National Shipbuilding Procurement Strategy (NSPS)

1. National Shipbuilding Procurement Strategy (NSPS) Quebec Government Delegation Briefing June 14 2011

2. Objective • To provide a brief background of the NSPS • Provide an overview of the NSPS Governance Structure • To provide an outline NSPS Large Ship Procurement Process

3. Why a new Strategy? Navy and Coast Guard fleets require renewal Government and other studies determined that individual procurements would not sustain the shipbuilding industry To end the boom and bust in federal shipbuilding All of our allies have an “NSPS” in some form Need to maximize limited budgets for fleet renewal – value for money for taxpayers Requested and supported by industry and associations NSPS Background

4. National Shipbuilding Procurement Strategy Establish a strategic relationship with two Canadian shipyards and designate them as source of supply to build Government ships over 1000 tonnes displacement, where: • One shipyard will build the combat vessels package • Arctic/Offshore Patrol Ship, Canadian Surface Combatant • The other will build the non-combat vessels package • Offshore Oceanographic Science Vessel, Offshore Fisheries Science Vessel, Polar Icebreaker, Joint Support Ship Set-aside smaller vessels for competition by other than the two selected yards and their affiliates Repair, maintenance and refit – Business as usual Web Site: http://www.tpsgc-pwgsc.gc.ca/app-acq/sam-mps/snacn-nsps-eng.html

5. Enhanced Measures Unprecedented lengths to ensure the fairness, openness and transparency of this historic procurement process • Regular meetings with the shipyards to develop procurement approach and Request For Proposal documents • An internationally recognized third party expert (FMI) has benchmarked the capability and performance of the yards • A leading consulting firm (KPMG) assisted in development of the procurement process • Fairness Monitor involved to provide independent assurance that activities are conducted in a fair, open and transparent manner • interim report at RFP release: “… decisions are made objectively, free from personal favouritism and political influence, and encompasses the elements of openness, competitiveness, transparency and compliance.” • Robust governance, empowered decision making, dispute avoidance and resolution

6. NSPS Governance Structure DM-Level Governance Committee DM/PWGSC (Chair), DM/DND, DM/DFO, DM/IC plus ex officio membership ADM-Level Interdepartmental Steering Committee ADM/PWGSC (Chair), ADM/DND, ADM/DFO, ADM/IC plus ex officio membership NSPS Interdepartmental Working Group DG/PWGSC (Chair), DG/DND, DG/DFO, DG/IC plus ex officio membership NSPS Secretariat PWGSC (Lead), DND representatives, DFO/CCG representative, IC representative, PWGSC representatives & other resources

7. Dispute Avoidance & Resolution • Ongoing engagement and dialogue • Governance structure used as dispute resolution ladder • Designed to eliminate requirement to engage lobbyists • Goal to minimize potential legal disputes

8. A National Competition to select 2 Canadian Shipyards: Issue a Solicitation of Interest and Qualification (SOIQ) to all Canadian shipyards to establish a short list of potential shipyards for the competitive RFP (Sept 2010) Issue a Request for Proposals(RFP) to the short-listed shipyards (Feb 2011) Evaluate Proposals and select 2 shipyards (Summer 2011) Finalize an Umbrella Agreement (UA) with each selected shipyard (Fall-Winter 2011) Negotiate Contracts for the individual projects Overview - Procurement Process

9. National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale Solicitation of Interestand Qualification (SOIQ) • A SOIQ was issued to all Canadian shipyards to establish Short-Listed Respondents (SLR) for the competitive RFP process • The SOIQ used criteria that were simple and concise while comprehensive, fair and open • 5 SLRs were established from the SOIQ Kiewit Offshore Services Marystown, Newfoundland Vancouver Shipyards Vancouver, British Columbia Davie Yards Inc. Lévis, Québec Seaway Marine & Industrial Inc. St. Catharines, Ontario Irving Shipbuilding Inc. Halifax, Nova Scotia

10. Request for Proposals (RFP) • RFP documents developed in consultation with Shipyards • One RFP has been released: • Shipyards may submit proposals for one or both work package(s); and • A shipyard may only win one work package, not both • Shipyard selection will be based on best value to Canada

11. Proposal Evaluation The final selection of the successful yards will be done within the established governance process approved by Cabinet and in accordance with the published terms of the RFP

12. Shipyards’ Proposals • Must address how the shipyard intends to address any capability gaps identified by our 3rd Party Expert (First Marine International) • Infrastructure and process improvements • Cost to Canada • Lay out the commitments that contribute to the health of the marine sector over the long term, if selected, such as: • Sustain a knowledge-based economy (partnership with provinces and other enterprises in the marine sector) • Invest in skills and human resources (skill set development) • Long-term supply chain development (out-sourcing and sub-contracting to other shipyards and SMEs) • Increased commercial work (job creation)

13. National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale Umbrella Agreements (UA) & Shipbuilding Contracts • UAs will be negotiated with the 2 selected shipyards to establish the framework by which Bidders’ productivity improvement and value proposition commitments will be measured and monitored over the duration of the Strategy • Ensuing contracts for shipbuilding projects will be: • Negotiated in accordance with the rules established in the UAs; • Subject to separate Government approval; and • Used by the selected shipyards to deliver the productivity improvement and value proposition commitments detailed in the UAs

14. Under Contract : - FMI List of RFP RFP RFP - FM Industry SOIQ Pre - Finalize Selection of Release Closes Locked - TAS Day Release qualifiers UA shipyards Down Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jul 2010 Dec 2012 2011 Jan 2011 - Jun 2011 Initial Benchmarking Jan 2011 - Jun 2011 Jan 2011 - Jun 2011 Evaluation Negotiate Lead Of Shipyards of Umbrella Projects Proposals Agreement Contract Negotiations Overall Schedule for NSPS Process Feb 7 July 7