The RCN’s Joint Support Ship disaster

In late May, the Royal Canadian Navy paid off HMCS Protecteur, last of two remaining support ships. Built in the 1960s, the Protecteur-class was expected to be replaced by 2012. At present, the government is working with Seaspan Shipyards to begin construction on two Joint Support Ships, to be known as the Queenston class. In the interim, however, it may have to consider a commercial alternative to bridge the gap between now and when new ships enter service in 2020. Henning Jacobsen served as a consultant on the initial Joint Support Ship Program that was cancelled in 2008. He argues the program to deliver a new support ship should never have reached this point.

The Royal Canadian Navy entered the 21st century with three underway-replenishment vessels. Today, the service has none. How did we reach this unfortunate state? The history of the Joint Support Ship (JSS) replacement program is littered with missteps and might be instructive as a lesson for the future.

On 16 April 2004, then Prime Minister Paul Martin announced plans to procure three new support ships to replace the Protecteur-class of underway-replenishment vessels. This new class of ships, in addition to supporting naval operations, would perform sealift and be able to transport an army battle group – a capability Canada’s navy has lacked since the departure of the light carrier HMCS Bonaventure in 1970. The new ships would also have reinforced hulls enabling support of the soon to be developed Arctic Ocean Patrol Ships (AOPS) to facilitate operations in the Arctic Ocean. The requirement for three JSS was re-affirmed in June 2006 by the newly elected Conservative government, which summarily issued a request for proposals for a funded project definition phase.

As one of the largest navy shipbuilding contracts in the past 20 years, the RFP attracted four syndicates vying for two contracts. The two down-selected consortia were ThyssenKrupp Marine Systems Canada (TKMSC), and SNC-Lavalin (SNC); the unsuccessful bidders were Irving Shipbuilding and BAE Systems. TKMSC and SNC prepared and then submitted their respective project definition proposals in March 2008. The government announced that one bidder would be awarded the project implementation contract later that year and the first 28,000-tonne vessels would be delivered in 2012.

Murphy’s Law

The two teams were well qualified, though not without their deficiencies. SNC Lavalin, a large engineering firm, had vast expertise in project management. Though it had no experience with naval shipbuilding, it partnered with Washington Group’s Vancouver Shipyard (today known as Seaspan) and ProFac, an in-service support provider with a sound track record on previous Canadian maritime programs. Vancouver Shipyards was in turned assisted by a U.S. marine architect during the design phase.

ThyssenKrupp Marine Systems of Germany, an international naval designer and shipbuilder perhaps best known for its MEKO-class of surface combatants, built in shipyards throughout the world, often in counties with little shipbuilding experience. In Canada, it partnered with PKS Kiewit of Newfoundland, a shipyard better known for building oil rigs. At the time, more suitable partners such as Davie Shipbuilding were in bankruptcy and Irving Shipbuilding was involved in repair and overhaul of the current fleet of Canadian frigates. Though Kiewit had no naval shipbuilding experience or a suitable facility, this did not appear a problem for TKMS, which had extensive experience in providing management to shipyards in less developed countries – after 20 years without a naval building program, Canada fit this category.

The straightforward project for three underway replenishment vessels had grown into a more ambitious project. Throughout 2007 major increases in requirements emerged and the basic replenishment ship morphed into a support and troop carrier, with roll-on, roll-off capability for some 100 vehicles and 500-600 soldiers, and a command center for directing operations ashore. National Defence’s (DND) ambitions quickly outstripped the cost. The initial budget of $2.9 billion, which included a 10-year in-service support contract, was never realistic for the evolving design. Yet, to be compliant, both teams were compelled to accommodate the growing wish list.

TKMSC responded by adding Flensburger Shipbuilders, a leading designer and builder of roll-on, roll-off car ferries, as a design partner. In recognition of a potential budget shortfall, Flensburger prepared their own cost analysis and concluded that the price could be met if the department would accept three ships built to a commercial standard. DND refused to budge, suggesting that TKMSC was overstating costs. The department advised both TKMSC and SNC that Canada would not accept any cost increases for the design as it was proposed. As a result, an alternative proposal based on Flensburger’s commercial design was never offered.

