Question Period Note: National Shipbuilding Strategy

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.

• The Government is delivering on its commitment to continue to renew the RCN and the CCG fleets, revitalize the shipbuilding industry across Canada, create middle-class jobs, and ensure Canada’s marine services have the modern ships and marine infrastructure that they need for long-term sustainment

Progress on current work

• At Seaspan’s Vancouver Shipyards, all 3 Offshore Fisheries Science Vessels have been delivered to the CCG, marking the completion of the first class of large ships built under the National Shipbuilding Strategy. Work is ongoing on the first Joint Support Ship (JSS)
• At Irving Shipbuilding, the first Arctic and Offshore Patrol Ship was delivered and accepted by the RCN on July 31, 2020. Three other vessels are currently under construction. Design work on the Canadian Surface Combatant is advancing
• PSPC is assessing marine infrastructure across the country to ensure the federal fleets can be sustained through the anticipated lives of the vessels built under the National Shipbuilding Strategy

If pressed on the Canadian Surface Combatant:

Note: The Parliamentary Budget Officer will be publishing a report in February 2021 on CSC. Questions on budget, requirements, estimated timelines, international comparisons, project management should be directed to the Minister of National Defence

• The Parliamentary Budget Officer’s report on the Canada Surface Combatant will be published in the new year
• Over the past several years, significant progress has been achieved on the Canadian Surface Combatant project
• Progress and successes are being achieved, however, shipbuilding is highly complex, and we must continue to work with shipyards and industry to address ongoing challenges, including costs, estimated timelines and productivity
• Since the Canadian Surface Combatant Definition contract was issued to Irving Shipbuilding Inc. in February 2019, the first phase of the design process has been substantially completed and work is progressing on the next phase, preliminary design

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 expand the facility so that is 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 3000 full-time highly-skilled, high-paying trades jobs, and is an economic generator for the local and regional economies, contributing close to one billion dollars of economic output and over $30 million in taxes to all levels of government

Third yard

• Chantier Davie has pre-qualified to become the third strategic partner under the NSS
• Canada and Chantier Davie are now going through the steps of the 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 mid-2021
• The third yard will build 6 Program Icebreakers for the CCG
• The entire Invitation to Qualify process was overseen by an independent fairness monitor

Opportunities for other yards / Chantier Davie

• Across the country, opportunities exist for Canadian shipyards and businesses to win contracts for small vessel construction, repair, refit and maintenance
• On February 17, 2020, following and open and competitive process, we announced the award of a $12.1-million contract to Shelburne Ship Repair for a Vessel Life Extension on the CCGS Edward Cornwallis, a high-endurance multi-tasked vessel and light icebreaker in the CCG fleet. This contract will help create or sustain approximately 100 jobs in Shelburne, Nova Scotia
• On July 21, 2020 the first Royal Canadian Navy frigate arrived at Chantier Davie for repair and maintenance. It is the first vessel to be re-furbished under 1 of the 3 Halifax Class Docking Work period contracts awarded to Chantier Davie (1 of the 3 shipyards selected for the work) in July 2019
• On August 26, 2020, following an open and competitive process, we announced the award of a $4-million contract to Heddle Shipyards for dry-docking work on the CCGS Griffon, a high-endurance multi-tasked vessel and light icebreaker in the CCG fleet. This contract will help create or sustain 80 jobs in Hamilton, Ontario
• On November 6, 2020, we announced the award of a $182-million contract to General Dynamics Mission Systems–Canada, of Ottawa, Ontario, for in-service support on 6 Halifax-class combat systems. The initial contract amount may increase over the next 6 years as work progresses, and will maintain up to 106 jobs
• An Advance Contract Award Notice (ACAN) signaling our intention to enter into a contract with Chantier Davie for required vessel life extension work on the CCGS Louis S. St-Laurent, Canada’s largest icebreaker, closed November 19, 2020. Chantier Davie has been identified as the only facility in Eastern Canada capable of performing this work during the specified time period. Contract award is anticipated for mid-Summer 2021 with work scheduled to begin in Spring 2022
• Since 2012, Chantier Davie has been awarded more than $1 billion in NSS contracts. They are presently converting 2 icebreakers for the CCG, and are undergoing a process to become the third shipyard under the NSS

