The Conference of Defence Associations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008

Military/Naval Procurement in : A Flawed Process

By Commander (Ret’d) Ken Bowering

Currie Paper 1/08 Introduction

Commissioned as a Militia Officer in Vic- Armed with the Canada First Defence toria in 5th Regiment Canadian Garrison Artil- Strategy, insofar as funding and equipment lery, General Sir Arthur William Currie, GCMG , replacement are concerned, life should be KCB commanded 2nd Canadian Brigade which rosy for the Canadian Forces for the next 20 held the line during the first poison gas attack years (i.e., out to 2028). But cancellation of at Ypres, 1st Canadian Division at the capture of Vimy Ridge, and became the Commander of the navy’s Joint Support Ship (JSS) the Canadian Corps in June, 1917. procurement, the fact that two (of three) His greatest victory was at the Battle of qualified bidders for the Halifax Class Amiens, which German Field Marshall von Modernization (HCM) project opted out of Ludendorff described as the ”blackest day of that procurement, and the concurrent (with the German Army in the history of the war,” JSS) cancellation of the Coast Guard’s Mid- and which Field Marshall Lord Byng of Vimy de- Shore Patrol Vessel procurement, leads one to scribed as “the finest operation of the war.” believe that such may not be the case.1 The General Sir Arthur Currie Papers are Although the reasons may be selected from those presented at events organ- different for each of these setbacks, in their ized by the Conference of Defence Association own ways they each point to a procurement Institute or as “standalone” submissions to the process that does not serve the best interests CDA Institute on defence related topics, as best of the nation. There are other examples representing the innovative heritage of Sir Ar- where this process has been shown to be less thur Currie and the Canadian Corps. than satisfactory, and they’re not just with Commander Bowering’s 21 year naval ca- navy procurements as both the army and air reer included service in HMCS FRASER, NIPI- force have had their setbacks too2 - perhaps GON, YUKON, SUSSEXVALE and GATINEAU, and the most glaring being the delayed ashore in a variety of training, engineering, and acquisition of Search and Rescue Fixed Wing management postings followed by 25 years in Aircraft. Announced formally in Budget 2004, Canada’s Defence and Technology Industry sec- tors. A graduate of the University of British Co- this project has gone nowhere under two lumbia (MAS Electrical Engineering), he is a Di- separate governments. rector and National Vice-President for Maritime Given the complexity of their design Affairs of the Navy League of Canada. and construction, warship procurement is arguably the most complex procurement The General Sir Arthur Currie Papers may activity our government undertakes and, in be freely reproduced in their entirety for academic this article, we examine the process that has research or instructional or journalistic purposes been followed by the navy over the past 60 provided that the author’s and the Institute’s copy- years in acquiring most of its ships.3 In doing so, we’ll point out the flaws in the current The views expressed are those of the authors process and, hopefully, identify some steps and do not necessarily represent the views that can be taken to remedy the present of the Institute or its members. The Conference of Defence Associations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008 situation. approximately 200 people in its project management offices to oversee the project. Background The following table summarizes this 4 period of shipbuilding activity in Canada. In 1949, the – Still with prime/design agent as it was at the time – embarked on an responsibility, in the early/mid-1960s the aggressive program to replace many of its navy modernized the seven St. Laurent Class fighting ships that had been the mainstay of escorts to become helicopter- the navy during World War II. In all, from carrying and, in the mid/late- 1950 until 1965, a total of 20 modern 1960s/early-1970s, also modernized the destroyer escorts were designed, weapon systems aboard four of the constructed by a number of shipyards Restigouche Class destroyers. In the early- across the country, and commissioned into 1990s, with the first phase of the Halifax the navy in four batches, or classes. These Class (also known as the “Canadian Patrol were followed in the late-60s/early-70s with Frigate” or “CPF”) project in progress, the navy modernized the weapons and main machinery four new destroyers and, in the late-80s/ 7 mid-90s with twelve new frigates – three in the four DDH-280 Class destroyers shipbuilding projects over a span of about though, as with the CPF project, industry (but 50 years. in this instance not the shipyard) took total Table 1: Destroyer Escort/Destroyer/Frigate Shipbuilding Projects 1950-1998