In early 2007, TKMSC made a presentation to the JSS Program Office, demonstrating the difficulty in meeting the project implementation price, informing DND that the baseline budget for the program was six years out of date – in the intervening years steel prices had increased by nearly 100 percent; copper by 400 percent; and engines costs had doubled. In addition, engine delivery schedules had increased by a full year over the schedule prepared by DND in 2002.

But TKMSC’s appeal was to no avail – DND did not adjust the budget or the schedule.

By May, TKMS DE had performed a bid evaluation that resulted in a no-bid decision. But believing that Canada would either reduce the number of ships or down-scope the design requirements, senior management in the parent company gave its subsidiary approval to go ahead with a bid.

During the final DND program review in June, TKMSC again repeated its concerns about the unrealistic overall budget. It is my belief, however, that DND opted to proceed after being emphatically assured by the SNC program manager that their team could deliver the JSS at the budgeted price. It appeared to have been a spur of the moment decision by the project manager, possibly in order to gain favour with the department.

At this stage, however, Murphy’s Law took over. In February 2008, just before the proposal deadline, Vancouver Shipyards withdrew from the SNC team and the competition. The reason was reported to be schedule risks and inability to meet the budget price. It was also reported that the yard did not have a suitable facility unless the government floating dock was made available, which would have meant repair and maintenance on other naval vessels would not have been possible for the duration of the JSS program.

At about the same time, ironically, TKMSC received confirmation that Kiewit was withdrawing after revealing the true cost to modify their yard to meet the requisite naval standards. I was never told exactly how much the yard conversion was going to cost, but one could surmise that it was in the range of $500 to $600 million. Kiewit was a division of an American firm and the parent company was adamant that the yard conversion be included in the price of the program, not as a partial investment by Kiewit. It also appeared that both shipyards were facing manpower shortages and cost issues.

As a result, by March 2008 both primes found themselves without shipyard partners. SNC rushed to confirm a partnership with Davie Shipbuilding, which was now under Norwegian ownership, but in subsequent meetings with Davie management it was learned that the commitment was nonexclusive. In fact, Davie was positioning itself to be available to whoever got the JSS contract.

For reasons that were never shared with me, TKMS Germany decided to stand by its initial partner, Kiewit, and proceed by including the high capital cost in its bid. (This was apparently supported by advice from TKMSC’s Canadian partners and consultants stating that Canada would in the end find the extra money). I suspect TKMSC felt that changing horses at such a late juncture would eventually cause a credibility problem.

When SNC and TKMSC submitted their project definition proposals, their bids were reported to be $700 to $800 million over budget. Consequently, the JSS program was cancelled and the government launched a study that led to the National Shipbuilding Procurement Strategy, the outcome of which has been the selection of shipyards on the East and West coasts to build combatant vessels non-combatant vessels, respectively.

Conclusion

The political imperative in Canada is to have a stable shipbuilding industry, one that can also serve the country’s maritime defence needs in the future. It is a noteworthy objective. But how to get there is more complicated than having the political will to dole out sole source contracts.

In the first round of the joint support ship program, TKMSC had the full support of its globally experienced parent company; Vancouver Shipyards, an all Canadian yard, had assistance from some of the best U.S. naval architects to develop its proposal based on a realistic understanding of costs. Neither bidder had all the capabilities to be prime on such an ambitious multi-shipbuilding project, yet even with highly capable support both bids greatly exceeded the $2.9 billion budget.

Crucially, the backing experience to both teams, especially TKMS, meant there was a certain amount of “safety” to both bids – a large parent company that DND could “lean-on” to ensure a successful outcome. This may not be the case with the current reissued program.

 

 

Author: Henning Jacobsen

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