Study of Report 2, National Shipbuilding Strategy, of the 2021 Reports of the Auditor General of Canada

Table of contents

• Opening remarks for the Deputy Minister Tim Sargent
• National Shipbuilding Strategy/Fleet renewal (general)
• Office of the Auditor General’s Report on the National Shipbuilding Strategy (NSS)
• Interim measures
• Third NSS shipyard
• Polar icebreakers
• CCGS Capt. Jacques Cartier
• CCGS Hudson – refit delay

Opening remarks for the Deputy Minister Tim Sargent

• Good morning and thank you for the introduction.
• I am pleased to be here today to address the Auditor General’s report on the National Shipbuilding Strategy with Mr. Andy Smith, Deputy Commissioner, Shipbuilding and Materiel, as well as my colleagues from Public Services and Procurement Canada, Department of National Defence, and Innovation, Science and Economic Development,.
• As you know, this is the second Auditor General’s report on the Strategy and it was focused on a relatively short period of time in its implementation.
• The audit period, from January 1, 2018 to January 30, 2020, was a very exciting time for the Canadian Coast Guard during which we made significant progress with the renewal of the fleet under the National Shipbuilding Strategy.
• Two of the Coast Guard’s new Offshore Fisheries Science Vessels were delivered during the audit window, and with the delivery of the third ship in October 2020, we have taken delivery of the first class of ships completed under the National Shipbuilding Strategy.
• In March 2021, Seaspan’s Vancouver Shipyards cut steel for a fourth Coast Guard ship. This Offshore Oceanographic Science Ship will be the replacement for CCGS Hudson and is on track for delivery in 2024.
• While this milestone is acknowledged to be outside of the audit period, it serves to demonstrate the momentum that has been building for the renewal of the Coast Guard fleet.
• In 2019, the Government of Canada announced the most significant investment in Coast Guard history, with 24 new large vessels to be built under the National Shipbuilding Strategy.
• As a result, funded replacement plans were in place for 29 large ships at the time of the audit.
• One of those 29 ships was a Polar Icebreaker that was funded at the time of the audit, but did not have a procurement strategy.
• Since that time, a government investment decision has been made for a second Polar Icebreaker – bringing us to a total of 30 new large ships for the Canadian Coast Guard under the National Shipbuilding Strategy.
• In 2019, an additional $2 billion was also announced for a comprehensive Vessel Life Extension program that will take our existing fleet to the limit of their technical life expectancy.
• We are taking steps in the right direction
• As noted by the Auditor General:
  • interim measures are being implemented to sustain operational capabilities until new ships are delivered; and
  • the Coast Guard started Vessel Life Extensions for its fleet with an investment made in 2012.
• In addition, three medium icebreakers have been acquired to backfill while ships are out of service for vessel life extension work, and there is a competitive process underway to acquire a light icebreaker.
• I strongly believe that this suite of interim measures will provide sufficient on-water capability until new ships are delivered under the National Shipbuilding Strategy.
• The Auditor General noted the continuing risk of delay for shipbuilding projects and recommended that Coast Guard should implement mechanisms to:
  • Obtain, current and reliable schedules to support shipbuilding projects; and
  • Ensure scheduled targets and delivery timelines are monitored to support timely decision making.
• I welcome this recommendation and consider it to be a foundational element of both project and program management.
• Scheduled monitoring and oversight is something that we have been managing closely, with shipyards and with Public Services and Procurement Canada, and we are making progress.
• In the ten years since the National Shipbuilding Strategy was initiated, we have learned a number of important lessons and look to continuously fold those lessons into follow-on projects.
• However, even the most experienced shipbuilders will caution that the process is never without risk.
• The bottom line is that Canadians can rest assured that we will take any action necessary to maintain delivery of critical Coast Guard services.
• At the same time, we will continue to work with Public Service and Procurement Canada to ensure the timely delivery of the new ships we need to renew the fleet.
• We thank the auditor general for her recommendations and are committed to addressing them to ensure the success of both the National Shipbuilding Strategy and the renewal of the Canadian Coast Guard fleet.

