World class shipbuilding and repair

Presentation to RMC Symposium – February 27, 2012

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October 19, 2011

Why They’re Excited:Monumental Economic Impact

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NSPS Impact on ISI Employment

20122013

20142015

20162017

20182019

20202021

20222023

20242025

20262027

20282029

20302031

20322033

20342035

0

500

1000

1500

2000

2500

3000

2012 - 2035

Win Combat

FTE's

Employment Peak 2020 = 2,700 est.(AOPS and CSC production over-

lap)

Employment Ramp-Up Begins 2013/2014(MSPV and AOPS production overlap)

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NSPS Annual NS Economic Impact

Combat VesselsAverage Peak

Employment 8,453 11,495

Real GDP (Basic Prices) $661M $897MFederal Income Taxes $66M $76M Provincial Income Taxes $51M $74MCorporate Income Taxes $34M $50M Indirect Taxes (HST, etc.) $115M $169M Personal Income $447M $634M

Personal Disposable Inc. $293.0 $412.0

6Source: Conference Board of Canada & Jupia Consultants Inc.

Consumer Spending in Nova Scotia

Personal Income will average $447 million per year over the life of the Combat Project and drive consumer spending

7Source:Conference Board of Canada & Jupia Consultants Inc.

Significant benefits to rest of Canada especially ON, PQ and BC

National Economic Impact

How Did We Get Here?Government & Industry Collaboration

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• Existing marine procurement for fleet renewal was high risk– Highly complex– Time consuming– Expensive

• Change required given significant government shipbuilding requirements

• Need to ensure capable, qualified strategic shipbuilding asset in Canada

• Canadian Shipbuilding Association responded with collective recommendations– COEx…The Road Map to A Sustainable

Industry

2009 - An Industry Aligned

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• Industry consultations held on July 27 & 28, 2009

• From that process, NSPS was developed

Collaboration Key to Success

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• Federal ships to be built in Canada• Finite federal demand over a 30-year

horizon• Limited number of yards involved– Recognized there would be winners and

losers– Long-term stability of industry came first

• Government will level-load Construction Schedule Requirements– Eliminating Boom-Bust cycle so damaging

to long-term industry viability

What was required by Industry

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• Award contract to 2 facilities emerging from SOI-Q process– Compete on capability, not scope of work– Use appropriate risk-reducing qualification criteria

• Use supply arrangements as basis for contracts to ensure best value

• Negotiate contracts by particularized project

• Build incentives into projects– Reward performance and share savings with

Canada

Procurement Recommendations

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• Preserve sovereign capability for Canada• Shipbuilding as strategic asset for Canada• Steady workload into future (30 years)• Retain and develop high value jobs• Provide stable facilities for cost-effective

delivery • Allow for incremental investment to keep

pace with world wide industry• Reduce industry’s cost of proposals, more

money for facility and HR investment

Benefits of COEx Approach

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• Provide basis for long term shipbuilding industrial strategy

• Expedite government procurement process

• Provide earlier delivery of vessels• Reduce Canada’s PMO office level of effort,

by:– Reducing Canada’s cost in project definition and

implementation phases– More money available for ship and project

deliverables– Reduce risk to program, contractor and Canada

Benefits of COEx Approach

Where Do We Go From Here?Capitalizing on the NSPS Experience

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Benefits of NSPS Process

Industry’s Projected Benefits (2009) NSPS Benefits Realized (now & future)

Reduced solicitation time & cost

Significantly reduced up-front expenditure for government & industrySignificant project/program risk reductionsEarlier delivery of vessels & earlier IRB’sBest value for money for Canada

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Benefits of NSPS Process

Industry’s Projected Benefits (2009) NSPS Benefits Realized (now & future)

Reduced solicitation time & cost Eliminated approx. 18 – 24 months of traditional procurement process

Significantly reduced up-front expenditure for government & industrySignificant project/program risk reductionsEarlier delivery of vessels & earlier IRB’sBest value for money for Canada

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Benefits of NSPS Process

Industry’s Projected Benefits (2009) NSPS Benefits Realized (now & future)

Reduced solicitation time & cost Eliminated approx. 18 – 24 months of traditional procurement process

Significantly reduced up-front expenditure for government & industry

Costs associated with steps in procurement process eliminated

Significant project/program risk reductionsEarlier delivery of vessels & earlier IRB’sBest value for money for Canada

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Benefits of NSPS Process

Industry’s Projected Benefits (2009) NSPS Benefits Realized (now & future)

Reduced solicitation time & cost Eliminated approx. 18 – 24 months of traditional procurement process

Significantly reduced up-front expenditure for government & industry

Costs associated with steps in procurement process eliminated

Significant project/program risk reductions

Resulted in new way of procurement – government / shipyard relationships

Earlier delivery of vessels & earlier IRB’sBest value for money for Canada

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Benefits of NSPS Process

Industry’s Projected Benefits (2009) NSPS Benefits Realized (now & future)

Reduced solicitation time & cost Eliminated approx. 18 – 24 months of traditional procurement process

Significantly reduced up-front expenditure for government & industry

Costs associated with steps in procurement process eliminated

Significant project/program risk reductions

Resulted in new way of procurement – government / shipyard relationships

Earlier delivery of vessels & earlier IRB’s

18-24 months closer to production and delivery of vessels

Best value for money for Canada

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Benefits of NSPS Process

Industry’s Projected Benefits (2009) NSPS Benefits Realized (now & future)

Reduced solicitation time & cost Eliminated approx. 18 – 24 months of traditional procurement process

Significantly reduced up-front expenditure for government & industry

Costs associated with steps in procurement process eliminated

Significant project/program risk reductions

Resulted in new way of procurement – government / shipyard relationships

Earlier delivery of vessels & earlier IRB’s

18-24 months closer to production and delivery of vessels

Best value for money for Canada Committed to a new relationship, with complete transparency and risk rebalancing to delivery best value for money to Canada

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• Build Navy’s combat vessel fleet utilizing balanced work flow

• Provide value for $ to Canada• Meet 100% Industrial and Regional

Benefit commitments • Help build sustainable marine industry • Build World Class Shipbuilding Facility

capable of meeting all Canada’s Combat Vessel needs

ISI Long Term NSPS Goals

World class shipbuilding and repair

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