Shipbuilding

On June 3, 2010 the Government of Canada announced the National Shipbuilding Procurement Strategy, a long-term plan that would create good jobs in high-tech industries across Canada and provide ships for the Canadian Navy and the Canadian Coast Guard. Davie had largely been passed over by the federal government's multi-billion-dollar National Shipbuilding Strategy, with most of the work going instead to Halifax-based Irving Shipyards and Vancouver-based Seaspan Marine. Davie and the Quebec government both began demanding more federal work for the shipbuilder after it laid off 800 workers at its shipyard in Levis late in 2017.

The Honourable Rona Ambrose, Minister of Public Works and Government Services and Minister for Status of Women, made the announcement together with the Honourable Peter MacKay, Minister of National Defence, the Honourable Gail Shea, Minister of Fisheries and Oceans, and the Honourable Denis Lebel, Minister of State (Economic Development Agency of Canada for the Regions of Quebec). "Our Government made the decision to support the Canadian marine industry, to revitalize Canadian shipyards and to build ships for the Navy and Coast Guard here in Canada," said Minister Ambrose. "The Strategy will bring predictability to federal ship procurement and eliminate cycles of boom and bust, providing benefits to the entire marine industry."

The Strategy, which was developed after consultations with industry stakeholders, encompasses three streams - large ship construction, small ship construction, and repair, refit and maintenance projects. The government would establish a long-term strategic relationship with two Canadian shipyards for the procurement of the large ships - one to build combat vessels, the other to build non-combat vessels. The selection of the two shipyards would be done in a competitive, fair, open and transparent manner. A fairness monitor and independent third party experts would participate in the process. The construction of smaller ships would be set aside for competitive procurement among other Canadian shipyards. The repair, refit and maintenance of ships in the Government fleet would continue to be sourced through competitive tendering.

The Strategy promotes the regional distribution of work and opportunities to shipyards across the country. Shipyards that are selected to build the combat and non-combat packages would have to subcontract vast amounts of work to the broader marine industry and suppliers of this industry. Subcontracting in any of the three streams encompassed by the Strategy would be of notable benefit small and medium enterprises.

"This strategic relationship with Canadian shipyards will help us deliver on our commitment to the Canada First Defence Strategy, and enable us to provide our Navy with the modern ships they need to defend Canada's interests at home and abroad," said Minister MacKay. "We are proud to support Canada's new shipbuilding strategy because it will create jobs and help stimulate our country's economy" said Minister Shea. "It will also give Canada's Coast Guard the tools it needs to do its job."

"The Strategy is about undertaking major ship procurements in a smarter, more effective way - a way that sustains Canadian jobs, strengthens the marine sector, and provides best value for Canadian taxpayers," said Minister Lebel. The Government of Canada is committed to getting the best value for Canadian taxpayers. Under the Strategy, shipbuilding projects that are similar in nature will be grouped together to reduce production costs. This type of strategic sourcing would create the conditions for the effective and efficient delivery and support of the federal fleet over the long term.

Two shipyards would be selected to build the large vessels (1000 tonnes displacement or more), through a fair, transparent and competitive process. This selection process, led by Public Works and Government Services Canada (PWGSC), would consider the experience, capability, and performance of the shipyards. It would result in the signing of formal agreements establishing a long-term relationship between each yard and the Government of Canada. The negotiation and signing of umbrella agreements with the successful shipyards is expected to occur in the 2011-2012 timeframe.

One shipyard would be selected to build combat vessels. This would enable the procurement of the Canadian Surface Combatant (CSC) and Arctic/Offshore Patrol Ships (AOPS). The surface combatant project would renew the Navy's surface fleet by replacing various warfare capabilities of the destroyers (Iroquois-class) and multi-role patrol frigate (Halifax-class) ships. The primary tasks of the Arctic ships would be to: conduct sea-borne surveillance operations in Canada's Economic Exclusion Zones (EEZs), including the Arctic; provide awareness of activities and events to various departments; and cooperate with other elements of the Canadian Forces and other federal government departments to assert and enforce Canadian sovereignty, whenever and wherever necessary.