Prime/Design Project Time-frame Shipyard(s) Agent Responsibility St. Laurent Halifax Shipyard (4) 1950-1957 Class (7) Davie Shipbuilding (2) Restigouche 1953-1959 MIL (Sorel) (3) Class (7) Destroyer (4) Navy Escorts Mackenzie 1958-1963 Class (4 Burrard Drydock (4)

Annapolis Victoria Machinery Depot (2) 1960-1964 Class (2) Yarrows (1)5 Destroyers Iroquois Class MIL (Sorel) (3) 1969-1973 Navy (4) Davie (1) Frigates Halifax Class St. John Shipbuilding (9) 1987-1996 Industry (12)6 MIL Davie (Lauzon) (3) system responsibility while the navy oversaw For two of these projects, the navy 8 relied upon its in-house design capabilities the project. as well as those of its contracted-out Naval With the CPF ships nearly complete Central Drawing Office, and managed what and the DDH-280s being modernized, the were, in effect, “build-to-print” construction navy embarked on another shipbuilding contracts with the shipyards. For the third project, though this time for a much smaller ship for the naval reserves – the twelve project, the entire responsibility - total 9 system responsibility - was undertaken by Maritime Coastal Defence Vessels (MCDVs). industry though the navy still had a staff of For this project SNC-Lavalin was the prime The Conference of Defence Associations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008 contractor and these ships were built by The Current Situation Halifax-Dartmouth Industries which, during the MCDV project, became part of the Irving So, what has happened since then (i.e., Shipbuilding group. Once again, total since the 1950s/60s/70s) and can we now system responsibility was undertaken by recover such that we can build on past industry as the design agent and prime successes? Hopefully, the answer to the contractor.10 second part of this question is a resounding While the 20 ship St. Laurent and “yes”, but change will be needed. follow-on classes experienced the normal Notwithstanding that government-industry challenges of complex projects, they were relationships have changed since the CPF ultimately completed successfully. Being in project, some of the factors that today impact control of the project, the navy was able to directly and/or indirectly, and/or exacerbate incorporate design changes/improvements – the shipbuilding situation are listed below: structural as well as basic features - as the ships in the different classes were built. For • The threat/capability deficiency is more example, the superstructure and the forward complex today than it was 20-30-40-50- gun and sonar equipment were changed on 60 years ago, thus forcing a more the Restigouche and Mackenzie Classes, and demanding operational requirement the Annapolis Class (the final two ships of statement that ultimately is transposed the overall project) were built with a into a technical statement of helicopter hangar deck and variable depth requirements against which the industry sonar (these two features were added to the must bid. In doing so, the navy seven St. Laurent class ships when they were sometimes defines the requirement modernized in the early/mid-60s). down to the finest detail as opposed to That said, the DDH-280, CPF, and asking for the industry’s solutions to a MCDV new construction projects were also broader capability-based requirement. successful, though the DDH-280 project was the subject of an examination of the • The navy has gone through a period government’s decision-making process,11 where its personnel, though suitably and it ultimately impacted the CPF educated and trained, are fewer in procurement. However, the fact remains numbers and, in some cases, particular that today the navy has a modern frigate/ classifications and trades have all but destroyer fleet that is as good as, or better, disappeared. For example, within than similar warships in any of the allied Maritime Engineering there are today far navies. fewer people trained as naval architects We have good ships with well-trained and constructors than there were up to crews and that fact is often reflected as the 1980s, and these are the people NATO and coalition responsibilities are who once led the conceptual studies and regularly assigned to the Canadian navy. design trade-offs. They are also the And, with the recently-announced Halifax people who once were able to Class Modernization contracts, these ships completely design our warships and will be appropriately outfitted for the manage and oversee their construction. remainder of their operational life (i.e., till A similar situation has occurred with about 2030(+/-)). civilian personnel within both the What remains as urgent are projects Department of National Defence and to replace the support ships (AORs) and the Public Works and Government Services Iroquois Class destroyers as all of these as downsizing led to early retirement of ships (three AORs and four DDHs) have now highly experienced engineers in the surpassed their design lifetime. 1990s. Younger engineers who joined DND to fill some of those vacancies The Conference of Defence Associations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008

simply do not have relevant – and budget and developed its requirements necessary – experience.12 and specifications.

