By R. Bruce Striegler
In early April, the Honourable Lynne Yelich, Minister of State for Western Economic Diversification welcomed over 400 people in Vancouver saying, “Today’s Symposium is an integral part of Western Canada’s Shipbuilding Action Plan, and is just one of the many ways we are connecting small-and medium-sized enterprises with new business opportunities. Through events like these, we are providing businesses with the information they need to take advantage of key opportunities in the shipbuilding industry.”
Western Economic Diversification expects this year’s event will build on the Shipbuilding Summit of May 2012 in Vancouver. That conference outlined opportunities, steps and procedures for small and medium-size business to provide technical, mechanical or other commercial service support to the two Canadian shipyards building $33 billion worth of new Canadian combat and non-combat vessels. The goal of this year’s meeting was to educate participants about the federal government’s defence-related procurement process, specifically for projects under the National Shipbuilding Procurement Strategy (NSPS). Those attending met with prime contractors and other stakeholders, making business connections.
Announced in October 2011, the National Shipbuilding Procurement Strategy is planned as an approximate 30-year program. Seaspan’s Vancouver Shipyards on the West Coast was selected to build seven non-combat ships; an offshore oceanographic science vessel, an offshore fisheries science vessel, a polar icebreaker and two joint Navy/Coastguard support ships. Irving Shipyards of Halifax was chosen to provide The Royal Canadian Navy between six and eight fully supported Arctic/offshore vessels capable of conducting marine surveillance of Canada’s waters as well as up to fifteen surface combat vessels.
NSPS has received both praise for its selection process and criticism for its perceived lack of vision. Former Canadian military professionals worry that the program is too little and will take too long. Their concerns appear against the backdrop of Russian plans to spend $137 billion on northern off-shore vessels by 2020 and they worry that the Canadian spending of $33 billion is comparatively insignificant. Others say NSPS is nothing more than a procurement plan with no strategic vision. This comes as scientific reports predict that Arctic waters will soon be navigable and the region’s untouched mineral resources may be up for grabs with competing sovereignty claims.
For the federal government however, NSPS is clearly a job creation plan. Government officials counter that the program, when fully implemented, will create 15,000 jobs across the country and bring more than $2 billion a year in economic benefits over the next three decades. They also say NSPS was intended to bring predictability to federal ship procurement, eliminating cycles of boom and bust within the Canadian marine industry. Andrew Saxton, M.P. for North Vancouver and Parliamentary Secretary to the President of the Treasury Board and for Western Economic Diversification, told the participants of this year’s symposium, “Our Government’s first priority is creating jobs, growth and long-term prosperity. The National Shipbuilding Procurement Strategy is supporting Canadian jobs and industries, while bolstering our economy by building ships right here in Canada.”
Briefings on the intricacies of security requirements and Industrial Regional Benefits
During the day-long symposium, federal officials outlined the mandatory security clearances that suppliers must have before their company and personnel can qualify as part of the national shipbuilding venture. The Controlled Goods Program administered by the Department of Public Works is a domestic industrial security program designed to prevent the proliferation of tactical or strategic assets including weapons, defence systems or components. The program works to prevent and detect unlawful possession or transfer of controlled goods in Canada through mandatory registration and regulation of registered businesses and individuals.
Along with the requirement of registering and having specific credentials examined under this program, suppliers or partners in the NSPS must also register and receive clearances through the Industrial Security Program (ISP). Designed to help industry participate in Government of Canada and foreign government contracts, ISP provides security screening services for contractors before entrusting them with protected, classified information and assets. Companies seeking business under the NSPS must comply with the terms of both the Controlled Goods and Industrial Security programs, and employee security screenings are required.
Companies seeking business opportunities through the national shipbuilding program may profit from the government’s Industrial and Regional Benefits (IRB) policy. The IRB policy requires major defence contractors to integrate Canadian suppliers into their global supply chains and enable direct investment into small and medium businesses with appropriate technologies or services. According to Minister Yelich, “This is why we have those players here, like Lockheed Martin who have secured contracts under NSPS and who now want to fulfil their IRB obligations. Events such as today’s symposium are an opportunity for small or medium business to meet with the prime contractors.” The value of benefits the international firms must meet through incorporating Canadian suppliers is equal to the value of the shipbuilding subcontracts awarded to them.
Seaspan and their prime partners
It’s been over two years since the selection of the shipyards to build 28 large vessels for the Royal Canadian Navy and Canadian Coast Guard. Irving Shipyards of Halifax and Seaspan’s Vancouver Shipyards are moving forward with significant yard upgrades, have finalized agreements with prime contractors, and are now seeking second tier partners, sub-contractors and suppliers.
From Seaspan, Gerald Esau, program manager offshore fisheries science vessel (OFSV) briefed the symposium audience on the first vessel the company will construct. “There will be three vessels in this series. Each will be 55 metres in length with a maximum speed of 13 knots, a range of 6000 nautical miles and will accommodate 34 persons, 21 crew plus 13 scientific personnel.” The vessel’s mission is to conduct science to understand and manage Canada’s ocean resources and marine eco-systems. “This will be accomplished through the performance of acoustic surveys, sampling fish stocks, gathering physical, chemical and other biological data from sensors installed during the ships’ construction.”
