NAVAL PROJECTS ON REVIEW

(Volume 24-03)

By David Pugliese

Maritime systems and naval equipment will be front and centre at CANSEC 2017 as the Canadian government’s massive military shipbuilding program continues to dominate defence procurement.

CANSEC 2017 will be held this year on May 31 and June 1 at its usual location at the EY Centre, near Ottawa’s international airport.

Some of the top maritime equipment providers and shipbuilders — from Saab to DCNS to Atlas Elektronik — will be highlighted at the trade exhibit.

Fuelling much of the interest will be the Canadian Surface Combatant (CSC) program.

The project to purchase new future warships for the Royal Canadian Navy is in a critical year. Requests for proposals will be submitted this year from a series of pre-approved firms. The 12 pre-approved bidders are:

• Alion-JJMA Corp.
• Atlas Elektronik GmbH
• BAE Systems Surface Ships Limited
• DCNS SA
• Fincantieri S.p.A. Naval Vessels Business Unit
• Lockheed Martin Canada
• Navantia SA
• Odense Maritime Technology
• Saab Australia Pty Ltd.
• Selex ES S.p.A.
• Thales Nederland B.V.
• ThyssenKrupp Marine Systems GmbH

The submission of bids for the Canadian Surface Combatant project will be delayed somewhat, coming shortly after CANSEC 2017 wraps up. Companies were to submit their bids on the CSC by April 27 but a third of the firms approved by the Liberal government to submit proposals had requested extensions. Bids are now due June 22, according to Public Services and Procurement Canada.

MP Darrell Sampson, Parliamentary Secretary for National Defense John MacKay, Minister of Public Services and Procurement Judy Foote, Halifax Mayor Mike Savage are given a tour of the Halifax Shipyard by Kevin McCoy, president Irving Shipbuilding. A number of companies have warned the Canadian government that the CSC project is poorly structured. (irving shipbuilding)

The reason for the extension is to allow companies the time to go over the technical requirements and line up Canadian firms as partners for the CSC project, which is expected to cost more than $26-billion.

A winner is expected to be announced sometime in the fall of this year. Construction of the vessels is expected to start in the early 2020s.

A number of companies have warned the Canadian government about the structure of the project. Fincantieri, the Italian shipbuilder, had told procurement Minister Judy Foote last fall that the project was so poorly structured it had doubts whether it could bid unless significant changes were made. Lucas Maglieri, a consultant for Fincantieri, however has pointed that the company “remains interested in doing business in Canada and in the CSC project — we continue to assess our options for the Canadian marketplace.”

What could emerge at CANSEC 2017 are details about which companies will not proceed with a bid on CSC as well as various announcements on the long-awaited teaming arrangements with Canadian firms. The trade exhibit would be one way to gain publicity for those teams.

Federal Fleet Services will have a number of programs to highlight at CANSEC 2017.

Its Project Resolve, the program to provide an interim refuelling and supply vessel for the Royal Canadian Navy, is on track and on schedule.

The ALMACO Group was recently awarded the contact for the delivery of the superstructure/accommodation unit for Project Resolve. The vessel’s accommodation will soon be delivered by ALMACO as a single structure to be integrated at the Davie shipyard.

ALMACO’s scope of work includes the full EPC (Engineering, Procurement and Construction) contract for the accommodation including cabins, public areas, galley, provision stores, wheelhouse and technical spaces, the firms noted. Combining cruise-ship standard accommodation with military requirements will ensure a safe yet highly comfortable experience for the crew, according to the companies.

“We are proud to be part of this project where ALMACO and Davie will combine Finnish accommodation production expertise with Canadian shipbuilding capabilities to the great benefit of the vessel’s end users and to meet the timeline for the delivery of the superstructure,” Vilhelm Roberts, ALMACO Group’s President and CEO, stated.

Jared Newcombe, CEO of Chantier Davie, also pointed out that ALMACO has consistently delivered on Project Resolve.

The companies plan to highlight ALMACO’s concept of fabricating accommodation solutions for the international market, an advantage for future projects carried out at Davie’s shipyard premises, which will strengthen the cooperation between the companies even further.

“ALMACO will establish a more permanent presence in Canada by supporting projects at Davie, with the aim of fabricating modular cabins in Québec,” Mikael Liljeström, President of ALMACO’s offshore division, pointed out.

For its part, rival shipyard Seaspan comes to CANSEC 2017 armed with a new contract for the Queenston-class Joint Support Ship (JSS) project. In February the Liberal government announced it had awarded the JSS Design & Production Engineering (D&PE) contract to Seaspan’s Vancouver Shipyards Co. Ltd. The latest contract is worth about $230-million.