National Shipbuilding Strategy/Fleet renewal (general)

• The Coast Guard continues to make progress on fleet renewal through the National Shipbuilding Strategy.
• In addition to the 24 large vessels announced in 2019, Canada has announced that two new Polar Icebreakers will be constructed for the Canadian Coast Guard.
• All three Offshore Fisheries Science Vessels have now been delivered, representing the first class of large vessels delivered through the National Shipbuilding Strategy, and construction has begun on the Offshore Oceanographic Science Vessel.
• Coast Guard is also renewing its small vessel fleet with eight Search and Rescue Lifeboats and two Channel Survey and Sounding Vessels delivered in recent years.
•  At the same time, interim measures are in place to ensure that we can continue to deliver essential services for Canadians, while the new ships are being built.

Background

•  This work aligns with the 2019 mandate letter commitment to: “work with the Minister of Public Services and Procurement on the full renewal of the Canadian Coast Guard fleet…”.
• On May, 5, 2021, Canada announced the procurement of two Polar Icebreakers to be built in Canada, with one ship being directed to Vancouver Shipyards and another ship to be directed to the third shipyard selected under the National Shipbuilding Strategy.
• Two Offshore Fisheries Science Vessels were delivered in June and November 2019. The third ship was delivered in October 2020. Construction began on the Offshore Oceanographic Science Vessel on March 29, 2021.
• On August 2, 2019, Canada announced the construction of six new Program Icebreakers.
• In May 2019, the Prime Minister announced $15.7 billion for the construction of up to 18 large vessels, including up to 16 Multi-Purpose Vessels and two Arctic and Offshore Patrol Vessels. Design of a new class of small vessels was also announced.

Office of the Auditor General’s Report on the National Shipbuilding Strategy (NSS)

• In February, we received the Office of the Auditor General of Canada’s second report on the NSS.
• We were pleased that the Auditor General recognized efforts to improve the NSS, concluding that recent key decisions put the Strategy on a more viable path.
• As noted in the report, delays have impacted the delivery of new ships. However, the Coast Guard has introduced interim measures to ensure continued program delivery.
• The Canadian Coast Guard, along with National Defence and Public Services and Procurement Canada are working together to continue to improve the oversight and management of shipbuilding projects.

Background

• On February 25, 2021, the Office of the Auditor General tabled a report regarding the National Shipbuilding Strategy, which covered the period between January 1, 2018 to January 31, 2020.
• In particular, the audit looked at whether project schedules were being maintained and whether new ships were being delivered in time to replace aging ships before they were to be retired.
• The Auditor General noted that only two of the four ships scheduled at the start of the audit period to be delivered by January 2020 were delivered – these were the first two of three Offshore Fisheries Science Vessels (OFSV) for the Canadian Coast Guard. The other two ships, the third OFSV and an Arctic and Offshore Patrol Ship for the Navy, were delivered later in 2020.
• The government has taken steps to extend the lives of its aging vessels and acquire interim capabilities to continue delivering essential services, but progress was delayed.
• The Audit provided recommendations regarding: obtaining reliable schedules to support shipbuilding projects and monitoring progress; improving the use of risk management tools; and applying lessons learned to guide the Target State process for the third NSS shipyard.

Interim measures

• We are committed to building new ships, including icebreakers, for the Coast Guard to serve Canadians into the future. 
• Until new assets can be delivered under the National Shipbuilding Strategy, the Government of Canada will take action to ensure continued service delivery.
• The Government is funding interim and supporting measures to ensure the existing fleet continues to deliver critical services until new ships are delivered.
• Three commercial icebreakers acquired in 2018, as well as a fourth “light” icebreaker, are interim measures to backfill for Coast Guard ships while they are undergoing vessel life extension work.
• Coast Guard’s use of interim measures facilitates shipbuilding in Canada, helping to sustain operational capabilities until new ships can be delivered under the National Shipbuilding Strategy. 