Another competitively selected shipyard would build non-combat vessels, such as the Joint Support Ships (JSS). The capabilities required of these ships are crucial to the Canadian Forces. The Joint Support Ship increases the range and sustainment of a Naval Task Group , permitting it to remain at sea for significant periods of time without going alongside for replenishment. These vessels would also provide capacity for sealift and support to troops ashore.

Shipyards among those not selected for the building of large vessels may be engaged in the building and support (maintenance, refit, and repair) of the approximately 100 smaller vessels included within the strategy. Maintenance, refit, and repair of the Navy's fleet represent some $500 million annually.

On October 11, 2010, the results of a Solicitation of Interest and Qualification process to build large vessels for Canada under the National Shipbuilding Procurement Strategy (NSPS) were announced. Five Canadian shipyards had been short-listed to build these large vessels. They are:

• Davie Yards Inc., Lévis, QC
• Irving Shipbuilding Inc., Saint John, NB
• Vancouver Shipyards Co. Ltd., North Vancouver, BC
• Kiewit Offshore Services - a division of Peter Kiewit Infrastructure Co., Milton, ON
• Seaway Marine & Industrial Inc., St. Catharines, ON

In order to ensure that the selection of the two shipyards is being done in a competitive, fair, open and transparent manner - a fairness monitor is participating in the selection process and an internationally recognized third-party expert would benchmark the capability and performance of the short-listed Canadian shipyards. The third-party expert is First Marine International (FMI).

On March 9, 2011, the five short-listed Canadian shipyards invited to submit bids in connection with the National Shipbuilding Procurement Strategy Request for Proposal received their final First Marine International (FMI) reports. FMI is an independent third-party retained by the National Shipbuilding Procurement Strategy Secretariat to assess the capability and benchmark the performance of the short-listed shipyards.

Tim Colton's Oct 12/10 Maritime Memos offers a blunt assessment: "Well now, Davie is bankrupt (for about the tenth time since WWII); Kiewit (that's Marystown Shipyard, in Newfoundland) is much too small, and Seaway Marine (that's the old Port Weller Dry Dock, in St. Catherines ON) is a repair yard these days and hasn't actually built a complete ship since 1992. So, bearing in mind the obvious political desirability of selecting one yard in the east and one in the west, we seem to be left with Irving Shipbuilding and Vancouver Shipyards. Given that Irving has a track record of building surface combatants and Vancouver doesn't, it seems to be what I believe is called a no-brainer to divide the work accordingly. Now watch while they take about a year to come to that conclusion."

A study by the Canadian Association of Defence and Security Industries (CADSI) entitled Sovereignty, Security and Prosperity: Government Ships - Designed, Built and Supported by Canadian Industry notes that the majority of Canada's shipyards had not received any government orders for new construction since the 1980s, with the last major Canadian Coast Guard program, and as a result several yards had either shut down or converted their business to more generalized industrial pursuits as part of an industry-led, government-supported shipyard rationalization program.

Large ships contributing to the federal fleet are derived primarily from two sources: Department of National Defence and Canadian Coast Guard. In determining the list of ships that would comprise the federal fleet, each of the aforementioned departments were queried on their large ship fleet renewal forecasts for the 30 years 2010-2040. In total, more than fifty ships with a displacement over 1,000 tonnes are forecast.

Canada is a maritime nation with the longest coastline of any country in the world. The Canadian shipbuilding and industrial marine industry is diversified in its product and market focus. It includes firms with specialized capabilities in manufacturing and repairing ships, building oil and gas rigs, and supplying related equipment, technologies and services.

It was during the first seventy-five years of the nineteenth century that the building of wooden ships in Canada reached its largest proportions. The centers at which the industry flourished were Quebec city and various points in the Maritime Provinces, especially Moncton, Pictou, St John and the Miramichi ports, lying on rivers down which large quantities of timber could be floated. But timber was not the only requisite for establishing the industry upon a prosperous basis. Shipbuilding flourishes best under a seafaring people.