If pressed on the Polar Icebreaker:

• The government is exploring procurement options for construction of the Polar Icebreaker. No decisions have been taken
• A Request for Information was issued on February 28, 2020 to obtain information on domestic shipyard capability and capacity to build a Polar Icebreaker which closed on March 13, 2020
• There is no intention to use the Esquimalt Graving Dock dry-dock to construct the Polar Icebreaker
• Seaspan’s Vancouver Shipyards infrastructure was modernized at the outset of the NSS for the construction of the vessels in its work package, which—at that time—included the Polar Icebreaker

If pressed on the Chantier Davie National Icebreaker Center:

• The Government of Canada is not involved with the Chantier Davie National Icebreaker Center, and the Center is not a part of the NSS

If pressed on Interim Icebreaker Capacity for CCG:

• The current value of the contract with Davie for the acquisition and conversion of the three medium icebreakers is $843 million
• The first vessel began operations in December 2018, the second vessel CCGS Jean Goodwill was delivered to the CCG in November 2020 and the third vessel CCGS Vincent Massey is expected in 2021

If pressed on Chantier Davie workers being exposed to lead:

Note: Questions on lead exposure should be directed to the Minister of Fisheries, Oceans, and the CCG.

• The Government of Canada takes the health and safety of all workers very seriously
• The 3 medium icebreakers were purchased through Chantier Davie and are under their care and custody from purchase until delivery to the CCG. It is not uncommon for vessels of this age to have lead paint and Chantier Davie has extensive experience refitting and maintaining older ships
• We will continue to work with Chantier Davie to ensure the health and safety of personnel while delivering this important capability to the CCG

If pressed on Chantier Davie COVID-19 impact:

• The Government of Canada is committed to protecting the health and safety of Canadians and keeping our workforces safe, while ensuring a safe and sustainable economic recovery
• We are continually assessing the impact of COVID-19 on the delivery of ongoing and future major procurement projects, including those under the NSS
• We acknowledge the situation at Chantier Davie and are in direct contact with the yard to assess if there will be any impacts on current and future shipbuilding projects as the shipyard’s senior management takes measures to protect their employees

If pressed on Irving Shipbuilding Inc. COVID-19 impact:

• The Government of Canada takes the health and safety of all workers very seriously
• The union has alleged that a sub-contractor who arrived from Quebec did not self-isolate. Consequently a number of employees refused to work on October 27, 2020
• The shipyard has stated that the sub-contractor had been given a provincial government exemption to the 14-day self-isolation requirement for people entering the Atlantic bubble
• All workers returned to work early the next morning, following the recommendation of the Nova Scotia Labour Department

If pressed on the Parliamentary Budget Officer report (Joint Support Ship):

*Note: Questions relating to vessel capabilities should be referred to the Minister of National Defence.

• The MV Asterix is meeting short-term requirements for basic at-sea replenishment duties, but is not equipped to conduct the full spectrum of military activities required by the Royal Canadian Navy
• The Joint Support Ship will be able to carry out at-sea replenishment capabilities as well as the full spectrum of military activities required for the Navy’s operations
• The cost of the MV Asterix contract covers the provision of service over a limited number of years, and does not represent the cost of purchasing the ship outright

Esquimalt Graving Dock

Other Canada-owned graving docks were divested in the 1990s as part of the effort to divest of over 30 engineering assets and well over 100 marine assets as a result of the Nielsen Report (Government of Canada Program Review) in 1985.

