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 Russia 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, 8 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 the amount of contracts awarded to Chantier Davie Canada Inc.:

• From 2012 to 2023, Chantier Davie was awarded approximately $2.89 billion in contracts, or 10.86% of the value of all National Shipbuilding Strategy contracts awarded across the country, of which approximately $1.99 billion was for repair, refit and maintenance activities

If pressed on the increase in the budget for the Joint Support Ship project:

• With large-scale, long-duration procurement projects like the Joint Support Ship, all project values are best estimates that are based on the data and figures available at the time and can change over the lifespan of the project. Cost projection changes are expected, as the cost of both materials and labour evolve over the years
• In June 2024, the project obtained additional build contract authorities to complete the remaining construction and related work for both Joint Support Ships
• The increased contract value was calculated by considering a number of factors, such as lessons learned from developing a new type of warship for the Royal Canadian Navy, COVID-19 impacts that resulted in labour and supply chain disruptions, economic price adjustments, foreign exchange rate fluctuations, and changes in labour rates

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 2023 alone, the Government of Canada awarded approximately $1.88 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 2023 are estimated to contribute approximately $1.2 billion ($625 million annually) to Canada’s gross domestic product, and will create or maintain close to 5,600 jobs annually during 2023 and 2024

If pressed on the Polar Icebreakers:

• On May 6, 2021, the Government of Canada announced its intention to move forward with the construction of 2 Polar Icebreakers for the Canadian Coast Guard
• Vancouver Shipyards will engineer and construct one Polar Icebreaker while the other vessel will be engineered and constructed by Chantier Davie
• At Vancouver Shipyards, conception work on a Polar Icebreaker is advancing as part of the construction engineering and long-lead items contracts awarded in December 2022
• On September 9, 2024, the Government of Canada awarded a $16.47-million (including taxes) ancillary contract to Chantier Davie to advance work on a Polar Icebreaker

If pressed on the program icebreakers:

• On March 26, 2024, the Government of Canada announced that it has awarded a $19.6 million (including taxes) ancillary contract to Chantier Davie of Lévis, Quebec to initiate design activities for the Program Icebreakers
• The new Program Icebreakers will replace the Canadian Coast Guard’s heavy and medium icebreakers that operate in Atlantic Canada and the St. Lawrence waterways during the winter and in the Arctic during the summer
• This contract is expected to create and sustain approximately 35 jobs annually

If pressed on the Canadian International Trade Tribunal 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 a compensation settlement amount
• The parties reported back to the Tribunal that they were unable to reach an agreement, and subsequently filed submissions supporting their respective proposals. The Tribunal reserved jurisdiction in this matter and provided a ruling on the settlement amount
• On August 19, 2024, the Tribunal issued its Order and Public Reasons on the final settlement amount of $5,426,954, which represents the amount of compensation for lost opportunity to profit ($4,022,254), reasonable bid preparation costs ($1,400,000) and the amount of reasonable costs incurred preparing and proceeding with the complaint ($4,700)
• Payment instructions have been requested from the complainant and finalization of the payment is planned for end of October 2024
• The contract award remains with Ontario Shipyards (formerly Heddle Shipyards) and work continues in support of the Canadian Coast Guard’s mandate

If pressed on the Canadian Surface Combatant project:

• On June 28, 2024, the Government of Canada marked the start of construction activities on the production test module for Canada’s new Canadian Surface Combatant fleet
• The test module will allow the shipyard to develop and test project-specific build processes and establish new supply chains, as well as reduce costs by applying lessons learned to achieve efficiencies ahead of building the full ship
• As part of the definition contract, the Canadian Surface Combatant project is presently in the third of four design stages, functional design
• The Government of Canada, in collaboration with its partners, is actively developing the Canadian Surface Combatant implementation contract, which will define the terms and conditions for the construction and acceptance of the first batch of Canadian Surface Combatants

If pressed on the Government of Canada funding infrastructure enhancements at Irving Shipbuilding:

• On August 8, 2023, the Government of Canada announced an investment of $463 million (including taxes) for the first phase of infrastructure enhancements at Irving Shipbuilding
• This funding is part of a larger commitment of $871.7 million (including taxes) for all phases of infrastructure enhancements, provided to Irving Shipbuilding to ensure that they have the capability to construct the Canadian Surface Combatant design at a rate that will meet the needs of the Royal Canadian Navy
• The investment 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
• The 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 2 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 a Polar Icebreaker and Program Icebreakers for the Canadian Coast Guard, and 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.

The National Shipbuilding Strategy continues to evolve and will be strengthened by the Icebreaker Collaboration Effort Pact, an enhanced partnership announced in July 2024 between Canada, Finland, and the United States. This collaboration seeks to accelerate polar vessel production, boost the marine industries of all three nations, and enhance technical cooperation and information sharing to meet global demand for icebreakers. For Canada, the Icebreaker Collaboration Effort Pact presents new opportunities for the shipbuilding sector by leveraging shared expertise and capabilities, while ensuring that Canadian shipyards and supply chains play a key role.

• As of December 31, 2023, we have awarded approximately $26.5 billion in contracts under the National Shipbuilding Strategy to businesses across the country and, of these, $1.36 billion went to small and medium businesses with less than 250 employees
  • National Shipbuilding Strategy contracts awarded since 2012 are estimated to have contributed close to $30 billion ($2.3 billion annually) to Canada’s gross domestic product and to have created or maintained approximately 20 400 jobs annually
  • The Icebreaker Collaboration Effort Pact, announced in July 2024 between Canada, Finland, and the United States, aims at improving the collaboration on building polar icebreakers and tackling common technological and operational challenges in the Arctic. A Memorandum of Understanding is being drafted to outline the roles, responsibilities, and contributions of each country, reinforcing their commitment to enhancing Arctic operations and security