In the early years of the 19th century the products of Canada's farms, mines and factories were not sufficient to provide the traffic necessary for the employment of a large ocean tonnage, and consequently did not hold out encouragement for the establishment of a shipbuilding industry on a large scale. But, while the wealth of the country's mines and lands was still hardly developed, the forest provided a readily available article of commerce, and the early inhabitants addressed themselves with a will to the initial task of clearing the land of its trees and selling the timber, the chief market for which lay across the Atlantic Ocean in Great Britain.

The forests of Canada, therefore, not only furnished the material from which ships were constructed, but also the goods which made the shipbuilding industry economically profitable. A large number of the ships built in Canada were used in the timber trade, and when, in the course of time, the shipbuilders increased the output of their yards beyond the needs of the Canadian timber merchants, few ships were sent to England for sale that did not carry cargoes of timber on their maiden voyages across the Atlantic.

Colonial-built ships were not popular in England, principally because they were not built of oak. Canadian shipbuilders endeavoured to cater to the English demand, and for a while built a number of vessels of Canadian oak, but this wood was far inferior to the English oak, being affected with dry rot after being in use for a comparatively few years. The builders were therefore compelled to return to the use of tamarac, or hackmatac as it was then often called. This wood, although strong, was much lighter than oak, and ships built of it, on account of their buoyancy, could carry heavier cargoes than those of the same dimensions built of oak. It was a soft wood, nevertheless, and there was a long and tiresome period of waiting before the builders of Quebec and of the Maritime Provinces could secure due recognition for their vessels by the insurance underwriters.

From a variety of unexpected conditions, new and vigorous life was given to Canadian shipbuilding. Gold had been discovered in California and in Australia, and in the late forties and early fifties the rush of gold-seekers to these places created an unprecedented demand for fast-sailing vessels. The outbreak of the Crimean War gave employment to colonial vessels as transport ships, and the conclusion with the United States of an agreement for reciprocal free trade opened up a new market for the Quebec builders.

Few of the builders, despite the favorable reputation their work enjoyed, were financially successful. This was because most of them worked on borrowed capital and their profits were eaten up by interest and commissions. Most of the Quebec shipbuilders were poor men.

The increasing use of iron for shipbuilding purposes sounded the knell of the Canadian industry. The Rainbow, the first iron-hulled ocean-going vessel, was launched at Liverpool, England, in 1838, and from that time iron gradually ousted wood from its place in shipbuilding. The Great Britain, an iron vessel which lay stranded for eleven months on the coast of Ireland in 1846-47 without serious damage, amply demonstrated the superiority of the metal hull, and underwriters soon evinced a decided preference for it. It was found too that iron ships, on account of their greater durability, were much cheaper in the long run than those built of wood. With suitable wood growing scarcer and dearer and with the strong competition of iron, and, later, of steel ships, Canadian builders found their businesses becoming more and more unprofitable, and by the early 1880 most of them had engaged in more remunerative pursuits.

Splendid opportunities for steel shipbuilding presented themselves in Nova Scotia, where coal and iron were to be had in close proximity. The first steel vessel of any size constructed in New Glasgow, which is in the heart of a coal and iron district, was a steamer of about 300 tons, built in 1893. The shipbuilding companies in Canada felt most keenly the competition of British-built ships. There was a heavy duty on most of the material imported- for construction work from Great Britain and the United States. So the growth of Canadian shipbuilding and shipping had not kept pace with the general growth and progress of the country.

A revival of this industry occurred as a result of war activities. It is estimated that the total tonnage of vessels launched in Canadian shipbuilding vards during 1918 was about 400,000 tons dead weight. Of this, 28 steel and 45 wooden ships, with a tonnage of 253,463 dead weight, were for the Imperial Munitions Board. The tonnage delivered was valued at $37,156,972. In the autumn of the year the French Government contracted in Canada for 50 wooden ships valued at $21,000,000. Following the Great War, the outlook for Canadian shipbuilding was less rosy. Unless the Government came to the rescue with orders - which was problematical - a number of shipyards were compelled to close their doors, especially on the Great Lakes.

