Introduction
The naval shipbuilding industry in Canada is traditionally known to experience booms and busts. There are brief periods of high-intensity shipbuilding, often followed by multiple years of neglect. As a result, people in the sector opt to work in other jobs.
Each time Canada wants to build new ships, it is forced to hire from a population that may not be familiar with shipbuilding practices. The National Shipbuilding Strategy (NSS) aims to create a competitive shipbuilding industry and jobs for Canadians (Public Services and Procurement Canada [PSPC], 2022a). The NSS has continued revitalizing the Canadian economy’s marine sector, creating job opportunities, and bringing socio-economic prosperity and benefits to communities in the nation.
Summary of the National Shipbuilding Strategy
The NSS, formerly known as the National Shipbuilding Procurement Strategy (NSPS), refers to Canada’s long-term project to revitalize the federal fleet, especially the Royal Canadian Navy (RCN) and Canadian Coast Guard (CCG). The approach is categorized into three sections, including the smaller vessel package, non-combat package, and combat package (PSPC, 2022a). Due to the stagnation of Canada’s shipbuilding sector, the government decided to support the marine industry by building vessels domestically.
Furthermore, Canada’s shipyards had become obsolete, and the country lacked access to equipment, skilled workers, and supply lines. There has been no substantial order to construct new vessels for several years. Thus, a new approach was necessary to create vessels supporting the nation’s marine industry.
The NSS focused on developing a long-term and sustainable plan that could benefit Canada’s marine industry and Canadians. Using this strategy, Canadian shipyards will be revived by constructing vessels for the Coast Guard and Navy (PSPC, 2022a). The NSS remained the most significant federal procurement in the shipbuilding industry and was designed to ensure long-term sustainability through the value proposition.
The Value Proposition
Sector Growth
The NSS Value Proposition (VP) was created to benefit Canada’s marine sector and help maintain long-term sustainability. The NSS has indirect and direct effects on Canada’s economy. The two companies that won the procurement contracts must directly invest 0.5 percent of their total contract value in three priority areas: human resources, industrial, and technology development (PSPC, 2022a).
The marine industry in Canada has outperformed the manufacturing sector from 2018 to 2020. In addition, from 2014 to 2020, the Canadian marine industry’s sales grew by 57 percent while employment increased by 46 percent (PSPC, 2022a). However, the growth is not solely related to NSS shipyards, as some of the sector’s sales and employment originate from small and medium-sized firms in Canada’s marine industry.
Canada has been awarding multi-billion-dollar contracts for several years since the inception of NSS. For example, it awarded new contracts worth $2.86 billion to domestic firms (PSPC, 2022a). Indirectly, the contracts led to the Gross Domestic Product (GDP) growth. Approximately 1.987 billion was counted towards Canada’s GDP, resulting in more than 9,284 indirect and direct jobs between 2021 and 2022 (PSPC, 2022a). Thus, Canada’s shipbuilding sector has grown tremendously since implementing the NSS, leading to increased GDP and employment opportunities for Canadians in the defense sector.
Supplier Development
Canadian suppliers have benefited from NSS since the program was started in 2010. The Canadian government awarded shipbuilding contracts to domestic suppliers such as Seaspan’s Vancouver Shipyards (VSY) and Irving Shipbuilding Inc. The two companies are legally required to subcontract their work to firms within Canada. For example, Lockheed Martin, Irving Shipbuilding Inc.’s major subcontractor, benefits financially by becoming part of the supply chain ecosystem of the shipyard (PSPC, 2022a). There are numerous opportunities for SMEs (small and medium enterprises) to provide services and goods to select shipyards and suppliers involved in shipbuilding.
SMEs can participate in small ship construction as the government prioritizes their services. Since 2012, about $976 million in contracts have been awarded to SMEs with no more than 250 employees (Public Services and Procurement Canada [PSPC], 2022b). Approximately $2.27 billion has been spent on subcontracting to provide opportunities for supplier development to 988 domestic firms (PSPC, 2022b).
The Canadian government awarded about $40.3 million to SMEs to offer services in small ship construction in 2020 (PSPC, 2022b). Zodiac Hurricane Technologies was awarded a $35 million contract to acquire thirty new boats to replace obsolete ones used by Halifax-class frigates (PSPC, 2022b). Thus, the procurement strategy promotes local firms, especially SMEs, that can supply their services or goods to main contractors.