• Except for the destroyer escort project • Coupled with the complicated (St. Laurent and follow-on classes), as procurement process, there are three shown above, naval shipbuilding in government departments that have key Canada occurs at infrequent intervals – roles in ship procurement – DND as the on average about 20 years between end user defines the operational and major projects. Thus, there is no technical requirements, project continuity for the shipyards and the management requirements and associated industries. In turn, this determines the budget; Public Works situation has seen a reduction in the and Government Services negotiates the number of shipyards in Canada that are contract and manages it; and, Industry able to build ships of destroyer/frigate Canada has responsibility for industrial size and larger for the navy and those and regional benefits. Thus, despite the that continue are likely not in a position fact that PWGSC is seen to have the lead, to invest in the necessary infrastructure it’s not their requirement and it’s not and workforce in anticipation of future their money and therefore no one naval projects.13 The government has department or individual can be held contributed to this shipyard accountable for problems with defence rationalization process and, under programs. In this regard Canada stands pressure from other countries, stopped out as one of the few NATO countries to subsidizing the industry several years divide various procurement functions ago.14 Alternatively, there is a national among separate departments and, if the strategic imperative in building warships government were to address and resolve though in Canada this does not seem to only this aspect of defence be fully recognized or appreciated. procurement, it would go a long way towards resolving the current crisis. • The government has introduced complex procurement processes that, • One of the principles of the from start to finish, can take 15-20 procurement process is to ensure that years to complete. These involve letters there’s adequate competition, preferably of interest that often lead to source amongst Canadian companies, a notion qualification, contracted project that is not the panacea that it might definition phases during which two appear to be. Unfortunately, the source companies (or teams) compete to qualification part of the process tends to produce a final design, then the final create a mirage of competition well “build” and “support” contracts with before all the facts are known and their onerous requirements, mandatory before the business decisions can be terms and conditions, and outdated made. This is likely what happened with industrial benefits obligations. This the Halifax Class Modernization project lengthy process, though full of good when two of three qualified (by the intentions, often leads to a distorted government) combat systems view of the indigenous shipbuilding integrators withdrew from the industry and its capabilities. It does not competition. The only good part of that identify companies or teams that are situation was that one qualified bidder suitably qualified to undertake the work, remained. It must, however, be and it is incorrectly based on the recognized that there will be occasions premise that the government always when only a single product or platform “had it right” when it stipulated its meets the military requirement. In those The Conference of Defence Associations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008

cases it should be incumbent on the navy could, once again, in effect, develop its government to make a strategic own detailed designs, have these validated decision and proceed with a sole through third party modelling and simulation, source acquisition – such as was done and return to the “build to print” form of ship for the C-17 procurement. A case in procurement. point, the government has stalled and While this approach might seem to tried to create an artificially place design risk with the navy, such risk competitive environment for the could be mitigated by having the selected replacement of fixed wing search and shipyard(s) – the ones that will actually build rescue aircraft such that the air force the ships – also undertake design validation now must try to maintain the Buffalo process as part of their contract. In addition, aircraft well beyond their intended life. the navy’s design team could act on the government’s behalf to oversee the work of A Way Ahead the shipyard thereby ensuring that the government’s requirements are being met. Some of the issues outlined above The overall effect of this approach may be beyond control and, if that’s the would be to reduce the risk to both the case, a suitable work-around must be found shipyard and the government and to speed up as the issue itself will not simply disappear. the overall procurement schedule (design On the other hand some of these issues can alternatives could be developed well ahead of be addressed and changes can be made – time and there would not be need for the without in any way diluting the overall letter of interest step or the usual project integrity of the process. definition phase).

Outsource the Design Process. Requirements.

