorough cost analysis using supporting information from Bombardier as well as a third party market analysis. The price was deemed to be fair and reasonable.

Acceptance and title transfer of the aircraft occurred on June 30, 2020, and July 3, 2020. Both aircraft completed the first of 2 post-delivery retrofit periods in August 2020. Both aircraft are currently undergoing the second post-delivery retrofit in Whichita, Kansas, which is expected to be completed in early December 2020. The RCAF has been able to operate the aircraft since mid-August 2020.

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