Esau says that to execute construction, Seaspan has developed an integrated program team, “Each member brings considerable expertise in their respective areas. “ STX Canada Marine Inc. has proficiency in design and production engineering. Imtech Marine Canada is a skilled platform systems integrator. Thales Canada has high level capabilities in electronic systems integration, communications and navigation. Computer Sciences Canada (CSC) will provide integrated logistics support. Mr. Esau adds that with this team, Seaspan will achieve 100 percent of the required IRB Canadian content.
Imtech will supply the ship’s platform automation, electrical solutions, electric propulsion, air conditioning and climate control systems. Imtech Marine B.V. is a global marine system integrator with over 2,600 employees worldwide and a network of 90 offices. Imtech Marine Canada has offices in Halifax and Vancouver, and Gerry Neven, Vice-President of Marketing and Sales told the symposium, “We’re looking for potential Canadian-based partners to expand our supply chain, companies that are involved in quality management programs.”
Mr. Neven introduced Imtech’s Vancouver program manager, Stefan Nieuwenhyus, saying he is presently setting up their project team and that the company would soon be sending out Requests for Information and Proposals. “We’re here to fulfill our IRB obligations and we continue to look for partners. Interested companies should register through our website.”
Another of Seaspan’s top tier partners, Thales Canada Defence and Security was represented by Gary Payne, Contracts and Industrial Benefits (offsets) Manager. He told the audience the company is the electronics systems integrator for the construction of the non-combat ships and will be bidding for the role of combat systems integrator for the ships being built by Irving. “In the industrial regional benefit world, it’s not just the direct work that counts. In a lot of cases it is indirect work that may have absolutely nothing to do with the ships, so for those companies with diverse backgrounds, this may help you find other opportunities with Thales Corporation.”
He added that small to medium-sized business may find their skills or areas of expertise could be applicable to other international projects, and marketable through Thales Netherlands operations. “These three ships in Vancouver could turn out to be 30 or 40 other ships, part of other programs, thus offering an indirect benefit to the company that gets this contract.” He continued, saying there’s an advantage to getting involved in the program and looking for other things that may not be going on the ships, advising potential partners to “get their name out there”, telling the symposium that industry websites such as the CADSI listings, Chamber of Commerce or Industry Canada are all places Thales monitors for potential partners.
Thales Canada has 1,300 employees in Quebec City, Montreal, Ottawa, Toronto and Vancouver working in the defence, aerospace and transportation markets. Sales across its operations in Canada exceeded $500 million for 2011, with a range of customers including Canadian and overseas urban rail operators, civil aviation, defence and security agencies. Thales Canada also hosts three worldwide centres of excellence which include business and regional jet flight control systems in Montreal, optical electronics in Montreal and urban rail signalling in Toronto.
Irving Shipyards selects team for Arctic Offshore Patrol Ships
Mike McAloon, Vice-President, Industrial Regional Benefits program at Irving Shipbuilding says, “We’ve been actively engaged in supplier development through forums such as this since our selection in 2011. To-date we’ve held over 19 sessions nationally and we’re happy to say we have over 1,900 people who have approached us through our supplier web portal.” He notes that a big part of Irving’s supply chain and supplier development activities has been the selection of the tier one suppliers. “Lockheed Martin and GE are among the important members of our team and will enhance how we perform for Canada. We’re proud to have them.”
Lockheed Martin Canada is responsible for command and surveillance systems integration on the NSPS ships and GE Canada is the propulsion system integrator. Others in Irving’s team include Lloyd’s Register Group as classification society, Odense Maritime Technology as marine engineering and naval architecture provider, and Fleetway Inc. as integrated logistics support provider. Other Canadian work undertaken by Lockheed Martin Canada is the modernization of the combat systems on-board the HALIFAX Class frigates. Gerhard Hones, Manager, Industrial and Regional Benefits, says, “With the large number of global locations Lockheed maintains, it can be very difficult to penetrate all those sites, but we work very hard to match up Canadian supplier requirements across the network. If you have services or products you want to try and exploit through Lockheed, please contact us, especially if you have a unique capability or a niche market application, we want to hear from you.”
Daniel Verreault, Country Director for military systems operation, GE Canada says, “We are making every effort to maximize direct Canadian content and engage small and medium business, and we satisfy IRB requirements with quality work packages.” General Electric Canada has had a presence in the country since 1892, the company does $4.8 billion in sales and has over 7,000 employees. Verreault says GE Canada was very pleased to have been selected by Irving to be the propulsion integrator for the AOPS program and now the company is into the design phase
The Arctic offshore patrol ships, of which there are between six and eight planned, have a length of 98 metres, a draft displacement of 5,874 tonnes and can accommodate 45 crew and 40 others. Machinery control and power management systems will form part of GE’s contribution to AOPS program. The GE system enables control of the ship’s electric load as well as control of the number of diesel gensets in operation to achieve optimal loading. The system also manages auto blackout recovery.
Mr. Verreault says, “We have IRB requirements, but beyond that is the question of how we get Canadian value in the supply chain in a highly competitive environment.” He explains that General Electric established a centre of excellence in Peterborough Ontario, part of the GE global network, for large electrical naval motors. “From that, we’ll develop a supply chain. We will do in Peterborough what hasn’t been done before by bringing our naval expertise for large electric motors into play in response to navies and merchant marine looking more and more at electric or diesel electric ships.” He concluded by saying that GE Canada is keen to learn who makes what, and where, keen to compete in this market.