It’s extremely unlikely that the navy The tendency today seems to be in will ever rebuild its pool of naval over specifying everything and, as a result, engineering expertise to the point it was issues that should best be left to the prior to about 1990 and, even if it could be shipbuilder are not, thus leaving the done, it might prove to be absolutely shipbuilder with little scope for coming up unaffordable and it may not be wanted in with alternatives – that is, the specification the first place. But, the navy should maintain has pre-defined the solution and in turn this the core of talent that it presently has and, determines the cost even though there may to the degree necessary, could augment this be more cost-effective alternatives, but the by outsourcing more to industry. shipyards’ hands are tied. In addition, since The approach currently used by the specifications are usually written or at least navy (i.e., contracting with naval engineering contributed to by a number of persons, there support companies) could be expanded is often variation in the detail provided in upon to include contracting with qualified different parts of the specification. This ship design firms (ideally in Canada or dilemma could also be addressed by having elsewhere if necessary) whereby one or the navy’s design team take responsibility for more companies – or perhaps a joint developing all technical specifications. venture – could be awarded a long-term And, before technical specifications contract to undertake all of the navy’s are ever issued, the navy should verify conceptual analyses and preliminary/ traceability between, and conformity with, the detailed design work – i.e., work that was operational requirement and the derived previously done in-house by naval engineers technical requirement. Another major issue is or work that is, in part, done during the the tendency for the government (operators project definition phase. In doing this, the and engineers) to stipulate hundreds if not The Conference of Defence Associations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008 thousands of mandatory requirements from amongst these five shipyards and, based without understanding that many are not on reasonable criteria, pre-select at most really mandatory and that the more there three Canadian shipyards that can be are the more difficult it is to deliver a cost- contracted to build naval ships of frigate/ effective and compliant solution. In destroyer size and larger ships, up to addition, the navy must ensure that its nominally 35,000 tonnes. Then, with design requirements are consistent with those specifications produced by the navy’s design stipulated by classification societies such as team, the government could negotiate Lloyds and by other recognized bodies such contracts with a perhaps a subset (one or two) as the International Maritime Organization. of these yards on a “right of first refusal” At the same time, the need for basis. That is, say the government wants to invoking military standards and/or military procure three ships; it goes to the first specifications needs to be given thought as shipyard and says “we want to procure three many industrial/commercial specifications ships of this design and we’re giving you the are actually better and more current than first opportunity to bid; are you interested?” their military counterpart and they often If they’re interested, the government don’t have the same high cost that is always contracts with them. If they’re not interested, associated with military standards and the government goes to the next shipyard, specifications.15 This is particularly true etc. If none of the three are interested, the when it comes to specifying requirements government goes offshore. for in-service support as invoking military specifications for logistics support probably Ship Acquisition Schedule. doubles the cost over a accepting a modern, flexible, commercial approach. When a ship is built, it will have a design life based largely on how long the hull Shipyards and Competition. should last if properly cared for. In addition, it may have a time identified for a major mid- Today, of the five major shipyards life update or modernization when many of its left in Canada (Kiewit Offshore Services systems might be replaced as well as a [formerly Marystown Shipyard] in schedule of periodic refit periods. Typically, Newfoundland, Halifax Shipyards, Davie the lifetime for Canadian naval ships has been Yards Inc. in Lauzon [formerly MIL Davie], somewhere between 35 and 40 years. Seaway Marine & Industrial Inc. in Port Weller However, studies conducted by other navies [formerly Canadian Shipbuilding and (for example, Australia, the Netherlands) have Engineering], and Washington Marine Group shown that mid-life modernization projects in Vancouver and Victoria) only three have are not cost-effective and that, for destroyer/ built ships for the navy since the end of the frigate type ships, it is best to keep them in Second World War (Halifax Shipyards, Davie operation for at most 15 years then replace Yards, and WMG) and, coincidentally, them while they still have some resale value Canada really only needs three such (to a third tier navy).16 Coupled with a shipyards to cost-effectively procure its “continuous build” concept whereby ships are naval ships. But Canada needs shipyard always being built at a rate of one or two per facilities on both coasts. Historically, most year, this would ensure that Canada always shipyards have been on the east coast but has a modern, state-of-the-art navy of 16 to adequate naval presence and naval 24 ships.17 facilities – government and commercial – are also needed on the west coast as the Asia- Government Accountability. Pacific region continues its rapid expansion. Thus, it would behove Industry It’s perhaps surprising that the Auditor Canada to undertake a source qualification General hasn’t jumped on this as an area for The Conference of Defence Associations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008 concern but the issue described earlier that responsibility for economic adjustments and three government departments are involved exchange rate fluctuations, passes the with different areas of responsibility thereby financial risk to the bidders who must also leaving no one point for accountability take responsibility for all schedule and needs to be addressed. Using Australia’s technical risk. There’s no question of sharing Defence Material Organization as a model, risk; it’s all borne by the bidders. total responsibility for defence procurement There are other cost drivers in the (including requirements, budget, terms and terms and conditions, such as: conditions, and industrial benefits) would be assigned to a to-be-created organization • Fixed price (government preference and within DND and it would report directly to often mandated) versus cost plus and the Minister. Of course, this would apply to the linkage between cost-constrained all military procurement, not just naval acquisition and life cycle costs; procurement • Liability clauses that lead to unlimited Terms and Conditions. liability on the contractor plus the potential for severe liquidated damages For several years now, the should there be any shortfall in government’s approach to stating the terms delivering industrial benefits; and conditions that apply to contracts is nothing less than archaic, dictatorial, and • Government project management confrontational, and it serves to create oversight requirements and reporting confrontation between the parties from the processes that are often excessive and, onset. In essence, the government wants with a constrained budget, sacrifice everything their way and there’s no product for process; and possibility of negotiation in order to reach a middle ground compromise. • Risk and total system responsibility is to In shipbuilding projects these terms the account of the contractor but the and conditions can run to in excess of 200 government maintains direct oversight, pages of complex terminology often design review and approval and what’s requiring (teams of) lawyers to interpret and effectively government control of the understand; many are outside a layman’s work flow. The result is that the general knowledge.18 In addition to the many contractor has all of the responsibility other onerous demands the government but the government retains all the puts on the contractor, these terms and authority. With regard to design review conditions often unrealistically demand that and approval, at least in the case of ship the bidders turn over all intellectual procurement, there is often a lack of property – whether funded by the project or clarity between the government’s role not – to the government to basically use as and that of the applicable/called up it may wish. Even giving it to competitors! classification societies. Furthermore, the government requires that bidders pass these same terms and Industrial and Regional Benefits.19 conditions on to lower tier subcontractors, in spite of the fact that, by doing so, the Liked by some and hated by others, cost just continues to rise. IRBs are a fact of life in our government The government also mandates how procurement system, but the government’s and when it will pay for the procurement approach to them is extremely short-sighted and generally, through holdbacks, requiring although there’s no question that Canada parental/bank guarantees/bid bonds, and should reap a benefit when money is spent sometimes forcing the bidder to take offshore. The Conference of Defence Associations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008