Esquimalt Graving Dock was removed from the 1985 direction to divest in 2008 as it was recognized as a key strategic asset for federal fleet sustainment, as well as for support of the west coast industrial ship repair industry. Tenant ship repair companies at the Dock repair and sustain not only Royal Canadian Navy frigates, but cruise ships, domestic barges/tugs, BC Ferry vessels, and cargo tote ships among others.

The purpose of the current expansion is to ensure the federal fleet can be sustained well into the future. With redevelopment, the facility will be able to accommodate existing and future federal fleet vessels under the NSS, The redevelopment will also attract additional tenants and add hundreds of highly-paid, skilled trades jobs, and reduce ‘whole of government’ costs to sustain federal fleets.

Contracts under the National Shipbuilding Strategy

From 2012 to the end of September 2020, the Government signed approximately $16.96 billion in new NSS contracts throughout the country. In terms of economic impacts of the NSS, contracts awarded in the period of 2012 to the end of 2019 are estimated to contribute over $17.04 billion ($1.54 billion annually) to GDP, and create or maintain more than 15,521 jobs annually, through the marine industry and its Canadian suppliers between 2012 and 2022.

National Shipbuilding Strategy contracts awarded from 2012 to the end of September 2020

Irving Shipbuilding: $4.96 billion

Vancouver Shipyards: $4.35 billion

Chantier Davie: $2.15 billion

Other shipyards/Companies: ‎$5.51 billion

National Shipbuilding Strategy contracts awarded by province to the end of September 2020 (Total $16,964,073,051)

• Alberta
  • Total Contract Value: $21,523,321
  • Percentage of Total Contract Value: 13%
• British Columbia
  • Total Contract Value: $5,596,786,286
  • Percentage of Total Contract Value: 99%
• Newfoundland and Labrador
  • Total Contract Value: $214,781,458
  • Percentage of Total Contract Value: 1.27%
• Nova Scotia
  • Total Contract Value: $5,053,794,436
  • Percentage of Total Contract Value: 29.79%
• Ontario
  • Total Contract Value: $3,610,687,906
  • Percentage of Total Contract Value: 21.28%
• Quebec
  • Total Contract Value: $2,466,499,644
  • Percentage of Total Contract Value: 14.54%

Project budgets and delivery dates

<h5>Vessel: Offshore Fisheries Science Vessels (OFSV)</h5>

• OFSV 1 (delivery date: June 27, 2019)
• OFSV 2 (delivery date: November 29, 2019)
• OFSV 3 (delivery date: October 9, 2020 )

Budget: $788.5 million

<h5>Vessel: Joint Support Ship (JSS)</h5>

• JSS 1 (delivery date: 2023)
• JSS 2 (delivery date: 2024)

Budget: $4.1 billion

<h5>Vessel: Offshore Oceanographic Science Vessel (OOSV)</h5>

Delivery date: 2024

Budget: Under review

<h5>Vessel: Arctic and Offshore Patrol Ship (AOPS)</h5>

• AOPS 1 (delivery date: July 31, 2020)
• AOPS 2 (delivery date: Spring 2021*)
• AOPS 3 (delivery date: Spring 2022*)
• AOPS 4 (delivery date: Winter 2023*)
• AOPS 5 (delivery date: Winter 2024*)
• AOPS 6 (delivery date: Fall 2024*)
• AOPS 7 (delivery date: Summer 2025*)
• AOPS 8 (delivery date: Spring 2026*)

AOPS 1 to 6 budget: $4.3 billion

AOPS 7 and 8 budget: $1.5 billion (estimate)

*Incorporates current estimated delays due to COVID-19. For AOPS 2 to 6, there is also a 3-month risk window in addition to these targets due to continued uncertainty surrounding the pandemic.

<h5>Vessel: Canadian Surface Combatant (CSC)</h5>

Delivery date: 15 CSCs between 2020s to 2040s

Budget: $56 to 60 billion (estimate)

<h5>Vessel: Multi-Purpose Vessel (MPV)</h5>

Delivery date: Up to 16 MPVs starting in late 2020s

Budget: $14.2 billion (estimate)

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