During the 1920's and most of the 1930's, the Royal Canadian Navy was reduced drastically. When Canada declared war on Germany in September 1939, the RCN consisted of 6 destroyers, 5 minesweepers, 2 training vessels and fewer than 2000 officers and men. Therefore, the RCN immediately embarked on a rapid expansion program, commissioning 6 American destroyers on lend lease to Britain, and reactivating the Canadian shipbuilding industry.

During the Second World War, Canada had demonstrated its ability to build warships and to produce complex electronic and other equipment, based on designs and technical guidance provided from the Royal Navy. Once the war was over, however, the Canadian government made substantial cuts in resources allocated to the military. By late 1947, the Canadian navy had only eight ships left in commission. Plans for renewed naval shipbuilding were soon under way with a recommendation for construction of four fast ocean escort vessels and four smaller minesweeping and coastal escort ships.

Since World War II, most ships of the Canadian Navy had been built in Canadian shipyards. However, because Canadian naval vessels tend tobe built in batches rather than in a steady state fashion, and with gaps of up to 25 years between projects, this trend sends the industry through boom and bust cycles which only exacerbates the issues of capacity, not to mention the significant costs associated with re-activating the industry each time new platforms are approved.

The modern Canadian shipbuilding and repair industry consists of shipyards located in several parts of Canada, capable of building a wide range of vessels of up to 85 000 deadweight tons (DWT). The shipbuilding and repair industry is in a strategic position to capture upcoming opportunities. Canadian shipyards had built ferries, fishing vessels, offshore supply vessels, lakers, cargo ships and offshore drilling platforms. They had designed and produced sophisticated naval ships and icebreakers. They are successfully building luxury yachts for the world market and had carved out a niche in ship repair and overhaul. To do so, they had to innovate, invest in modern technology and manufacturing processes and now produce highquality products for sophisticated buyers, competitively and on time.

As the shipbuilding and industrial marine industry moves toward higher value and more sophisticated segments of the market, the quality of the equipment that goes into a new vessel is increasingly important. Offshore oil platforms require tremendous technological resources and expertise for their conceptual design, construction and operation. They are part of complex, high-tech and highvalue-added projects involving all segments of the industry. As a result,the shipbuilding and industrial marine industry generates a considerable demand for electronic navigational devices, communication equipment, radar and sonar, marine robotics, sub-sea vehicles, imaging equipment and marine applications programming. The equipment manufacturers are an integral and essential part of the industrial marine sector and ensure its competitiveness.

As in many western countries, the decade of the 1990s was a difficult one for the Canadian shipbuilding industry. Canadian shipyards e had to adjust to a shrinking domestic market, reduced government procurement and adapt to an internationaln market characterized by overcapacity and market-distorting trade practices. As a result, despite growing global demand, the Canadian industry experienced a long-term decline during the 1990s. Between 1990 and 2000, valueadded in the shipbuilding industry fell at an average annual rate of almost 9 percent per year. In 2000, real value-added in the shipbuilding industry amounted to $264 million, representing only 1 percent of the total value-added in the transportation equipment sector, down from 4.4 percent in 1990. The shipbuildingindustry employed about 4 700 workers - 1.8 percent of the total work force engaged in the transportation equipment industry, compared with 5.4 percent in 1990.

By 2010 the Government had not placed any new substantial build orders for ships since the mid-1990s. The national shipbuilding capacity, once enhanced by the construction of the Canadian Patrol Frigates and Maritime Coastal Defence Vessels, had substantially eroded. Several Canadian shipyards had either closed or converted to more generalized industrial pursuits. The erosion of Canada's shipbuilding capacity, combined with worldwide increases in shipbuilding costs, could severely hinder Canada's ability to build complex ships cost-effectively, resulting in delays to federal fleet renewal.