That said there are projects in which be able to be left – all of them – until after IRBs should have a strong influence in the contract award. final decision and others in which they should have no influence at all. For example, Conclusion since armoured tanks, jet fighters, and heavy lift aircraft are not designed or This article has identified some manufactured in Canada – and they probably concerns with the government’s current never will be – it makes eminent sense to procurement process and we have recently ensure that, for procurement of these seen definitive examples of its shortcomings platforms, there is a strong requirement for (e.g., Joint Support Ship). Like the rusted-out industrial benefits and perhaps even 100% is equipment that it aims to replace, the system too low. On the other hand, since we do itself has rusted out and is in dire need of have aerospace, armoured vehicle, and overhaul. Yet, there doesn’t have to be any shipbuilding industries in Canada, it makes losers if the changes are made as we’ll all no sense to penalize them with onerous IRB benefit and, in particular, our navy, indeed requirements (they are already providing the entire Canadian Forces will benefit. them!), and thus a requirement to deliver Some of the generic 65% industrial benefits with an incentive- recommendations – applicable to naval based desirable target of 100% would be procurement but also, perhaps, to air force more reasonable. and army procurement - made in this article But, the government’s IRB policy are as follows: should be there to help and encourage Canadian companies and not – as it does • industry-based navy design teams – now – ridiculously tie their hands. The fact is perhaps using a variation on the GOCO20 that procurements are now calling for 100% model; of industrial benefits, plus equitable regional and acceptable small business • tailored/consistent requirements in benefits. And, when doing this, it’s now accordance with commercial practices customary to demand that at least 60% be where possible; committed to and clearly and fully identified in the form of acceptable industrial benefits • pre-qualify Canadian shipyards and give as part of the bidder’s proposal. That means them regular work – build-to-print; that, in order to ensure at least 60% acceptable benefits, more than 60%, perhaps • government responsibility and 75% or 80%, must be identified in the accountability – to make use of the navy proposal, otherwise the proposal could be design team; deemed non-compliant. Unlike direct work on a project, • single accountability point (DND) for industrial benefits are like an investment – government procurement; an investment in the future – and, in this regard, Industry Canada, as the • continuous build – up to two ships per government’s IRB agency, should be more year – each with a 15 year operational flexible and helpful in identifying lifetime – no more mid-life refits – no opportunities for realization of benefits. In more rust-out; a perfect world there should not be any need other than the contractor’s assurance • reasonable, negotiable terms and that IRBs, in the amount committed to, will conditions with shared risk; be delivered during the agreed to timeframe. The “who, what, where, and • reduced government oversight and when” variables in the IRB equation should The Conference of Defence Asociations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008