Seaspan was selected to build the JSS for the Royal Canadian Navy. The entire project has an estimated budget of $2.3-billion. Under the non-combat vessel component of the National Shipbuilding Strategy, the RCN will receive two Joint Support Ships with the option for a third. The first JSS is scheduled for delivery in 2021; the second ship is expected to be delivered in 2022.

Seaspan’s Vancouver Shipyards is completing the initial design review of the off-the-shelf ship design from ThyssenKrupp Marine Systems Canada. In December 2015, Vancouver Shipyards was awarded the long lead items contract to engage suppliers and select the equipment, including the propulsion systems and generators, needed to finalize the design and to build the JSS.

  Although the captain still overseas the bridge, ships in the 21st century rely more and more on complex integrated computer networks and automated systems. L3 Technologies is known around the world for its system integration.

It will remain to be seen if French defence giant Thales uses CANSEC 2017 to finally acknowledge it was selected by the Canadian government to provide the long-term in-service support (ISS) for the Joint Support Ships and the Arctic Offshore Patrol Ships (AOPS). Neither the Canadian government nor Thales has yet acknowledged that Thales was selected for the contract worth around $5-billion.

But Public Services and Procurement Canada spokesman Nicolas Boucher confirmed to Esprit de Corps that the negotiations over the in-service support deal are finished and that the actual contract is expected to be awarded in the fall of 2017.

The awarding of the contract to Thales is controversial. CANSEC 2017 exhibitor Irving Shipbuilding, which is building the Arctic Offshore Patrol Ships, has publicly questioned the deal, suggesting it doesn’t make sense to award Thales the lucrative contract.

The Department of National Defence’s various unions have also vowed to fight the contract to Thales.

The unions, representing 24,000 civilian employees at DND, including those involved in the purchase of military equipment, ship maintenance as well as other work in the federal government dockyards serving the Royal Canadian Navy, are lobbying to have the Liberal government change course and keep the work among federal employees.

Irving Shipbuilding and Lockheed Martin will have a few projects to promote at CANSEC 2017, in particular the successful completion of the Halifax-class Modernization/Frigate Life Extension project. HMCS Toronto, based on the East Coast, has completed the refit portion of its modernization by Irving. This means all 12 frigates, five on the West Coast and seven on the East Coast, have completed the refit portion of their modernization, according to the Royal Canadian Navy. The Halifax-Class Modernization/Frigate Life Extension project included a new combat management system purchased from Lockheed Martin Canada, as well as new radar capability, a new electronic warfare system, and upgraded communications technologies and missiles.

Irving should be able to use CANSEC 2017 to improve its public relations situation on the shipbuilding program. The company faced negative publicity in February and March when the Chronicle Herald newspaper in Halifax broke a number of stories about Irving Shipbuilding hiring outside of Canada for various jobs related to the construction of the Arctic Offshore Patrol Ships. Irving was trying to recruit workers from Poland and a subcontract was put in place with the Spanish firm Gabadi LC, which involves Spanish carpenters being brought in to work on the Arctic Offshore Patrol Ships in Halifax.

Irving pointed out that Canada has not had a new-build naval program in place for almost 25 years so some specific shipbuilding expertise does not exist in the country. The firm also says it has tried to recruit Canadians for certain positions but has not found the skilled personnel it needed.

Union officials, however, say they find it difficult to believe that no one in Canada could fill any of these positions.

Irving is also hoping to convince the Liberal government to provide it with additional shipbuilding work that would deal with the expected gap between the time when the building of AOPS ends and the construction of the CSC begins. Irving says without the extra work it is looking at significant staff layoffs during that gap period.

Last year, Irving pitched the idea at CANSEC of a $300-million support ship for humanitarian missions. But the controversy swirling around the use of foreign labour at its Halifax yards could conceivably harm those chances for additional government shipbuilding contacts to deal with the gap period.

Firms providing equipment for warships will also be able to use CANSEC 2017 to highlight their systems.

The Canadian Surface Combatant has the RCN looking for a new drone. It requires a tactical unmanned aircraft system (UAS) that can provide what it is calling a cost-effective and sustainable shipborne, persistent, near real-time, over the horizon intelligence-gathering capability. The RCN is expecting initial approval for the project in 2018 and a request for proposals to be issued in 2019. Contract award is set for 2020. The cost estimate for the project is between $100-million and $240-million.

Industry was recently provided with more details by the federal government on the naval drone program. It’s currently seeking a minimum flight time of six hours, minimum range should be just less than 100 kilometres, and the system can be either vertical takeoff or rotary wing. The RCN does not want a launch or recovery system.

