Harper government funded Seaspan Shipyard to help with Contract

BY MARIE-DANIELLE SMITH

OTTAWA — The former Conservative government quietly helped fund improvements for a Vancouver shipyard that was scrambling to get ready for shipbuilding, despite saying it would not do so.

Seaspan’s Vancouver Shipyards received about $40 million in 2014-15 to get its engineering systems up to speed as it prepared to build non-combat vessels for the Canadian Coast Guard, documents suggest.

But one of the premises underlying the Conservative government’s enormous National Shipbuilding Procurement Strategy (NSPS) — lauded by prime minister Stephen Harper’s government as the biggest defence program in Canadian history — is that shipyards would have to fund improvements to their shipbuilding infrastructure at no cost to Ottawa.

The existence of a government-funded program to help Seaspan, an association of western Canadian marine transportation companies, was revealed at a House of Commons committee meeting in December 2014.

Marty Muldoon, assistant deputy minister and chief financial officer at Fisheries and Oceans, told committee members $9.5 million of his department’s money was going to the “horizontal engineering program plan,” an initiative shared with the Department of National Defence.

That money was to help Seaspan “hit full stride in manufacturing capability or construction capability for our vessels,” he said.

“Basically, what we’re doing is investing in the shipyard’s capability to get itself up to capacity, to start churning out vessels.”

(Seaspan) went from a very small shipyard to a very large shipyard in a very short amount of time.

Though Public Services and Procurement Canada admits the contract is being used to help Seaspan create “material, engineering and production standards” for its yard, making systems consistent across “multiple projects,” it says this doesn’t count as the type of shipyard improvement forbidden under the agreement governing NSPS.

Jessica Kingsbury, a spokeswoman for PSPC, said this contract is “clearly distinguished” from capital investments Seaspan made to ready its yard for shipbuilding.

The horizontal engineering program plan is “in no way related to the criteria which the shipyards were required to meet, at their own cost, to achieve target-state,” she added.

Rather, it aims to co-ordinate and manage Seaspan’s non-combat package “more strategically,” through building a “program management capability.”

All three bids for NSPS contracts — from Halifax-based Irving, Seaspan and Quebec-based Davie — orginally included the guarantee that Ottawa wouldn’t pay to help the shipyards get ready for shipbuilding. Federal money would only go towards the shipbuilding projects.

But successful bidders Irving and Seaspan lacked capacity to start building ships when umbrella agreements were announced in 2011. Both negotiated to include clauses in the agreements, saying Ottawa would reimburse them for shipyard infrastructure if it decided to spend less than promised on new ships.

Irving and Seaspan also went to the provinces for money. Irving got a $304-million loan from Nova Scotia, $260 million of it forgivable, while Seaspan got only $40 million, for training from British Columbia.

No federal money was officially announced for either shipyard.

The agreement between Ottawa and Seaspan, dated Feb. 14, 2012, obtained by the National Post, says Seaspan agreed any improvements to shipyard capacity would be “paid for by the company entirely at its own expense” — unless Canada reneged on its commitments.

In November 2014, Seaspan announced a two-year, $170-million project to modernize its shipyard had finished “ahead of schedule and under-budget,” according to its website.

Still, recent job postings show it has continued hiring people to work on the “horizontal engineering program plan.”

The plan does not include improvements to physical infrastructure, but focuses on improving engineering systems, technical programs and management, says a consultant who worked for Seaspan from April to October 2014.

“It covered the whole spectrum of trying to stand up an engineering organization that was robust enough to support the overall shipbuilding objectives,” said Matt von Ruden, now director of vessels at Washington State Ferries.

Employees believed Ottawa was helping fund this work, he confirmed. “The government understood the need for this program, as far as I understand,” he said.

“(Seaspan) went from a very small shipyard to a very large shipyard in a very short amount of time.”

The fact government money was used for “systems” and “programs,” not physical infrastructure, may have made this a grey area under NSPS guidelines.

Several unusual contracts posted on the government’s Buy and Sell website from June 2014 to October 2015 appear to show money flowing into such programs.

