1 implementation of a national shipbuilding procurement strategy steve durrell president, irving...

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Implementation of aNational Shipbuilding Procurement

Strategy Steve Durrell

President , Irving Shipbuilding Inc.

COEx…The Road Map to A Sustainable Industry

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Brief History

Due to over capacity in the Mid 80’s Government introduced “Shipyard Rationalization Assistance”

Shipyards Closed in British Columbia Ontario Quebec Atlantic

Company Confidential

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Shipyard Rationalization Assistance

Source: Industry Canada Website


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Shipyard Capacity


Today our industry is only sustainable if we have a federal program

Canada can not afford any further reduction if we are to meet pent-up demand

Contracts are required immediately to maintain current capacity

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Overview

Existing Marine procurement for fleet renewal requirements contains high risk elements, it is very complex, time consuming and expensive for both Government and Industry.

Stakeholders recognize the need for change given significant government shipbuilding requirements and the need to ensure capable and qualified Canadian shipyards have continuous work in order to maintain a strategic asset.

Our proposal was submitted in response to the July 27, 2009 National Shipbuilding Procurement Strategy Consultations. Most Western nations have chosen a model similar to our submission.


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Future For Canada’s Shipyards

Majority of work will be Government

Some commercial in booming markets this market is not predictable.

Perhaps some niche markets Lake Vessels Provincial ferries and tugs


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Continuous Procurement (New Builds) Essential to Maintain

Ongoing Viable Industry

History of the Boom/Bust industry:

Canadian Patrol Frigate (CPF)contract signed 1983

Maritime Coastal Defence Vessel (MCDV) contract signed 1992

Next Navy MCP new build contract …?


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Government New Build Solicitations

Cost of bidding is very high and the time from Request for Proposal (RFP) to contract award is exceptionally long

CPF – 7 years from expression of interest to contract Bid cost $20Million

MCDV – 4 years from expression of interest to contract Bid cost $8Million

JSS solicitation suspended – project exceeds budget - $ million spent

MSPV bid 3 times before award Arctic Offshore Patrol Ships (AOPS) – Awaiting

communication.


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National Shipbuilding Procurement Strategy (NSPS)


Consultations were held with Industry on

July 27th & 28th, 2009

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Some of the Assumptions (or Objectives) of the NSPS

Federal Ships will be built in Canada

The Finite Federal demand will be over a 30 year horizon

Limited number of yards would be involved

Government ship operators will level-load the requirements (No Boom Bust)


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National Shipbuilding Procurement Strategy

(the Road Map)

Establish two (2) Centres of Excellence (COEx) for fleet renewal Major Crown Projects (MCP) through a competitive qualification process.

One COEx would be qualified for medium, complex combatant vessel capability.

One COEx would be qualified for large, complex, non-combatant vessel capability.


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FAQ’s What is the competitive Process? What is the Contracting Process? What do other western countries do? How is value for money achieved? What are the benefits of a COEx

approach? What about the SME’s and small yards? What is the Irving and Davie deal about?


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Competitive Process

Utilize the proven and successful Procurement Strategy, recently used on other Major Marine Procurements prepared in collaboration with Industry

Competitive Solicitation of Interest and Qualification Process (SOI-Q) on MERX

Compete “Capability” not “Scope of Work”

Utilize Appropriate (risk reducing) Qualification Criteria Adequate existing facilities Qualified resources – skilled labour Management strength and experience Financial strength Recent proven experience in ship construction Past performance


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Contracting Procedures

Award a Contract to the 2 Facilities emerging from the SOI-Q process

Utilize (Shipbuilding) Supply Arrangements (SSA) as basis for contracts that ensure Best Value.

Negotiate contracts by particularized project.

Build incentives into the projects, reward performance and share savings with Canada.


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How do other Western Countries do this?

The COEx model of contracting is similar to other countries

U.S.A. U.K France Australia


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Value for Money

SSA would use contract cost principles 1031-2 and include contracting templates to ensure fair value utilizing:

Annual Rate NegotiationsContract Audits For Profit LimitationEarned Value Performance MeasurementContinuous Improvement Incentives Through

Shared Risk Integrated Project Management Teams Use contract incentives for continued incremental

infrastructure investment


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Benefits of a COEx approach :

Canada can preserve “Sovereign Capability “ and Maintain shipbuilding as a Strategic Asset for Canada

Provide a steady work load into the future (30 Years)

Retain and develop “high value jobs” with subject matter expertise

Provide stable facilities for the cost effective delivery of all MCP’s

Allow for incremental investment to keep pace with a world wide industry

Reduce industries cost of proposals, more money for facility investment and HR development


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Benefits of a COEx approach :

(continued)

Provide the basis for a long term shipbuilding industrial strategy

Expedite the government procurement process, while respecting contract policy

Provide earlier delivery of vessels

Reduce Canada's Project Management Office level of effort:

Reduce Canada's costs in the project definition and implementation phases

More $ available for the ship and project deliverables Reduce risk to the program, the Contractor, and to

Canada


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SME’s and Small-yard Benefits

Facilities designated as a COEx would not be allowed to bid on non-MCP’s

Sub-contract work to small shipyards, where geographically feasible;

Provide significant contracts to Small and Medium Enterprises (SME’s); and

Include shipyards on the West Coast, Ontario and Newfoundland for participation in “In-Service Support” work based on the eventual home port location of the new vessels


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Other Shipyards (non-COEx) Facilities designated as a COEx would not be

allowed to bid on non-MCP’s

Utilize National Supply Arrangements Pre-negotiated contracts Work competed on capability and price Lowest priced compliant bid wins

Benefits Creates a natural commercial balance Win/win potential for all small shipyards in

Canada Minimum bid period, cost and risk Stimulate economy > $100M/year potential


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Irving Shipbuilding and Davie MOU:

Significant Benefits to Canada Technology, IP and Process sharing Project and contract management collaboration IRB coordination and partnership for maximum

Canadian benefit Distinct Regional Capabilities in a collaborative

teaming agreement Sub-contract where applicable Best Practice teamwork and sharing Value for money structure. Ensure value for

money for Canada.


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Industrial and Regional Benefits (IRB)

Company with facilities designated as a Centre of Excellence will:

- Create immediate high value jobs

Prior to contract signing, commit to direct Industrial Regional Benefits exceeding 60% of the contract value

Guarantee to achieve indirect benefits through offsets so that the total industrial benefits to Canada meet or exceed the contract value


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Industrial and Regional Benefits (IRB)

(continued)

Spread Industrial Benefits across Canada to the maximum extent possible

Include Aboriginal Business as well as Small and Medium Enterprise targets

The only thing for sure….if the vessels are not built there will be no benefits to worry about


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A summary of Benefits form this Procurement Strategy

Reduction in solicitation time and cost Projects start earlier and therefore earlier

delivery of vessels and earlier IRB’s Significant reduction of up-front expenditure

for Government & Industry Significant Project / Program risk reductions This is a win/win situation for Government

and Industry Best value for money


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The Way Ahead

Immediate action & steps required Decision by Government on COEx

concept Qualify COEx based on overall

capability Sign long term agreement Get on with the business of building

the Federal Fleet.


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Thank You!

1 implementation of a national shipbuilding procurement strategy steve durrell president, irving...

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