Background:

• Coast Guard is adopting interim measures to minimize service interruptions for clients until replacement vessels come online. This includes:
• A comprehensive Vessel Life Extension program to maintain the current fleet operational as new ships are being built;
• Acquisition of four interim icebreakers to backfill for ships while Vessel Life Extension work is undertaken; and
• Use of spot charters to provide additional capacity, as required.
• Three interim icebreakers with “medium” icebreaking capabilities: The first, CCGS Captain Molly Kool, came into service December 2018. The second, CCGS Jean Goodwill, joined the Coast Guard fleet in late 2020. Delivery  of the third ship, CCGS Vincent Massey, is expected in 2021;
• A fourth interim icebreaker with “light” icebreaking capabilities: A revised RFP was released in mid-September 2020 and closed on November 17, 2020. Bid evaluation has occurred and contract award is planned for the summer. 

Third NSS shipyard

• Canada has launched a process to add a third Canadian shipyard under the National Shipbuilding Strategy (NSS) to provide additional capacity to meet Coast Guard’s requirements for new ships.
• In 2019, it was announced that up to six new Program Icebreakers would be built by a third NSS shipyard to renew Coast Guard’s aging icebreaker fleet that operates in both northern and southern Canada.
• In May 2021, the Government of Canada announced that a Polar Icebreaker would be added to the program of work for the third shipyard.
• The first step, the Invitation to Qualify, is now complete. As announced in December 2019, Chantier Davie has pre-qualified to become the third NSS shipyard.
• The Request for Proposal process is currently underway and is expected to conclude in 2021. Once complete, negotiations will begin for a potential Umbrella Agreement with the third shipyard.

Background

• This work aligns with the 2019 mandate letter commitment to: “work with the Minister of Public Services and Procurement on the full renewal of the Canadian Coast Guard fleet…”.
• On May 5, 2021, Canada announced the procurement of two Polar Icebreakers, with one ship to be built at Vancouver Shipyards and another ship to be built at the third shipyard to be selected under the National Shipbuilding Strategy (NSS).
• The third NSS shipyard announcement is expected in 2021.  The Request for Proposal was released to Chantier Davie in late July 2020 and is expected to close in 2021. The Invitation to Qualify, the first step in adding the new shipyard, is complete and it was announced in December 2019 that Chantier Davie had pre-qualified to become the third NSS yard.
• On August 2, 2019, Canada launched the competitive process to enhance the NSS by adding a third Canadian shipyard as a strategic partner to build up to six Program Icebreakers for the Canadian Coast Guard.

Polar icebreakers

• The Coast Guard continues to make progress on building its future fleet.
• Most recently, the Government of Canada announced that two new Polar Icebreakers would be constructed for the Canadian Coast Guard.
• Both Polar Icebreakers will be built in Canada at shipyards under the National Shipbuilding Strategy.
• One Polar Icebreaker is required by 2030, to replace the High Arctic capabilities of the CCGS Louis S. St-Laurent when it retires from service.
• Once delivered, the Polar Icebreakers will strengthen Canada’s presence and sovereignty in the Arctic, and provide year-round service delivery and enhanced capabilities for Coast Guard missions, including science.

Background

• On May 5, 2021, Canada announced the procurement of two Polar Icebreakers, with one ship to be built at Vancouver Shipyards and another ship to be built at the third shipyard to be selected under the National Shipbuilding Strategy.
•  On February 28, 2020, Canada released a Request for Information seeking information on domestic shipyard capability and capacity to construct and deliver a Polar-class icebreaker. A decision has not been made yet.
• On May 22, 2019, it was announced that a long production run of 16 Multi-Purpose Vessels for the Canadian Coast Guard would replace the Polar Icebreaker in Vancouver Shipyards’ program of work.
• This work aligns with the 2019 mandate letter commitment to: “work with the Minister of Public Services and Procurement on the full renewal of the Canadian Coast Guard fleet…”.
• The Polar Icebreakers will be modern, multi-purpose icebreakers capable of year-round operations in the Canadian Arctic. These ships will become Canada’s sovereignty platform in the Arctic, and will provide enhanced capabilities for science, maritime safety, security, and environmental response services in the area.  