project management requirements (let strategic commitment to shipyard the contractor do his job – ever watch recapitalization but not borne within a “Restaurant Makeover”?); and specific project and an understanding of the reality of Canadian shipyard • a more reasonable approach to IRBs. financial capabilities. In other words “use it or lose it”. In addition to the above generic recommendations, since the navy’s current • If escalation were appropriately replenishment ships (HMC Ships applied to the original $2.1 billion JSS PROTECTEUR and PRESERVER) as well as budget and with a move to commercial HMCS PROVIDER(which was de- T&Cs/project management oversight commissioned almost a decade ago) are/ with better alignment between the were well beyond their design life, these technical requirement and the three ships – as a minimum – should be operational requirement, the available replaced as soon as possible. Thus, escalated funds would come closer to although it was recently cancelled, it is delivering three joint support ships. hoped that the Joint Support Ship procurement to acquire three – preferably Yes, our procurement system is flawed four – ships will be reinstated by the new and, as we continue to delay one project and government now that they have been re- cancel another, we also stand to lose face elected. In this regard, specific comments with our allies such that, the next time we cry and observations that are applicable to the wolf, maybe no one will listen. We have the JSS project are as follows: Canada First Defence Strategy; let’s live up to it and fix the process and get the projects • Timely resolution of the JSS way back on track. ahead is essential to the Canada First Defence Strategy, the naval Endnotes requirement, and minimizing further erosion of the JSS buying power. In 1. Although it’s mentioned here, the Mid-Shore Patrol Vessel is not covered under the Canada First Defence the absence of clarity and funds Strategy and, for the HCM procurement, the one bidder already expended firms will not be that remained has since been selected for contract award. able to support project teams indefinitely. 2. The government recognizes that the system is flawed as, in its Canada First Defence Strategy, it says “These ongoing procurement reforms will further streamline the • The key issue to moving forward in contracting process and ensure that it continues to a timely manner is resolution of remain open and fair. In addition, the Government will where JSS will be built – in Canada or revise the current industrial benefit policies attached to significant procurement projects with a view to abroad. Until this is resolved, the encouraging industry to make long-term investments in government will be assessing apples Canada”. and oranges and industry will be proposing oranges and apples. 3. In this paper the term “navy” is used to refer to both the Royal Canadian Navy – as it existed – and the Maritime element of the Canadian Forces as it has • Correct the government/shipyard evolved since unification. During this evolution, it is relationship and the longer term recognized that departmental organization, commitment to build the JSS and responsibilities, and relationships – as they apply to procurement - have changed substantially. future government fleets (navy coast guard, and other) in Canada. 4. Over the same period other naval ships were built by Canadian shipyards – for example, three replenishment • The key to a different relationship ships were built, one by Davie and two by St. John Shipbuilding. In addition, several commercial shipyards will be better level loading and undertook refit and maintenance work and the naval The Conference of Defence Asociations Institute