 The Mk 46 torpedo, first introduced in 1965, is a surface ship and aircraft-launched anti-submarine weapon. It is presently identified as the NATO standard and has been acquired by more than 25 countries, including Canada. Various modifications, including improved acoustics, guidance and control upgrades, and countermeasure-detection capability have been introduced into the weapon. (seaforces.org)

The RCN is also looking for an upgrade for the Canadian MK 46 Mod 5A (shallow water) lightweight torpedo. It wants to improve fleet survivability against evolving near and medium-term underwater threats. Project cost is estimated to be between $250-million and $499-million. The issuing of a request for proposals is scheduled for 2020 with a contract award the same year.

The RCN’s Torpedo Countermeasure Hard Kill project is also another program that is attracting interest from exhibitors at CANSEC 2017. It is estimated that the project could cost up to $249-million.

The Torpedo Countermeasure Hard Kill project is to acquire a system to provide Royal Canadian Navy frigates, support ships and submarines with an effective defensive capability against the full range of modern and emerging threat torpedoes.

How will it do that? By adding a hard kill anti-torpedo weapon to compliment shipboard soft-kill torpedo countermeasure systems, the RCN pointed out.

The system will be fielded until the end of life of the Halifax-class frigates, Victoria-class submarines, the Queenston-class Joint Support Ships, and may be also used on the Canadian Surface Combatants. A request for proposals is expected to be issued in 2021, with a contract awarded the following year.

Atlas Elektronik Canada of Victoria, BC is using CANSEC 2017 to highlight its SeaSpider, among other equipment.

The company points out that SeaSpider, which can operate in both deep and shallow water, is the world’s first dedicated anti-torpedo-torpedo (ATT) and is capable of being used to counter threats against submarines or ships. Atlas Elektronik also points out that the weapon system is deliberately designed to be affordable for navies in procurement and operation. To achieve a low unit cost, a solid propellant rocket motor was chosen as SeaSpider’s propulsion element, which provides affordable compact high-energy performance, notes the company.

The operational concept for SeaSpider also allows for a “torpedo alarm” configuration with a very low false alarm rate that, in turn, reduces expenditure, the company noted. The maintenance-free SeaSpider canistered round reduces maintenance effort and simplifies handling.

CSC SAILING INTO STORMY WATERS

(Volume 24-02)

By David Pugliese

The Canadian Surface Combatant (CSC) will be the backbone of the Royal Canadian Navy’s future fleet, yet the program — one of the largest defence procurements Canada has undertaken in modern times — is sailing into stormy waters.

The Liberal government announced October 27, 2016 that Irving Shipbuilding Inc. of Halifax had issued a request for proposals to companies on the design of the new warships. Firms are required to provide those bids, which must not only include the design but details of teaming arrangements with Canadian firms.

    But allowing only six months to compile bids for one of the largest procurements in Canadian history doesn’t make sense, say representatives of some of the companies. The extent of the technical data and other information the Canadian government requires is overwhelming, they add. Four companies requested that the bidding period be extended and on February 16 the Liberal government agreed. Instead of submitting bids on April 27, the proposals will now be due on June 22.

But there are other issues looming as well. Some firms are questioning whether it will be worthwhile to bid on the project, estimated to be valued at more than $26-billion.

On October 24, 2016 Italian shipbuilder Fincantieri sent Public Services and Procurement Minister Judy Foote a detailed outline of why the acquisition process was in trouble, warning that “Canada is exposed to unnecessary cost uncertainty.”

 The Honourable Judy Foote, Minister of Public Services and Procurement, gives her speech at CANSEC 2016. In it, she detailed the Liberal’s plans on procurement matters while also touting the government’s desire for transparency. But in February 2017, Foote seemed unconcerned about one bidder’s concerns about the current process and worry of bias in the competition. (richard lawrence)

Preparing a bid for the Canadian Surface Combatant project will cost companies between $10-million and $20-million, industry representatives say. If they don’t see that there is a chance of winning the contract because of various issues, then firms might decide not to bid, further narrowing the choices for the Liberals on a new fleet for the Royal Canadian Navy.

In its letter to Foote, Fincantieri pointed out that the current structure of the procurement limits the role of the warship designers to simply providing engineering and design services to Irving, which will then build the vessels.

In return for that small role, the companies are being asked to provide valuable intellectual property to their designs, access to their established supply chains, and transfer technology to Irving and Canada.

In addition, the warship designers have to provide a warranty on the integration of technology into their designs, even though they are not responsible for buying that equipment.

The project as it is structured now leaves little incentive for warship designers and builders such as Fincantieri, which has designed and constructed ships for the navies of Italy, India, Iraq, Malaysia, Malta and the United Arab Emirates.

“If the current proposed procurement approach is retained, then it will be very difficult for Fincantieri to obtain approval to bid from its board,” the company warned Foote.