CCGS Capt. Jacques Cartier

• Three Offshore Fisheries Science Vessels have been built and delivered under the National Shipbuilding Strategy.
• The second of three Offshore Fisheries Science Vessels, CCGS Capt. Jacques Cartier, is in the process of completing operational trials and training missions before entering into service.
• During initial operational trials, the ship experienced software malfunctions and issues with equipment, which caused some delays to scientific missions.
• Warranty work on a newly delivered vessel is not unusual.
• CCGS Capt. Jacques Cartier has had the trawl winch bearing replaced and a cooling system cleaned and flushed, all under warranty.
• Coast Guard is working with regional science partners on the training schedule to ensure delivery of programs and services.

Background

• Three Offshore Fisheries Science Vessels have been built and delivered under the National Shipbuilding Strategy:
• CCGS Sir John Franklin, delivered June 27, 2019
• CCGS Capt. Jacques Cartier, delivered November 29, 2019
• CCGS John Cabot, delivered October 9, 2020
  
• Offshore Fisheries Science Vessels are designed to be the primary platform for fisheries science research and monitoring, helping to collect information needed for the sustainable management of Canada’s oceans and aquatic resources.
  
• Sea trials for CCGS Capt. Jacques Cartier began October 10, 2019 to test oceanographic equipment – which measure conductivity, temperature and depth, and acoustic and trawling gear on board.  Problems were found with the starboard trawl winch; it has since been repaired.
• Since then, all sea trials required for the acceptance and delivery of the CCGS Capt. Jacques Cartier were completed in October of 2019, and crew training was completed in September 2020.
• The vessel is operational and at sea training for scientists and calibration of equipment are planned for late May 2021.
• Vessel-based research missions are an important tool for gathering data and developing science advice. When science missions are impacted, Fisheries and Oceans Canada can sometimes use modeling or other data sources to help bridge data gaps. In such cases, resulting scientific uncertainty is taken into consideration in the science advice provided to support decision-making.

CCGS Hudson – refit delay

• The CCGS Hudson winter refit period began 7 December 2020 and was scheduled to end on 8 March 2021.
• The refit period end date was extended to 5 May 2021 as a result of delays caused by additional steelwork, asbestos remediation of floor tiles, and Covid impacts on contractors.
• The CCGS Hudson returned to service on 20 May 2021, following the successful completion of sea trials.
• On 21 May 2021, the CCGS Hudson experienced an issue with one of its two ship-service generators.  It is presently out of service, awaiting repairs. 
• Repairs are projected to be complete within a week at which time the vessel will return to service.  This issue is unrelated to the work performed during the refit period. 

Background

• The refit work period delays were due to the need to replace additional steel deck plating, the discovery of asbestos in cabin floor tiles that necessitated their removal, and COVID impacts on contractors and sub-contractors.
• On Friday, May 21, 2021 the CCGS Hudson was conducting equipment testing in Bedford Basin prior to departing to conduct operations at Science Station HL2 outside the Halifax traffic lanes. Prior to departing for the Atlantic Zone Off-Shelf Monitoring Program (AZOMP) cruise from its home port of Dartmouth, NS, the ship experienced a generator failure.
• Although this generator was overhauled by sub-contracted service technicians from the original equipment manufacturer during the winter refit period, early investigation indicates that the recent failure is unrelated to work performed during the refit.  
• The CCGS Hudson  is currently alongside at its home port of Dartmouth, NS.
• Once the repair work is complete, dates for the upcoming science missions will be adjusted as needed.