Question Period Note: National Shipbuilding Strategy

The National Shipbuilding Strategy is a long-term commitment to renew the vessel fleets of the Royal Canadian Navy and Canadian Coast Guard, create a sustainable marine sector, and generate economic benefits for Canadians.

Notes:

• Questions on budget, requirements, timelines, international comparisons, and project management should be directed to the Minister of Fisheries and Oceans and the Canadian Coast Guard or the Minister of National Defence
• Questions related to Canadian sanctions against Moscow should be directed to the Minister of Foreign Affairs

• The National Shipbuilding Strategy is about Canadians and Canadian businesses working together to strengthen and renew our Naval and Coast Guard fleets
  • So far, 7 large vessels and numerous small ships have been delivered, and many more are under construction across Canada
  • We will continue working closely with industry to manage costs and schedules, and ensure the best value is provided to Canadians throughout the duration of these projects

If pressed on Chantier Davie Cadana Inc.’s acquisition of Finland’s Helsinki Shipyard OY:

• On November 3, 2023, Chantier Davie announced that it had officially acquired Helsinki Shipyard Oy. This purchase was supported by funding from Investissement Québec
• The Government of Canada was not involved in the purchase and did not provide funding
• The National Shipbuilding Strategy umbrella agreement signed between the Government of Canada and Chantier Davie does not prevent the acquisition of international shipyards by Davie
• The Government of Canada remains committed to building ships in Canada as part of the National Shipbuilding Strategy. Canada will continue to work with our strategic partners to ensure that members of the Royal Canadian Navy and Canadian Coast Guard have the equipment they need to do their jobs and protect Canadians, while maximizing economic benefits for the country

If pressed on the amount of contracts awarded to Chantier Davie Canada INC.:

• From 2012 to June 30, 2023, Chantier Davie was awarded approximately $2.65 billion in contracts – or 10.49% of the value of all National Shipbuilding Strategy contracts awarded across the country, of which approximately $1.77 billion was for repair, refit and maintenance contracts

If pressed on the increase in the cost for the construction of offshore oceanographic science vessel:

• The budget for the Offshore Oceanographic Science Vessel was established in 2007, prior to the announcement of the National Shipbuilding Strategy and was never intended to represent the full construction cost of the ship. It was revised in 2009, 2016 and in 2021, and was recently increased to $1.28 billion
• In June 2023, the project obtained additional build contract authorities to reflect new and updated information related to the impacts of COVID-19 to the shipyard, higher than anticipated inflation and global supply chain challenges, a more mature vessel design, and a better understanding of production and material costs

If pressed on contract amounts:

• The National Shipbuilding Strategy is a long-term investment that is delivering results now: ships for the Royal Canadian Navy and the Canadian Coast Guard and jobs and economic growth for Canada
• Across the country, opportunities exist for Canadian shipyards and businesses to win contracts for vessel construction, repair, refit and maintenance

If pressed on economic benefits:

• The National Shipbuilding Strategy is generating economic benefits
• In 2022 alone, the Government of Canada awarded approximately $2.72 billion in new contracts to Canadian companies under the Strategy, including approximately $238.1 million to small and medium businesses with fewer than 250 full-time employees
• Contracts awarded in 2022 are estimated to contribute approximately $1.84 billion to Canada’s gross domestic product, and will create or maintain close to 8,303 jobs during 2022 and 2023

If pressed on the 3rd yard:

• Following successful negotiations, the Government of Canada signed an Umbrella Agreement on April 4, 2023, with Chantier Davie Canada Inc. and announced that it has become the third strategic shipbuilding partner, joining Irving Shipbuilding Inc. and Seaspan’s Vancouver Shipyards Co. Ltd
• The third shipyard will build 1 of 2 Polar Icebreakers and 6 Program Icebreakers for the Canadian Coast Guard, and 2 Ferries for Transport Canada
• The exact build schedules, sequence and costs will be negotiated and finalized during the individual contract negotiations

If pressed on the polar icebreaker:

• On May 6, 2021, the Government of Canada announced its intention to move forward with the construction of 2 Polar Icebreakers
• Vancouver Shipyards will engineer and construct one Polar Icebreaker while the other vessel will be engineered and constructed at Chantier Davie

If pressed on the Canadian International Trade Tribunal (CITT) and Federal Court challenges to the award of the CCGS Terry Fox vessel life extension contract:

• The Government of Canada recognizes the decision of the Canadian International Trade Tribunal
• The Tribunal asked that the parties make best efforts to negotiate and report back to it by November 21, 2023, on the outcome of discussions regarding bid preparation costs, the amount of compensation for lost opportunity and litigation costs
• The contract award remains with Heddle Shipyards and work continues in support of the Canadian Coast Guard’s mandate

If pressed on government funding of $463M in infrastructure upgrades at Irving Shipbuilding:

• On August 8, 2023, the Government of Canada announced an investment in the Canadian Surface Combatant project’s infrastructure at Irving Shipbuilding
• Public Services and Procurement Canada, on behalf of the Department of National Defence, amended the Definition Contract with Irving Shipbuilding for an additional $463 million (including taxes) for the Canadian Surface Combatant project
• This investment will initiate enhancements at the shipyard that will enable the production and delivery of the Canadian Surface Combatant ships at the pace required to replace the ageing Halifax-Class ships and meet the needs of the Royal Canadian Navy while delivering the best value for Canadians
• These infrastructure enhancements were identified during the design phase and adopt specific accommodations identified by Australia and the United Kingdom in the construction of their ships that are based on the same design

The National Shipbuilding Strategy is a long-term plan to renew the Royal Canadian Navy and Canadian Coast Guard fleets. It aims to eliminate the boom and bust cycles of vessel procurement that have slowed Canadian shipbuilding in the past.

In 2011, following a competitive, fair, open and transparent process, the government established long-term strategic relationships for the construction of large vessels with two Canadian shipyards: Irving Shipbuilding in Halifax, Nova Scotia, for the construction of combat vessels, and Vancouver Shipyards in British Columbia for the construction of non-combat vessels.

Following successful negotiations, the Government of Canada signed an Umbrella Agreement on April 4, 2023 with Chantier Davie. Chantier Davie will build 1 of 2 Polar Icebreakers and 6 Program Icebreakers for the Canadian Coast Guard, and 2 Ferries for Transport Canada.

All Canadian shipyards across the country, except the three strategic shipyards, can compete to win contracts for small vessel construction, whereas all Canadian shipyards can compete for repair, refit and maintenance contracts.

Original budgets for large vessel construction projects were set many years ago and were guided by limited experience and projections. Shipbuilding is highly complex and we continue to build on lessons learned to ensure future project budget and timeline projections are realistic and achievable. We continue to work closely with the shipyards and industry to address ongoing challenges including cost, time estimates and productivity.

• As of June 30, 2023, we have awarded approximately $25.27 billion in contracts under the National Shipbuilding Strategy to businesses across the country and, of these, $1.31 billion went to small businesses with less than 250 employees
  • National Shipbuilding Strategy contracts awarded between 2012 and 2022 are estimated to have contributed close to $25 billion ($2.1 billion annually) to Canada’s gross domestic product, and created or maintained approximately 18,800 jobs annually between 2012 and 2023