OTTAWA – A report on the National Shipbuilding Procurement Strategy (NSPS) has just been released by the Rideau Institute and the Canadian Centre for Policy Alternatives.
Blank Cheque: National Shipbuilding Procurement Strategy puts Canadians at Risk was written by University of British Columbia political science professor Michael Byers and defence analyst Stewart Webb (a visiting research fellow at the Rideau Institute and research associate at the Canadian Centre for Policy Alternatives).
In 2010, the Harper government committed itself to reinvigorating Canada’s shipbuilding industry. The NSPS, estimated to cost $35 billion, aims to procure new ships for the Royal Canadian Navy and for the Canadian Coast Guard. The Auditor General recently estimated the full life-cycle cost of the NSPS at $105 billion, though his report did not re-examine the government’s estimate on acquisition costs.
In their report, Professor Byers and Mr. Webb examine the structure of the NSPS – and find that it is seriously flawed.
The Harper government made a serious mistake by confining the only truly competitive portion of the NSPS to the choice of shipyards, both of which are now, effectively, also in the position of “prime contractor”. The two shipyards are therefore free to select and contract the “system integrators” which coordinate various aspects of the procurement, including the selection and acquisition of sensor, weapon, communication, and propulsion systems – without any competitive process that involves the government or ensures a fair price, or Canadian jobs.
This approach to shipbuilding is unusual. In most NATO countries, a naval procurement begins with the definition of requirements, followed by the setting of a budget, and only then by the competitive selection of a prime contractor. As a result of that approach not being followed, and the largely uncompetitive and unsupervised process of sub-contracting by the shipyards, the NSPS is already showing signs of mismanagement and overspending. This may well lead to lower quality, less capable, and perhaps fewer vessels. It might even lead to the outright cancellation of the NSPS.
The authors make the following recommendations:
- The Canadian government should initiate a competitive process to select prime contractors for the shipbuilding projects. The powers allocated under the umbrella agreement with Irving Shipbuilding enable this change.
- The Canadian government should engage the prime contractors for the shipbuilding projects on a fixed-price basis, with detailed statements of requirements for the ships and their systems spelled out in advance.
- The Canadian government should build stringent penalties for delays or substandard work into the contracts.
“The Canadian government and the shipbuilding industry has not had a major procurement strategy like this since the Second World War,” said Stewart Webb. “We are not calling for the government to reverse course on the procurement strategy. But we are calling for it to alter course – and introduce much more competition and accountability – before another procurement disaster unfolds.”
For more information contact Kerri-Anne Finn, CCPA Senior Communications Officer, at 613-563-1341 x306.