NSPS addresses September 18, 2013 CBC story with the facts about AOPS
September 2013
Response with respect to September 18, 2013 CBC story:
International Marine Consultants Ltd. (IMC) was engaged by the Arctic/Offshore Patrol Ships (AOPS) project office to conduct an Independent 3rd Party Review of the Irving Shipbuilding Inc. (ISI) Proposal to Canada which set out indicative (estimated) costs for AOPS tasked-based Definition Contract. The role of 3rd party experts is to help inform the decisions that are made by Canada. IMC commented on these indicative costs in January 2013, and the government's negotiations with ISI on Tasks 1 (Project Management) and 2 (Engineering Design Phase 1) of the Definition Contract were directly informed by IMC's observations.
In assessing IMC's observations, Canada also took into consideration that comparisons to traditional build/design processes reflected by IMC were not being used for AOPS. Indeed, as Canada has indicated on many occasions, including at a recent technical briefing in June, ISI is taking a comprehensive design, then build, approach to AOPS. The net effect is an increased cost of design in order to generate more significant savings in construction. Thus a straight comparison to earlier or other projects that have not taken this approach is not valid. A description of the definition contract is provided on the National Shipbuilding Procurement Strategy (NSPS) website.
Equally important is that this third party review was conducted in the context of a ship design exercise. In fact, ISI is being tasked to set up the capability to design and build ships for the Government of Canada over the next 30 years, which includes preparations for construction that are taking place now for use during the entire duration of the shipbuilding strategy. ISI announced in August its $300M shipyard improvement initiative, which speaks directly to the long-term view that is being taken, with the first ships, AOPS, benefitting from that approach.
Costs negotiated for Task 1, which is a firm-fixed price task, represent fair and reasonable costs for the work to be done. For Task 2, which is a cost reimbursable incentive fee task, the costs and profits are estimates only at this time.
The review of Task 2 (i.e. costs of the Design Agent, the Command and Surveillance System Integrator, etc) raised important points that are being monitored during the execution of the contract. The basis of payment for this task is time and material, in an open book environment. In fact, the entire contract with ISI is being undertaken on an open book basis. As a result, the Crown will only pay for work actually performed by ISI and its subcontractors. If the effort is actually overestimated, as suggested by the third party review, the ultimate payment for Task 2 will be less than quoted.
It should be noted that in their report, IMC provided a general comment that “Irving Shipbuilding Inc. had presented a comprehensive, high quality proposal that accurately describes the work associated with Task 1 and Task 2 of the Contract Definition Phase of this important project.”
They also stated that “the amount of resources being allocated and associated level of effort proposed should ensure that a near-optimum Build Strategy can be developed for the Implementation Phase of the Project which in turn should allow the material procurement and actual ship construction to run smoothly using the minimal number of man-hours and full utilization of the available infrastructure.”
IMC provided their opinion that this will enable the “AOPS to be built and commissioned into service in a timely manner.”
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