Those who cannot remember the past are

condemned to repeat it – George Santayana

Recently I suggested in another note that it was time for a National Shipbuilding Strategy (NSS) expansion – an NSS 2.0 program.

As we face significant geopolitical turmoil and leadership challenges in the West, there is talk in many quarters of moving to a wartime footing. Our Prime Mister repeatedly states that the norms of global engagement are rupturing. This conjures up a water main rupture for me, which merits immediate emergency measures. NSS 2.0 is proposed in response.

Concurrently it seems that NSS has been seen as successful by the RCN and the Canadian Coast Guard (CCG). It also has retained support more broadly in industry for its economic impacts in at least six provinces, with more than two billion dollars in domestic supplier development opportunities shared by over 700 companies (over 50% in number being small and medium enterprises) and enabling over 100 new firms to be created – these statistics reported by the government.

If we are to launch NSS 2.0, we should revisit the lessons from errors during the original National Shipbuilding Procurement Strategy (NSPS) that created NSS, and the early years of implementation.

The subject has been covered before in many papers, but I have drawn from two for this article – one by Jeffrey F. Collins and the other by me.

Urgency

NSPS was conceived in 2008 to deal with major issues in Canada’s shipbuilding capacity for large and complex ships for government fleets. Both the RCN and CCG had struggled with procurement challenges. With an urgent requirement to build many classes of ships to replace obsolescent vessels in both organizations, something had to be done.

Shipbuilding is a complex endeavour. A very high priority in launching complex procurement projects is to take the time to get the requirements well defined and a skilled execution team in place.

As Nicholas Udall said in the 1500s, “haste makes waste.” NSPS suffered somewhat from its small execution team which resulted in a few mistakes that took years to overcome in some cases. NSS 2.0 would also face such urgency and could be much more complex. If preparing for war, mistakes must be avoided. The right execution team leader with experience in complex projects plus an effective stakeholder liaison and management team would be essential. And this must be assembled now.

Transparency, Expectation Management and Clarity on Deliverables

NSPS only had one purpose: to competitively select two shipyards. There was no detailed plan beyond that because there were so many unknowns until the shipyards were selected, had upgraded their infrastructure and developed design/build plans for the initial ships to be constructed. This created a number of unforeseen challenges for Canada and the shipyards.

NSS 2.0 would be more complex than NSPS. The NSS 2.0 strategy would identify the target weapon systems and their ‘high level mandatory requirements’. However costs and schedules would not be provided as the plan launched.

Transparent regular reporting on projects within NSS 2.0 could educate and manage expectations, both of which were failures as NSPS was announced and implemented. Unfortunately communications with the public have not improved, despite being promised by the government in its 2016 annual NSS report. NSS 2.0 should prioritize improved transparency.

It is a fact that highly complex projects suffer from significant unforeseeable emerging risks. For that reason, these projects typically employ wave planning, where the detailed planning is sequentially done to reach the next planned milestone. There is a higher degree of certainty in the near future than for projected deliveries many years in the future. This should be explained as the rationale for the delay of schedule and cost information.

Governance

Unique governance was created for NSPS that focused solely on the launch of that program. This provided excellent access when needed and timely decision-making.

Since that time, the scope of the NSPS governance was dramatically expanded in 2014 by the Defence Procurement Strategy, to govern all major weapon system platform projects in monthly meetings. During my tenure which ended in 2017, I concluded that the senior governance committee had insufficient time to effectively govern so many projects. The fledgling Defence Investment Agency (DIA) is mandated to manage all projects over $100 million, which could exacerbate this concern.

NSS 2.0 should resurrect the NSPS governance approach. A related key consideration is where this program would be housed, preferably in the Department of National Defence which now has arms length responsibility for the CCG agency. However, it should report directly to the Privy Council Office to assure that the appropriate resources are applied and decisions are timely.

Prime Contractors

NSPS insisted on shipyards as the potential prime contractors, whether they were the most capable or not. In NSS 2.0, more care should be taken in selecting the prime contractor candidates for various crewed and uncrewed vessel projects.

Personnel

Success is always enabled by finding enough people with the right skills, knowledge and experience.

The NSPS team had only x personnel assigned in haste and temporarily. Although the execution team identified and briefed on the extent of these challenges in terms of blue collar workers, I underestimated the government workforce’s capabilities to implement NSPS and the shipyards’ ability to scale up their blue-collar and white-collar work forces.