General Sir Arthur Currie Paper 1-08 November 19, 2008

dockyards themselves undertook the modernization of John shipyard; in the 1990s another government paid to some of the ships and supported the submarines. close the yard. In addition, of the eight shipyards listed in Table 1, only four are still in business today. The other 5. Laid down and launched by Burrard Drydock in four (were) shut down several years ago. Vancouver but completed by Yarrows in Esquimalt. 14. Like several other countries, Canada at one time 6. This project was done in two 6-ship phases with provided subsidies to its shipbuilding industry. However, three of the first six ships being built by St. John while Canada ceased doing this, other countries did not Shipbuilding and three by MIL Davie – by government cease, thus reducing the competitiveness of our direction. The six ships in the second phase were all shipyards in the international marketplace. At present, built by St. John Shipbuilding. there seems to be a worldwide shortage of commercial shipbuilding capacity and, as a result, some of our 7. The prime contractor (Litton) for the DDH-280 Class shipyards – despite not being subsidized – are surviving, modernization project (TRUMP) was awarded through though not from government work. Meanwhile, our a competitive bidding process although the aerospace industry is effectively subsidized and it government directed that a particular shipyard (MIL flourishes internationally. Davie) perform the actual ship work. The flexibility demonstrated by the use of the different approaches 15. It should be noted that military standards and will be important when considering future options for specifications were introduced to help generalist military procurement practices. staff write specifications without their having to have in depth engineering/technical knowledge and expertise. 8. In this article while the “industry” is sometimes Today, with qualified engineers on staff it should not be indicated as the “prime contractor” it should not be necessary to write everything in terms of the generic construed that the “shipyard” and the “prime “cover everything” military standards and specifications contractor” are necessarily the same entity. In fact, for and then be surprised at how much it costs. the DDH-280 modernization project, the prime contractor (Litton) was not the shipyard (MIL Davie). 16. It is recognized that care must be taken with regard However, for the CPF project, the prime contractor, St. to previously-completed studies and any John Shipbuilding, was the lead shipyard. assumptions made regarding the evolution of ship systems’ architectures which could overturn their 9. When the MCDV project commenced, the shipyard – conclusions regarding the program costs of sustaining where the MCDVs were eventually built - went by the naval capabilities. name Halifax-Dartmouth Industries Limited. During the project HDIL was acquired by 17. Currently budgeted at over $3 billion, the Halifax of St. John, NB and is now known as Halifax Shipyards Class Modernization contracts – shipyard work (refits) Ltd. and combat system modernization will take place over roughly 10 years during which time Canada could 10. See note 7. As for the DDH-280 modernization (depending on the outcome of sustainability/longevity project, the MCDV prime contractor was not the studies on the DDH-280 Class) at times be left with as shipyard. few as five operational ships.

11. “The DDH 280 Program: a Case Study of 18. Teams bidding on the Joint Support Ship Project were Governmental Expenditure Decision-Making” by Jack required to submit in excess of 100,000 pages of Arsenault, in Canada’s Defence Industrial Base, David documentation. G. Haglund, ed., Kingston: Ronald P. Frye & Company, 1988, pp. 118-136, ISBN 0-919741-47-9 (“The DDH 19. See note 2. The government recognizes that the IRB Program: a model of how not to build Canada’s next process is flawed and has said that it intends to fix it warship, the CPF”, by J.W. Arsenault, Canadian Forces Command and Staff College, 1981 may shed 20. GOCO – government owned, contractor operated additional light).

12. One of the CPF project’s objectives was to develop and establish a “Canadian Centre of Excellence” for Ship Design and Systems Integration to address the developing gap between the Navy’s internal design capability and the increased cost of internal resourcing The Conference of Defence Associations within the Navy. Unfortunately the lack of continuity of 359 Kent St., Suite 502 shipbuilding programs kept this goal from being fully Ottawa, Ontario, Canada realized. K2P 0R7 Telephone : (613) 236-1252 13. This was the case before the CPF project and the government essentially recognized this by stipulating Facsimile : (613) 236-8191 the strategic industrial benefit to modernize the Saint E-mail : [email protected]