For example, Public Services and Procurement Canada sourced just under $40 million in “engineering services” from the Vancouver shipyard.

Contracts are labelled as noncompetitive, representing the “best interests” and “value” to government. They differ from other contracts held by Seaspan, which are usually identified as being tied to a shipbuilding project.

The NSPS has an official budget of $39 billion, with $8 billion set aside for non-combat vessels.

Construction is expected to take at least 20 to 30 years, says the procurement department.

Seaspan began building the first of three offshore fisheries science vessels in June 2015 and the second in March. The three vessels, the first NSPS ships to come out of the improved Vancouver shipyard, are scheduled to be delivered by the end of 2017.

• Email: mdsmith@postmedia.com |
© Copyright (c) National Post

Project Resolve: CEO says Seaspan could Supply iAOR Cheaper/Faster

By Jonathan Whitworth,

Chief Executive Officer, Seaspan ULC

Let’s give the new Liberal government in Ottawa credit for taking a deeper dive into the reported costs associated with Canada’s search for an interim capability to support the Royal Canadian Navy’s supply ship needs in the aftermath of the unanticipated retirement of HMCS Protecteur and HMCS Preserver. This interim capability would provide a needed bridge to the greater capability of the future Joint Support Ship (JSS) to be built at Seaspan’s Vancouver Shipyard.

Notwithstanding the indignation of certain commentators from Quebec, the Davie Shipyard-controlled Shipbuilding Association of Canada (neither Seaspan nor Irving are members of this organization) and some in the media, at the heart of the issue is whether Canada will get value for the reported $750 million it would be spending on a sole-source contract with Chantier Davie. Taxpayers should expect our federal government to have confidence in the answer they give to that question and one clear way of determining best value is through a fair, open and transparent competition.

Since Seaspan’s name has found its way into media articles related to this issue over the past week, I offer facts for the public record.

– Seaspan believes in competition and are proud to have won the federal government’s competition to build the next generation of vessels for the Canadian Coast Guard and Joint Support (supply ships) for the Royal Canadian Navy (RCN) under the National Shipbuilding Procurement Strategy (NSPS).

– With no financial support from either the Province of British Columbia or the federal government we have invested $170 million of our own money to build North America’s most modern shipyard through which we have begun to produce the vessels that make up our initial inventory of work;

– The first of those vessels – the Offshore Fisheries Science Vessel for the Canadian Coast Guard – began construction in June and has 15 of 37 blocks presently under construction and is on plan;

– The engineering and planning phases are well underway on the next two classes of ships to be built in Vancouver. The Offshore Ocean Science Vessel for the Canadian Coast Guard and JSS for the Royal Canadian Navy are both benefiting from the world-class expertise that has been built at the Vancouver Shipyard under NSPS;

– This level of effort is currently providing employment to over 650 people at the Vancouver Shipyard and has resulted in contracts valued at over $321 million being awarded to some 140 Canadian suppliers. These numbers will continue to climb as our NSPS build program increases;

– Project delays that are often attributed to JSS are related to a failed procurement back in 2008 which predates NSPS and is unrelated to our current program. We are currently working to schedule and to budget with our JSS deliverables;

– We have formally expressed interest to Canada, at its request, to support the RCN’s interim capability need with a converted containership, similar to that offered by Davie but at a significantly lower price and faster, through our Victoria Shipyards. The work would be performed without compromise to our capacity at Vancouver Shipyards which will deliver JSS to Canada, in 2020;

– Seaspan’s Victoria Shipyards, and its trades-men and women, have enjoyed a very successful long-term relationship with the RCN including our delivery next summer of the fifth of five extensively refit Halifax Class frigates, each delivered to Canada on-time and on-budget. If Canada opens the interim supply ship project to best value competition, it is the Victoria Shipyard that stands ready to offer a winning, low-cost interim solution as a bridge to the much more capable Joint Support Ship.

We invite journalists and those who comment through the media to come and visit us at Seaspan, in both Vancouver and Victoria, to see with their own eyes why we are bullish on the future.