Research and Development
NSS’s main contractors are focused on promoting research and development by funding strategic entities in Canada. Each year, the companies are obligated to collaborate with other entities to foster national research and development. For instance, ISI and VSY invest a part of their contract value in research sustainability in the marine sector. For example, ISI’s Halifax Shipyard invested $2 million in collaboration with Nunavut Arctic College (Public Services and Procurement Canada [PSPC], 2022c).
The fund would finance nine research projects focusing on critical areas of the marine industry and Arctic communities. The $2 million fund was made due to ISI’s commitment to NSS VP. The total amount for the partnership will reach $12 million before the contract expires (PSPC, 2022c). The research can enable the shipbuilding industry to develop innovative solutions to current problems in marine safety. Research and development are at the core of NSS VP; therefore, continuing the strategy will bring numerous benefits, especially in marine safety and sustainability.
Exports
A revamp of the shipyards through the NSS approach has allowed Canadian firms to develop the requisite capacity to accommodate international and domestic markets. As a result, most Canadian firms have become competitive and developed competencies that enable them to compete globally easily by building their reputation and experience. For example, New Zealand awarded Lockheed Martin, an ISI subcontractor, a contract to upgrade combat systems on its Anzac-class ships due to its track record in integration methodology in combat systems. Other companies, such as Hepburn Engineering, Ultra Electronics, AutoNav, and DRS, have used their proven domestic record in shipbuilding to pursue international opportunities (PSPC, 2022c). Therefore, the NSS has enabled Canadian firms to increase export opportunities as their capabilities improve.
Skills Development and Training
NSS’s main contractors must invest in human resources, involving skills development and training. ISI supports various professional designations and learning opportunities for team members. The specific support offered to apprentices includes mentors, a devoted apprenticeship team, and wages to support them as they join the industry. In addition, ISI’s Red Seal Trade certification develops employees with the required national knowledge to work in the marine industry.
VSY also offers different training programs that allow the firm to acquire new employees yearly. VSY’s Welding Center of Excellence trains welders and conducts recertifications. In addition, the facility contains an analysis room and a metallurgy lab for developing welding processes and technologies. VSY has also collaborated with BC Tech to promote the Digital Lift Internship Program that helps Indigenous women, mid-career workers, and rural youth gain valuable real-world experience in various industries, including the marine sector (PSPC, 2022a). Thus, through its obligation, NSS VP has helped grow local skills in Canada.
Critical Assessment of the Current Status of the Strategy
The NSS has been successful since its start; however, key issues have overshadowed the program’s progress. The renewal of the federal fleet experienced multiple delays in construction and design. As a result, only two of the four ships were delivered according to schedule, while the remaining were delivered late. In addition, some vessels were retired before their replacement was completed (Office of the Auditor General of Canada [OAG], 2020).
The NSS endeavor is complex and large, facing challenges such as timely decision-making, analysis, and communications. The NSS may be affected by inefficiencies as decision-making becomes complex due to multiple projects. Additionally, communicating the NSS complex work can be challenging for external and internal audiences. The NSS fulfilled its initial goals by renewing the federal marine fleet and creating economic growth (PSPC, 2022a). Although there are some construction delays, NSS is renewing the old fleet before or after schedule.
Conclusion
In conclusion, NSS has revived Canada’s marine industry, created jobs, and brought socio-economic benefits to the nation’s citizens. The NSS, initially known as NSPS, was started in 2010. The program’s launch has resulted in multiple benefits for Canadian businesses, people, and the economy.
Businesses have benefited from sub-contracting NSS-related jobs, resulting in job creation. Major NSS contractors have helped develop local skills by training future marine industry employees. Although NSS has faced challenges in schedules and communications, it is still effective in meeting its original goals.
References
Office of the Auditor General of Canada. (2020). Report 2 – national shipbuilding strategy. Web.
Public Services and Procurement Canada. (2022a). Canada’s national shipbuilding strategy: 2021 annual report. Web.
Public Services and Procurement Canada. (2022b). Canada’s national shipbuilding strategy: 2020 annual report. Web.
Public Services and Procurement Canada. (2022c). Generating economic benefits – national shipbuilding strategy: 2016 annual report. Web.