NSPS: A great commitment by the government to renew the fleet and build in Canada

The National Shipbuilding Procurement Strategy (NSPS) was announced in June 2010. This commitment to renew the fleet in Canada supports the sustainable development of a robust domestic marine and shipbuilding industries through a long-term approach to federal procurement. CMISA is a strong advocate of this build-in-Canada policy.

The right to negotiate but only if the terms and conditions provide best value to Canada

In the first stage of the National Shipbuilding Procurement Strategy, three shipyards were qualified following a competitive process (the ‘NSPS shipyards’). The two top scoring shipyards were selected to negotiate contracts for the construction of a total of 28 vessels. Irving Shipbuilding was selected to negotiate the build contracts of up to 21 large combatant ships and Seaspan was chosen to negotiate contracts for the build of up to 7 large non-combatant ships. These umbrella agreements are subject to change and no binding obligations exist between the government and the two shipyards selected to negotiate with. The onus remains upon the shipyards to present the best value solution for Canada. As of today, no shipbuilding contracts have been awarded. The government has delayed a significant amount of NSPS funding until it can be determined that it can be used efficiently.

The government’s budget is enough to deliver the required vessels; capacity is the issue

NSPS has not been without its problems. Initial recommendations from the Shipbuilding Association of Canada were to select three shipyards in Canada who would then compete for contracts based on ship class. This would have ensured competition remained and sufficient capacity existed to deliver all the vessels required for the set budget. Several studies looking at the costs of various ship programs indicate that the programs may not have adequate funding to meet the requirements the Navy and Coast Guard have specified under the current two shipyard build strategy. The current under capacity has resulted in delays. Given the high inflation costs in the shipbuilding sector, these delays will result in fewer vessels being delivered for the set budget. Either the government must increase the budget or increase shipbuilding capacity by opening build negotiations to all three NSPS shipyards to bring the program back on track.

The NSPS predates the Defence Procurement Strategy (DPS)

The issues with NSPS and other Major projects such as the F-35 have caused the government to initiate a government wide Defence Procurement Strategy (‘DPS’). The Defence Procurement Strategy is aimed to leverage value propositions, key industrial capabilities, industrial and technological benefits and export strategies in defence procurements. The NSPS pre-dates the DPS and as such, the current federal shipbuilding programs do very little to consider these aspects. In particular, how to leverage the programs to develop industrial and technological benefits and create an export strategy has yet to be demonstrated.