An unprecedented procurement

Canada’s shipbuilding industry is now on the cusp of resurgence thanks to the federal government’s National Shipbuilding Procurement Strategy (NSPS). Years of work went into making the NSPS a revolutionary procurement activity free from political influence or regional favouritism, one that, in the words of the third-party fairness monitor who helped oversee the NSPS, was “rigorous, fair and transparent.”

In June 2010, the government of Canada announced the NSPS, a plan to select two Canadian shipyards to build large ships for the Royal Canadian Navy and Canadian Coast Guard. It would also issue contracts for over 100 smaller ships and calls for bids on repair and maintenance worth $500 million a year. Valued at $33 billion over 20 to 30 years, the NSPS would represent the largest procurement in Canadian history when complete.

Last October, the two winning bidders were announced. Halifax’s Irving Shipbuilding will construct 21 combat vessels. These include patrol ships designed to conduct sea-borne surveillance, joint support ships and destroyers and frigates. British Columbia’s Vancouver Shipyards Company was selected to build seven non-combat vessels, including science vessels for the Canadian Coast Guard and a polar icebreaker.

“The NSPS is unprecedented in terms of what I’ve seen in procurement during the last 10 years,” says Terry Williston, a former senior public servant responsible for marine procurement who has spent the past two years advising Public Works and Government Services Canada on the NSPS.

“Usually, the government will develop its requirements internally, create a request for proposals and send that out to industry. There is very little in the way of discussion between suppliers and government at this stage,” says Williston.

“What the government did with the NSPS was start a strategic, long-term relationship with shipyards. In 2009, shipbuilders were invited to a forum and asked for their input and that dialogue became the building block of the NSPS.”

A team of marine procurement specialists was brought together to form the National Shipbuilding Procurement Strategy Secretariat. The Secretariat was answerable to a committee made up of deputy ministers from Public Works, Industry Canada, Fisheries and Oceans Canada and National Defence.

After the announcement of the NSPS in June 2010, the government met with shipyards on a monthly basis to hammer out details. What would the request for proposals look like? How would the competing firms be evaluated?

Unprecedented collaboration with suppliers wasn’t the only thing that made the NSPS unique. From the outset, it was determined that there would be no opportunity for political involvement; Minister of Public Works Rona Ambrose was only informed of the winning shipyards less than an hour before they were announced to the press and only after all bidders had already been told of the outcome. The deputy minister of Public Works announced the winning shipyards at a press conference on October 19, 2011.

To ensure the process would withstand the scrutiny of the media, politicians and industry, the government engaged several third parties to help it come to its final decision. British shipbuilding experts from First Marine International scrutinized the competing shipyards, auditors from the professional services firm KPMG helped validate the process, accounting firm PricewaterhouseCoopers combed through the competing firms’ financial data and a fairness monitor was brought onboard to oversee the process in its entirety.

“I’ve had full access to everything I’ve wanted, including meetings, emails, documents, reports and solicitations,” says Peter Woods, the fairness monitor. He adds that, of the 50 such projects he’s reviewed during his career, this process “was one of the best, if not the best.”

The government first set out to complete a good procurement process. What it found was that by engaging proponents to help shape the process, putting control in the hands of the Secretariat, using third parties extensively and building a trusting relationship with suppliers early on, it had an innovative and unique new way of doing business that was beneficial to both the government and industry.

The next phase of the NSPS saw the signing of umbrella agreements, arrangements under which the government negotiated contracts with the shipyards to build ships for each project in January 2012.

The success of the NSPS doesn’t need to end when contracts are signed. Senior management will be asking how the attributes that made the NSPS successful can be applied to other areas of public administration in the months and years ahead.

Tom Ring is the assistant deputy minister for the Acquisitions Branch at Public Works and Government Services Canada.

Author: Tom Ring from the Feb/March 2012 issue published

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