NSS 2.0 could face the same issues. The assigned NSS 2.0 execution team should not shy away from pursuing contracted-in expertise to augment the government team and a national HR program to help resolve Canadian industry maritime workforce issues. Concurrently, military member involvement should be minimized to avoid disruption when they are needed for operations.

Modernizing Shipyard Facilities

Bidders for NSPS were provided an incentive to assume the cost of enhancing their facilities and processes to meet a defined ‘Target State’ of capability. Having done so, the winning shipyards required longer than had been anticipated to renovate infrastructure and purchase modern equipment, and subsequently to integrate efforts to meet the high performance bar identified. This approach underestimated the complexity involved, and failing to meet Target State milestones became one more tool for those doubting NSPS viability.

With NSS 2.0, infrastructure-driven schedule delays should be minimized by prioritizing and phasing enhancements which would be paid for with government funding – this to maximize premiums to accelerate shipyard improvements. As well, performance improvement targets should be tracked but not contractually binding.

Continuous Shipyard Employment and Cost/Schedule Estimates

Media attention in the first decade of NSPS implementation focused attention on late ship deliveries and at much higher costs than announced at project launch.

Ministers announced that shipyard employment would be continuous with no gaps between ship classes. Therefore when early ships were delivered late, all the follow-on ships became late and more costly than budgeted, because no flexibility was precluded after Ministers’ committed to continuous employment for shipyard workers. It soon became clear why such commitments are not common among allies.

Two methodologies should be adopted in NSS 2.0 to manage expectations:

  • Estimates are wildly inaccurate in shipyards globally until the first warship of a unique design is delivered. Using the initial ship’s actual cost, established learning curves can be applied more realistically to indicate delivery dates and budgets for repeat platforms. Many nations are choosing to announce these efficiency targets at two milestones: the original estimates at contract award with a very low confidence level, and high confidence level project estimates (70% or above) after first ship delivery. NSS 2.0 should use this approach.
  • While continuous employment of the shipyard workforce is attractive for many reasons, it can be both costly and damaging to reputations. Instead, it should be no more than a NSS 2.0 target aspiration with potential gaps probable; the complexity of our interconnected world of unknowns argues against certainty to support otherwise.

In a related vein, the approach to cost/schedule estimation and wave planning are among many techniques that emerged globally as NSPS was being implemented. They offer many benefits when navigating very complex warship acquisition projects. NSS 2.0 should maximize the use of these techniques to minimize the harm to outcomes, a few of which follow: prioritized requirements, nuanced definition of project success, consistently qualified reporting, structured joint-working collaboration, unique aspects of governance and leadership, generous manning of project execution teams, stakeholder management, advanced enterprise-wide risk treatment, flexible contracting and a support ecosystem for complex projects.

Politics

Much to my surprise, NSPS was largely spared from political and regional considerations before the shipyards were selected. I will admit that as a result of some confusion within the senior levels of government before NSPS was announced, an intervention was required to get the government approval in place. However, the subsequent NSPS competition was totally apolitical from everything I observed.

NSS 2.0 will be as massive a national program, but probably much more complex and involving perhaps dozens of prime contractors. Political considerations sometimes occur for lucrative government contracts. Given that the nation may be moving to a wartime footing during NSS 2.0, the government could consider guardrails to keep such interventions to a minimum – another factor supporting the previous recommendation regarding special program reporting to the Privy Council Office.

What’s Next

Over the years, there were many outstanding techniques instituted in NSS. Interested parties may find a presentation in 2019 to the Institute for Procurement and Materiel Management to be useful in pursuing NSS 2.0.

The importance of a proposed NSS 2.0 could be critical if the RCN adopts a wartime footing. NSS 2.0 could introduce a level of complexity that could rival Canada’s naval response to WWII. What must happen now is the creation of an execution team, development of potential content for NSS 2.0 and marketing of the concept to determine the level of interest.

As is always the case, the lessons learned during NSPS implementation and since in NSS were context specific. NSS 2.0 would undoubtedly face some new challenges. It is therefore prudent to consider the NSPS lessons so as to consider using the methods that worked and avoiding the mistakes that were made. To state the obvious, it could be one more no-fail mission.

The first move is that of the Commander of the RCN.