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Canadian shipbuilders decry lack of competition in NSPS

Delays in the delivery of vessels for the Royal Canadian Navy and the skyrocketing cost of buildings ships can be blamed on the shortcomings of the National Shipbuilding Procurement Strategy, according to Canadian shipbuilders.

“A shortage of shipbuilding capacity within the existing framework has resulted in an unaffordable and untenable fleet renewal program,” the Shipbuilding Association of Canada said in a statement released yesterday.

In its review of the NSPS, the Liberal government must make sure that competition is built into the procurement process, according to the association.

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The NSPS was launched by the Conservative government in 2010. The strategy was broken into three sections; the combat package, the non-combat package, and the smaller vessel package. Companies that won one of the larger ship packages were not able to bid on the smaller vessel package.

Irving Shipbuilding Inc. won the largest chunk of the NSPS when it was awarded the $26 billion contract as part of the combat vessel package. Seaspan of Vancouver got the smaller $8 billion non-combat vessel contract and Quebec’s Chartier Davie won the much smaller $587 million civilian tanker retrofit contract.

The price of the 15 warships that were to be procured for the RCN Single Class Surface Combatant Project has more than doubled from the initial $14 billion price tag to more than $30 billion, according to a report by the Canadian Broadcasting Corp. (CBC) News. This means the total cost $26.2 million approved by the government for the purchase of those 15 ships and an additional six Arctic Patrol Ships, will cost about $16 billion more and balloon to $42 billion.

“With only two shipbuilders with limited facilities, they (Conservative government) had to choose between the urgent operational requirement of either the Canadian Coast Guard or the Royal Canadian Navy – rather than look to other shipbuilders to meet the lack of capacity,” The SAC said. “Because of the delays emanating from a lack of capacity, the anticipated costs of the future program ballooned.”

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The shipbuilders said that way back in 2009, prior to the launch of the NSPS, they approached then Prime Minister Stephen Harper with a recommendation which proposed that each class of ship to be build should be matched to the corresponding shipyards that had the experience and capacity to build them. This, they said, would ensure that the government obtained the vessels they needed within the time frames they had set. Unfortunately, the government “seemingly ignored industry’s advice,” the association said.

Among the recommendation contained in the SAC’s most recent statement are:

  • Shipbuilders must be evaluated based on credible, realistic criteria such as experience, cost, schedule and labour and not primarily on promises of future capabilities, as has been the case
  • Delays and budget increases can be overcome with sourcing decisions that take advantage of Canada’s entire shipbuilding capacity and do not require extra spending
  • The current cost-plus contracting model is incentivizing over-spending and creating an unnecessary burden on the Canadian taxpayer
  • The federal fleet renewal program must create a useful, sustainable shipbuilding industry
  • The NSPS must be amended to include any Canadian shipyard capable of delivering ships to the program.

“We have thriving shipyards, both large and small,” The association said. “There is not one class of ship within the fleet renewal program that must be limited to a single source of supply due to capacity constraints. We must create competition.”

Author: Nestor Arellano

Nestor Arellano is editor of Vanguard Magazine. Nestor is a seasoned journalist who has written extensively on defence and military industry issues as well as technology and business developments. He is also associate editor of Vanguard's sister publication, IT in Canada.

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1 Comment

  1. When you can only cut the cost down by adding more competition, the realtion with you shipyards is turned sour. A lack of trust. You are forcing companies to let them fall there abuse of power. Then there is someting wrong in the company morality. Aim your arrows on their morals. Adding more kapitalism by competition isn’t the solution.

    In The Netherlands and more European countries there mostly 1 technological highest grade naval shipbuilder. We don’t have such excessive cost overruns. Merely just a few millions. Seek for the JSS Karel Doorman.

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