National Shipbuilding Procurement Strategy (NSPS)

National NATIONAL Shipbuilding SHIPBUILDING Procurement PROCUREMENT Strategy STRATEGY Secretariat Secrétariat STRATÉGIE de NATIONALE la stratégie D APPROVISIONNEMENT nationale d approvisionnement EN MATIÈRE en matière DE CONSTRUCTION de construction NAVALE navale Environment it has been 14 years since the last major warship was launched in Canada. The 38-year-old, 5,100-tonne destroyer HMCS Iroquois will soon be the oldest frontline warship in the western world. (Gen. Walter Natynczyk, Chief of Defense Staff) 78% of the Canadian Coast Guard s large vessels exceed their designed operational life, its youngest large vessels are over 20 years old and the oldest is over 45 years old Canada s shipbuilding industry was not well positioned to deliver on our ambitious shipbuilding objectives 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 A number of unsuccessful shipbuilding solicitations underlined the issues arising from this ad hoc approach 2

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d approvisionnement en matière de construction navale Major Canadian Shipyards Vancouver Shipyards Vancouver, British Columbia Kiewit Offshore Services Marystown, Newfoundland Davie Yards Inc. Lévis, Québec Seaway Marine & Industrial Inc. St. Catharines, Ontario Irving Shipbuilding Inc. Halifax, Nova Scotia 3

National NATIONAL Shipbuilding SHIPBUILDING Procurement PROCUREMENT Strategy STRATEGY Secretariat Secrétariat STRATÉGIE de NATIONALE la stratégie D APPROVISIONNEMENT nationale d approvisionnement EN MATIÈRE en matière DE CONSTRUCTION de construction NAVALE navale National Shipbuilding Procurement Strategy 1. Establish a long-term strategic relationship with two Canadian shipyards and designate them as source of supply to build government s large ships, where: One shipyard will build the combat vessels package: Arctic offshore patrol ship, Canadian surface combatant The other will build the non-combat vessels package: Offshore oceanographic science vessel, offshore fisheries science vessel, polar icebreaker, joint support ship 2. Set aside smaller vessels for competition by other than the two selected yards and their affiliates 3. Repair, maintenance and refit remains business as usual 4

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d approvisionnement en matière de construction navale Smaller Vessels Set aside designed to allow for the distribution of benefits to the greatest extent possible At this time only a notional list of future small ship requirements is available (116 vessels, $2B worth of work) It is not Canada s intention to bundle the small ships into a single package but rather to conduct open competitions on a project by project basis when requirements arise Canada does not have a policy restricting the regional area of competitive shipbuilding requirements Companies should monitor the Government Electronic Tendering System (GETS) at www.merx.com.

National NATIONAL Shipbuilding SHIPBUILDING Procurement PROCUREMENT Strategy STRATEGY Secretariat Secrétariat STRATÉGIE de NATIONALE la stratégie D APPROVISIONNEMENT nationale d approvisionnement EN MATIÈRE en matière DE CONSTRUCTION de construction NAVALE navale Economic Opportunity A once-in-a-generation opportunity to leverage Canada s fleet renewal investment to foster a stronger, more sustainable Canadian marine industry The renewal of the federal fleet will support 15,000 jobs annually in communities across Canada over the next 30 years (CADSI - Sovereignty, Security and Prosperity Government Ships, May 2009) The Industrial and Regional Benefits Policy will ensure that the full value of the resulting contracts (both shipyard and non-shipyard related work) is leveraged back into the Canadian economy In exchange for long term, predictable federal shipbuilding work, shipyards to make investments that contribute to the competitiveness, viability and health of the marine sector over the long term 6

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d approvisionnement en matière de construction navale Opportunities for Broader Marine Industry Combat Systems Auxiliaries Outfit and Furnishing Hull 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 Modern shipbuilding is an assembly process involving hundreds of thousands of individually prefabricated parts and equipment with a long, multi-tiered supply chain

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d approvisionnement en matière de construction navale Value Proposition a new initiative specific to the NSPS, separate and distinct from Industrial and Regional Benefits (IRB) obligations requires shipyards, in exchange for long term, predictable federal shipbuilding work, to make investments that contribute to the competitiveness, viability and health of the marine sector over the long term. Shipyard must spend, as a Value Proposition obligation, 0.5% of the Contract Price in Value Proposition priority areas, funded at its own expense Investments to be focused in three Key Priority Areas: HR Development - Efforts could include development and support to apprenticeship programs, investments in developing programs at community colleges etc. Technology Investment - Efforts could include in-house research and development, support to both private and public research institutions etc. Industrial Development - Efforts could include further integration of Canadian suppliers (SMEs) within supply chains, supporting efforts such as the development of technology clusters through private sector leadership and government facilitation, etc. 8

