Frequently asked questions on the National Shipbuilding Strategy

1. In terms of timelines, is the strategy where it should be?

Yes. The shipyards had to make significant investments in their infrastructure before the vessels could be built. Irving Shipbuilding Inc. and Seaspan's Vancouver Shipyards Co. Ltd. have together invested more than $500 million in capital infrastructure improvements to their facilities, at no cost to the Government of Canada, to create the capacity needed to build Canada's vessels in an efficient and effective manner. These financial commitments, which have now been made, will allow the shipyards to renew the fleets of the Royal Canadian Navy and Canadian Coast Guard and to reduce the federal spending required to ensure that Canada's fleet is built at home.

Also, we are using a "design-then-build" approach for each ship, which allows us to confirm the details and costs to produce the vessels before full construction begins. This approach is less risky, more efficient and ensures best value for Canadians.

Construction began in June 2015, at the Vancouver Shipyards for the first non-combat project, and in September 2015, at the Halifax Shipyard for the first combat project.

2. What is the difference in cost between building the vessels in Canada versus building them elsewhere?

Canada's approach to renewing its fleet is about more than building ships. By building these ships here in Canada, we are re-establishing an industry, supporting Canadian technological innovation and bringing jobs and prosperity to many communities across the country. We are also ending the shipbuilding boom and bust cycle that has previously existed in Canada.

The strategy will continue to create well-paying Canadian jobs, to foster skills development efforts, and to support the Canadian marine industry as a whole. While the shipyards are responsible for establishing their required supply chains they are motivated to use Canadian suppliers through the application of the Industrial Regional Benefits/Industrial and Technological Benefits policies. It is estimated that the strategy's large vessel component alone will contribute nearly $4.4 billion to the gross domestic product and create or maintain up to 5,500 jobs per year between 2012 and 2022Footnote 1.

It is very difficult to compare the cost of a vessel built in Canada with a similar one built offshore (assuming such a similar ship can be identified). This comparison is complicated by the necessity of taking into consideration country-specific variables such as labour, material and equipment costs, timing of the build (inflation, shipbuilding market, commodity pricing, etc.), number of ships produced and government investments/subsidies (direct and indirect). The number of variables involved make any such comparison very challenging.

3. Why are shipyards allowed to subcontract to foreign companies?

It is important to use the most suitable technologies available, while achieving best value for Canadian tax payers. For example, certain technologies may not be competed or sourced in Canada particularly if there is a need for interoperability with other fleet assets and with our North Atlantic Treaty Organization (NATO) allies.

Two Government of Canada policies—the Industrial and Regional Benefits Policy and the Industrial and Technological Benefits Policy—ensure that Canadian industry benefits from Canada's defence and security purchases.

Under the Industrial and Regional Benefits policy, Irving Shipbuilding and Seaspan's Vancouver Shipyards, together with their major suppliers, must undertake business activities in Canada valued at 100% of the contract awarded by the Government of Canada. These investments involve work performed in Canada by Canadians to build the vessels under contract. They also include high-value investments to support the growth of other sectors of the Canadian economy.

Learn more about the progress of all policy obligations, including for National Shipbuilding Strategy contracts:

  1. Industrial and Regional Benefits
  2. Industrial and Technological Benefits

4. Why did the government select two shipyards instead of spreading the work across three or more shipyards?

Industry endorsed the two-package option when it was consulted in 2009. Under this option, one shipyard would build the large combat vessels and the other shipyard would build the large non-combat vessels.

5. Will there be any work opportunities for other shipyards, small and medium enterprises and the broader marine industry to become involved with the National Shipbuilding Strategy?

Yes. They will have the opportunity to:

6. What is the Horizontal Engineering Program Plan and how is it used?

The non-combat work package requires integrated planning and coordination across several shipbuilding projects for different types of vessels for both the Canadian Coast Guard and the Royal Canadian Navy. The Horizontal Engineering Program Plan (HEPP) is a task-based services contract designed to deliver program-wide services related to the non-combat work package. The HEPP provides early engineering and program work to maximize efficiencies for all vessels built by Seaspan's Vancouver Shipyards Co. Ltd. For example, the program will allow for the development of piping and welding standards used across the fleets of ships being built. The HEPP will increase shipbuilding efficiency and maximize benefits to taxpayers.

7. Does the Horizontal Engineering Program Plan contract undermine the overall National Shipbuilding Strategy selection process?

No. The work under the HEPP contract is in line with the National Shipbuilding Strategy (NSS) shipyard selection process. The HEPP contract does not include any infrastructure capital investments made by the shipyard. Capital investments were made at zero cost to Canada in accordance with the terms of the shipyard's bid for the NSS Request for Proposal, the Umbrella Agreement and related contracts.

The selection process for the NSS was competitive, and was overseen by a fairness monitor. According to the fairness monitor, the decisions were made objectively, free from personal favouritism and political influence, and encompassed the elements of openness, competitiveness, transparency and compliance.

The Auditor General also concluded that the NSS shipyard selection process was successful and efficient, independent of political influence and carried in an open and transparent manner.

8. When was the Horizontal Engineering Program Plan contract issued?

On April 14, 2014, the Government of Canada awarded the contract to Seaspan's Vancouver Shipyards Co. Ltd. for the HEPP. Several amendments were made to the HEPP contract to reflect specific tasks. The last amendment was entered into by the parties on October 19, 2015.