NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
The NSPS Experience
Presentation to the PBO
11 Dec 2012
NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
What is the NSPS?
• Establish a long-term, strategic relationship with 2
Canadian shipyards to build $33B worth of ships
– One shipyard to build the Combat Vessels Package
• Arctic / Offshore Patrol Ship, Canadian Surface Combatant
– The other to build the Non-Combat Vessels Package
• Offshore Oceanographic Science Vessel, Offshore
Fisheries Science Vessel, Polar Icebreaker, Joint Support
Ship
• Set-aside the individual projects for $2B worth of
smaller vessels for competition by other than the 2
selected yards and their affiliates
• Repair, maintenance and refit – Business as usual
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NATIONA
NATIONALSHIPBUILDING
SHIPBUILDINGPROCUREMENT
PROCUREMENTSTRATEGY
STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Economic Benefits for Canada
• The Government has recognized a once-in-a-generation
opportunity to leverage its fleet renewal investment to foster a
stronger, more sustainable Canadian marine industry.
• The Canadian Association of Defence and Security Industries
(CADSI) has estimated that the renewal of the federal fleet will
support 15,000 jobs annually in communities across Canada
over the next 30 years. (Sovereignty, Security and Prosperity – Government
Ships, May 2009)
• Canada’s marine industries are broader than the ship
construction that occurs in shipyards and involves many
hundreds of Canadian companies, most of them small and
medium enterprises.
• The Industrial and Regional Benefits Policy will ensure that the
full value of the resulting contracts (both shipyard and nonshipyard related work) is leveraged back into the Canadian
economy.
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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
NSPS Process - What Did We Do?
National Shipbuilding Procurement Strategy launched
• June 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
Finalize Umbrella Agreements with the selected shipyards
• Signed February 2012 with Irving Shipbuilding Inc and Vancouver
Shipyards
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
3rd Parties
Engaged
SOIQ
Released
Industry Day
Strategy
Announced
NSPS Timeline
Short List RFP Released
Announced
RFP Closed
Selection of
Shipyards
Umbrella
Agreements
Signed
AOPS
Ancillary Contract
Signed
JSS
Ancillary Contract
Signed
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
Jun 2010
Sep 2012
Oct - Mar
Initial Benchmarking
of Shipyards
Jul - Sep
Oct - Jan
Evaluation of
Finalization of
Proposals
Umbrella Agreements
Project Contract
Negotiations
Next Step
•
Get actual ship design / ship build contracts in place
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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
Shipyard Selection Framework
O
verall
Assessm
ent
M
andatory
Requirements
Shipyard's
CosttoCanada
S
hipyard's
Value
CurrentState
forU
pgrades
Financial
Proposition
&Plans
&Im
provem
ents
S
ituation
Basis of Selection:
The Best Overall Score from the combination of Capabilities & Improvements, Cost to
Canada, Financial Situation and Value Proposition
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Shipyard Selection Framework
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Mandatory Requirements
Mandatory Requirements grouped into 4 areas:
•
•
Administrative
–
Normal PWGSC requirements
–
Continued adherence to pre-qualification criteria used to short-list the 5 shipyards
–
Industrial Regional Benefits requirements (100%)
Legal
–
•
Related to the entity submitting the proposal
Financial
–
Minimum normal standards regarding financial capability, in line with industry practices
–
Bidder cannot be under CCAA or insolvent
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Shipyard Selection Framework
Overall
Assessm en t
S h i p y a rd 's
M andat ory
Requirem ents
C u rre n t S t a t e
& P l a ns
S h ip ya r d 's
Current S tate
Cost to Canada
S h i p y a rd 's
fo r U p g ra d e s
F i n a n ci al
& Improv ements
S i t ua t i on
V alue
P r o p o s iti
Sh ip ya rd 's
Plans
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Current State
• The Current State of a shipyard was the most
important rated element
• The weighting of Current State element in the
evaluation process reflected its importance
• First Marine International report used as the
measure of a shipyard’s Current State
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Shipyard’s Plans
• Shipyards submitted plans that proposed
capability improvements to reduce overall
costs to build ships
• Plans also identified upgrades to
infrastructure, technology or processes
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Shipyard Selection Framework
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Cost for Upgrades & Improvements
• The improvements to shipyards are normally funded via
new work projects
• Shipyards identified costs based on FMI report
• A principle of the NSPS evaluation process was to
identify these costs as discrete items and evaluate them
• The lower the cost the higher the rating
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Shipyard Selection Framework
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Shipyard’s Financial Situation
• Financial situation assessed based on:
• Financial capability (experience)
• Access to financing
• Evaluation assisted by 3rd party professionals
(PwC) who submitted assessments using
financial industry norms
• Shipyards had to demonstrate access to working
capital for first project(s)
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Shipyard Selection Framework
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Value Proposition
• The Value Proposition considers broader socioeconomic benefits
• Canada identifed a minimum commitment level of
0.5% of contract value for Value Proposition
investments within the mandatory portion of the
Shipyard Selection Framework
• At the time of contract negotiation, shipyards will
submit an Investment Plan outlining the investment
activity(s) proposed to satisfy Value Proposition
commitments for each project along the key priority
areas
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Evaluation Weighting
Overall
Score
100 points
Shipyard's
Current State and Plans
60points
Current State
36 points
Plans
24 points
Cost to Canada
for Upgrades and Improvements
20 points
Shipyard's
Financial Situation
10 points
Financial
Capability
6 points
Value Proposition
10 points
Sources of funding
for Improvements
4 points
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
Evaluation
Organization
Evaluation Review Board
PWGSC, DND, CCG, IC
Evaluation Co-Leads
DND, PWGSC
Same
Team
Members
Support
Staff
Area Team Lead
Mandatory
Administrative
Area Team Lead
Mandatory
Financial
Area Team Leads
Plans
Area Team Lead
Financial Capability
Area Team Lead
Value Proposition
Evaluation
Team
Members
Evaluation Team
Members
Evaluation Team
Members
Evaluation Team
Members
Evaluation Team
Members
Area Team Lead
Mandatory Legal
Area Team Lead
Current State
Area Team Lead
Cost to Canada
Area Team Lead
Sources of Funding for
Improvements
Evaluation Team
Members
Evaluation Team
Members
Evaluation Team
Members
Evaluation Team
Members
Reference: Evaluation Plan Figure 1
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NATIONAL SHIPBUILDING PROCUREMENT STRATEGY
STRATÉGIE NATIONALE D’APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE
NSPS RESULTS
For the combat work package:
• Irving Shipbuilding Inc. is the selected shipyard
with a score of 82.8%. Cost to Canada is $0.
For the non-combat work package:
• Vancouver Shipyards Co. Ltd. is the selected
shipyard with a score of 76.8%. Cost to
Canada is $0.
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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 to
validate process
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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
• Communications
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National Shipbuilding Procurement Strategy Secretariat
Secrétariat de la 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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