NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
National Shipbuilding
Procurement Strategy
Status Update
October 2012
NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
The Environment
• Over the next 30 years, Canada will need to renew
the Royal Canadian Navy and Coast Guard fleets to
ensure operations can continue in all of Canada’s
waters, including the Arctic.
• Canadian Shipbuilding Policy states that the
Government will procure, repair and refit vessels in
Canada subject to operational requirements and the
continued existence of a competitive domestic
marketplace.
• Canada’s previous approach to building ships was
project-by-project with no long term strategy resulting
in a “boom” and “bust” cycle.
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
What is NSPS?
Developing
the Strategy
Selecting the
Shipyards
Establishing
the
Relationship
Preparing the
Yards &
Finalizing the
Designs
Constructing
the Ships
The Strategy was developed and is being implemented to:
• Recognize the strategic importance of a strong domestic
shipbuilding industry
• Support the industry’s sustainable development through
a long-term approach to federal procurement
• Ensure that Canada’s needs for large vessels can be
met in a timely and affordable manner
• Seek long-term benefits over short-term fixes
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Developing the Strategy
• Canada launched broad consultations with
industry during summer 2009 to inform the
strategy development
• Industry expressed a high level of support for
the development of a long-term strategy
• Most respondents supported establishing a
strategic relationship with two shipyards to
build all large ships
• Culminated in June 3, 2010 announcement
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Elements of NSPS
1. Select 2 Canadian shipyards to build
Canada’s large vessels, one to build
Combat Vessels and the other Non-Combat
Vessels
2. Compete smaller vessels procurements
amongst Canadian shipyards other than the
2 selected yards and their affiliates
3. Repair, maintenance and refit – Business as
usual; competitive procurements
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Selecting the Shipyard
NSPS Industry Day for Canadian shipyards
interested in building large ships
• August 2010
Issue of the Solicitation of Interest and
Qualification to all Canadian shipyards
• September 2010
Issue of the Request for Proposals to
qualified bidders
• Issued Feb 7, 2011, Closed July 21, 2011
Evaluation of Proposals received from the
bidders
• Selection announced October 19, 2011
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Successful Attributes
• Engagement
• Leadership /
Governance /
Decision-Making
• Use of Independent
Third Parties
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Engagement
• Extensive consultation with bidders took place
on the concept, the requirements and the
evaluation process and criteria
• The procurement process was driven by
transparency and collaboration
• Pro-active communication throughout the
procurement process
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Governance
• No Political Involvement
• Deputy Ministers’ Governance Committee made key
decisions in an open and transparent manner
• Unique dispute avoidance and issue resolution
processes
– Used the governance structure to resolve issues
– No lobbyists
– No legal disputes or challenges of the process or the results
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Use of 3rd Parties
• Internationally recognized experts were engaged to:
– Monitor Fairness
– Assess Capability and Performance Benchmarking
– Provide Expert Advice
– Assess Financial Proposals
• Third parties:
– Attended governance meetings to answer DM & ADM
questions directly
– Provided written attestations that processes, actions and
decisions were fair, reasonable and prudent
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Other Attributes
• Simplified Solicitation of
Interest & Qualification
• Value Proposition
• Umbrella Agreements
• Keeping the results
secret until the
shipyards were
informed
• Communications
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
The New Approach to Procurement
• Listen to those with a stake in the process - clients and suppliers in equal
measure
– Suppliers often have valuable ideas about how to efficiently supply the
government with what it needs
• Adopt a governance or decision-making process that allows for real
business choices to be made by both clients and procurement staff with
direct input from suppliers
– Make sure there is a robust issue resolution process to address any concerns
and manage risks in a timely manner
• Seek advice and input from those who are knowledgeable or expert but
do not have a stake in the process
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Establishing the Relationships
• Long-term nature of the strategic
relationships demanded a strong foundation
• Canada and the two selected shipyards
signed Umbrella Agreements in February
2012
• The Umbrella Agreements are long-term
strategic sourcing agreements that contain
the framework for business and relationship
management
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Preparing the Yards &
Finalizing the Designs
• In order to build the ships efficiently the yards need to
modernize their infrastructure
– An independent 3rd party expert has defined the required Target
State and will assess the shipyard’s progress in attaining it
– Infrastructure upgrades are being done at no cost to Canada
• Initial ships in both Combat and Non-Combat packages have
designs that must be finalized for production of the vessels
– Shipyards need to review and finalize designs
– Consultations with shipyards have lead to the decision to proceed
on a “Design then Build” approach
• No design work done yet for Canadian Surface Combatants
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
A Phased Approach to
Shipbuilding Contracts
• Contracting with shipyards to build ships will generally take place in three
phases:
– Ancillary contracts – understand the requirement and the initial design
– Production / Construction Engineering contracts – mature the design so
it is ready to be built
– Construction contracts to build the ships
• The establishment of the timelines for the phases is part of the negotiations
with the shipyards
• The phased approach provides less risk and will improve the efficiency of
the shipbuilding process
• Procurement strategy for the design, development and integration of the
Canadian Surface Combatant will be determined following industry
engagement
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Benefits of “Design then Build”
• Collaborative/Iterative understanding of requirements
• Furthering ship Design to Production Level Drawings before
Construction Contract
• Design/Cost Tradeoffs before Construction Contract
• Simulation & Modeling to attain cost fidelity before Construction
Contract
• Risk mitigation & appropriate risk sharing
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Ship Construction Contracts
• These contracts will be:
– Negotiated in accordance with the rules established in
the Umbrella Agreements
– Subject to separate Government approval
– Used by the shipyard to deliver the value proposition
commitments and capability improvement
commitments of the Umbrella Agreements
• Current plans show construction of first NonCombat ship (Offshore Fisheries Science
Vessels) beginning in 2013 and the first Combat
ship (Arctic/Offshore Patrol Vessels) beginning in
2015
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Opportunities for
Broader Marine Industry
Combat Systems
Auxiliaries
Hull
Outfit and Furnishing
Propulsion and Electrical
• Warship construction provides work to a broad spectrum of the marine industry, much
of it high tech
• Shipyards need to bring along partners / suppliers to increase the Canadian
participation in projects
• Equipment represents a significant portion of the ship construction cost, thus suppliers
will play an important role
• Components sourced offshore will be matched dollar for dollar by IRBs
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Current Status Summary
• Shipyards have:
– Hired senior staff including engineers, managers and production specialists
– Progressed with their plans to improve their physical facilities
• Canada has:
– Been actively maturing its ship requirements
– Reviewing its processes to ensure momentum is maintained
– Been in continuous communications with the shipyards on the way ahead
– Hosted supplier engagement events across the country to introduce
companies to the shipyards
• The Broader Marine Industry is
– Participating in supplier engagement events
– Preparing for supplier and sub-contracting opportunities
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Continuing Industry Engagement
• Canada continues to recognize the value of
early engagement with industry before
decisions are made
• Upcoming industry engagements this fall will
include:
– Canadian Surface Combatants
• Strategy for warship design, development and integration
– In Service Support for AOPS & JSS
– Small Ship requirement – DND Large Tugs
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Conclusion
• We are 1 year into a 30 year program
• Much has been accomplished
• The shipbuilding process is complex
– Need to get designs and production details right
BEFORE cutting steel
– Need to work with shipyards to ensure they are
ready to build ships efficiently and to avoid boom
and bust
• We’re on track to replace Canada’s large
ships
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