The company instead proposed to Foote that a fixed-price competition be held, with the wining shipyard building the first three warships, complete with Canadian systems, and deliver those to Irving. The ships would then be run through evaluations and after any technical issues were worked out, Irving would begin to build the remaining 12 vessels.

That way work on the new ships could get underway faster, the vessels will be fully tested, and the risk to the Canadian taxpayer significantly reduced. The “winning team can be held accountable for the overall performance of the finished ship,” Fincantieri added.

“Companies are also given incentive to make long-term investment in Canada because they can expect to get a fair return from the greater value of their work responsibility,” Foote was told.

The minister responded by suggesting Fincantieri approach Irving with their concerns.

But that response further worried the Italian shipbuilder as they had believed the Canadian government and its ministers were ultimately responsible for the program and the spending of billions of tax dollars.

Foote’s comments to journalists on February 7 will also not likely go down well with the Italian firm. She said she wasn’t concerned about Fincantieri’s warning that the current process was putting Canada at risk of unnecessary costs.

“That certainly is not our opinion on this,” Foote explained. “We’ve worked with industry. We did extensive consultations with industry to get to where we are. We will always consult with industry, and that is why we were successful in terms of the CSC. The fact that some people are questioning it is something we’ll look at, but in reality, of the 12 primes, eight have not expressed any issue with respect to the deadline.”

Irving spokesman Sean Lewis said the contract for CSC design would be awarded to an existing warship design that best fits the requirements of the Royal Canadian Navy. “I can assure you that the procurement process is being conducted in a way that ensures that all bidders are treated equally, with no unfair advantage given to any individual bidder, and under observation of an independent fairness monitor,” he added.

The other issue that has emerged on CSC are questions about whether there is a bias on the part of Canada for a specific design.

There is a strong belief in some industry circles that the federal government is favouring the design from the British firm BAE, which is offering the RCN the Type 26 warship.

An artist’s rendering released by BAE Systems of the expected form of the Global Combat Ship, a United Kingdom program to replace the Royal Navy’s Type 22 and Type 23 frigates through the Future Surface Combatant program, which has yet to start construction. Originally, the Liberal government said only proven warship designs would be considered for the CSC, but it reneged on that point just a few months later. (bae systems)

Much of that belief is fuelled by the unusual change in the CSC procurement process in mid-2016.

In the summer of 2016 Foote said only proven warship designs would be considered, a strategy that she insisted would cut down on risk and speed up construction.

But just months later the Liberal government retreated on that and instead indicated it would accept a Type 26 bid, even though that type of vessel has not been built yet. Construction of the first Type 26 ship for Britain will start sometime this year.

“You want to make sure that what you get on offer reflects not only what’s tried and tested in the market but also what’s coming on the market,” Lisa Campbell, assistant deputy minister of acquisitions at Public Services and Procurement Canada, explained to journalists.

In an earlier statement, BAE official Anne Healey said the company looks forward to bidding in an open and fair competition.

Other industry representatives point to the close ties between Irving and BAE as a reason for concern on the CSC. The two firms had joined forces to bid on the long-term maintenance contract for the Royal Canadian Navy’s Arctic patrol ships and the Joint Support Ships. They lost that contract to Thales.

But rival companies are still worried about whether BAE has an inside track on CSC.

Irving’s spokesman Sean Lewis said there is no need for concern. “The CSC procurement is being conducted in a way that ensures that all bidders are treated equally, with no unfair advantage given to any individual bidder,” he noted in an email. “We will continue to actively monitor the effectiveness of measures taken to avoid any conflict of interest.”

Meanwhile, Irving has raised its own issues about CSC. Irving president Kevin McCoy said the firm is concerned about the gap between when it finishes work on the new Arctic Offshore Patrol Vessels (AOPS) and the start of the CSC building.

The work Irving is doing on AOPS will provide its employees with the experience and expertise required to construct the surface combatants starting in the early 2020s.

But McCoy told Esprit de Corps that he is worried that if there is a gap where there is a slowdown or lack of work then those skilled employees will leave for other jobs. That, in turn, could impact the CSC program.

McCoy had an even blunter warning in early February when he told the House of Commons defence committee that the gap or any delays on the surface combatant program could mean “significant layoffs” for employees.

“It is imperative that we work at a steady pace and minimize delays,” he warned.  “Starting in fall 2019, production work on AOPS starts to wind down. If we don’t put our skilled shipbuilders to work on CSC we face significant layoffs. If there is a production gap between the two shipbuilding programs, the cost to reconstitute this workforce and their experience will be borne by the CSC program.”

McCoy also warned that “the impact of inflation is very real on a shipbuilding program such as CSC. With shipbuilding inflation running three to five per cent annually, on a 15-ship program you lose the buying power equivalent of 45 to 75 per cent of one ship for every year of delay. Delays have a serious impact on a program such as CSC.”