National NATIONAL Shipbuilding SHIPBUILDING Procurement PROCUREMENT Strategy STRATEGY Secretariat Secrétariat STRATÉGIE de NATIONALE la stratégie D APPROVISIONNEMENT nationale d approvisionnement EN MATIÈRE en matière DE CONSTRUCTION de construction NAVALE navale NSPS Process - What Did We Do A national competition to select 2 Canadian shipyards: Issue a Solicitation of Interest and Qualification to all Canadian shipyards to establish a short list of potential shipyards for the competitive RFP (Sept 2010) Issue a Request for Proposals to the short-listed shipyards (Issued Feb 7, 2011, Closed July 21, 2011) Five Proposals from 3 Bidders: 2 Combat, 3 Non-Combat Evaluation of Proposals and select 2 shipyards (Selection announced October 19, 2012) Finalize an Umbrella Agreement with each selected shipyard (Signed February 2012) Negotiate Contracts for the first project in each work package 9

NATIONAL SHIPBUILDING PROCUREMENT STRATEGY STRATÉGIE NATIONALE D APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE Engagement NSPS Attributes Regular meetings with stakeholders Canada in lead, but listen mode Stakeholders contribute to development of RFPs, evaluation criteria and methodology and procurement schedule Leadership, Governance & Decision-Making Arms-length from political considerations Dispute resolution process in place Timely, key decisions made openly and transparently by committee of DMs and communicated instantly on the website Use of Reputable 3 rd Parties To validate processes and provide credibility 10

Canadian Values National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d approvisionnement en matière de construction navale How NSPS addressed challenges Governance Engagement Transparency Clarifying roles and responsibilities Improving industry/client relationship + + = Consultation sessions Industry days Independent Third Parties By : By : By : Innovative interdepartmental governance structure Robust dispute resolution process NSPS Secretariat supporting the governance Use of fairness monitor Third party assessments from independent experts Creation of the NSPS website Innovative and outcome based procurement, meeting client needs, while respecting socio-economic objectives and best value for Canadians. Timeliness 11

NATIONAL SHIPBUILDING PROCUREMENT STRATEGY STRATÉGIE NATIONALE D APPROVISIONNEMENT EN MATIÈRE DE CONSTRUCTION NAVALE NSPS Winner - Public Policy Environment Overwhelming positive commentary on the process and the results from media, industry associations, parliamentarians, academia and international observers Restored public confidence in government procurement and the federal bureaucracy as a whole Provided a blueprint for future major procurements Keeping the process at arms-length from politicians was lauded The web site provided up to date and detailed communications with the public and media and eliminated time-wasting rumours and information power-brokers Maintaining the security / secrecy of the results until the formal announcement was unprecedented 12

National NATIONAL Shipbuilding SHIPBUILDING Procurement PROCUREMENT Strategy STRATEGY Secretariat Secrétariat STRATÉGIE de NATIONALE la stratégie D APPROVISIONNEMENT nationale d approvisionnement EN MATIÈRE en matière DE CONSTRUCTION de construction NAVALE navale NSPS Process Feedback We strongly support the government s decision to build its naval and coast guard fleets in Canada and to manage their production in a way that mitigates the boom-and-bust cycles normally associated with ship fleet construction. Canadian Association of Defence and Security Industries (CADSI) It s a great day, I can t remember a day like this in the industry and I ve been in it a long, long time. Shipyard General Workers Federation Beyond the benefits for the winning companies and their workers, the shipbuilding contracts will have profound benefits for the entire economy, coast-to-coast. We congratulate the government on a fair and transparent process that will maximize opportunity for participation and growth throughout all regions of Canada to address the subject matter. Canadian Manufacturers and Exporters (CME) "That's competition for you. And in this case no one can complain that the competition for the contracts was unfair." Yves-Thomas Dorval of Quebec's Conseil du patronat 13

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d approvisionnement en matière de construction navale 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 dispute-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 These three simple attributes, applied with judgement, will allow Canada to buy smarter, achieve better results, save taxpayers money, expand Canadian business and other, yet-to-be determined positive outcomes 15

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d approvisionnement en matière de construction navale Questions?