National Shipbuilding Procurement Strategy: An Update

Martin Auger 
Economics, Resources and International Affairs Division

In June 2010, the federal government unveiled its National Shipbuilding Procurement Strategy (NSPS) to renew and modernize the fleets of the Royal Canadian Navy and the Canadian Coast Guard over the next three decades.

The NSPS was introduced to provide long-term, predictable federal shipbuilding work in Canada. The strategy’s main goal is to eliminate the historical “boom and bust” cycles of shipbuilding in Canada and help sustain the Canadian shipbuilding industry.

The NSPS has three components:

  • a large-ship construction program – construction of ships of more than 1,000 tonnage displacement;
  • a small-ship construction program – construction of ships of less than 1,000 tonnage displacement; and
  • a ship repair, refit and maintenance program.

According to the federal government, the NSPS is the “largest procurement sourcing arrangement in Canadian history.”

Large-ship construction program

In October 2011, the federal government announced the selection of two shipyards to deliver the large-ship construction program.

They are Irving Shipbuilding’s Halifax Shipyard and Seaspan’s Vancouver Shipyards.

Halifax Shipyard was selected to deliver the NSPS combat package, which currently consists of 21 vessels for the Royal Canadian Navy:

  • Arctic/Offshore Patrol Ships (six to be delivered between 2018 and 2023); and
  • Canadian Surface Combatants (15 ships to be delivered between 2025 and 2042).

Vancouver Shipyards was selected to deliver the non-combat package, which includes up to 17 vessels for the Canadian Coast Guard and the Royal Canadian Navy:

  • Offshore Fisheries Science Vessels (three ships for the Canadian Coast Guard to be delivered in 2017–2018);
  • Offshore Oceanographic Science Vessel (one ship for the Canadian Coast Guard for delivery in 2017–2018);
  • Joint Support Ships (two ships for the Royal Canadian Navy for delivery in 2019–2020);
  • Polar Icebreaker (one ship for the Canadian Coast Guard to be delivered in 2021–2022);
  • Medium Endurance Multi-Tasked Vessels (up to five ships for the Canadian Coast Guard); and
  • Offshore Patrol Vessels (up to five ships for the Canadian Coast Guard).

To date, more than $2.6 billion worth of federal contracts related to the Arctic/Offshore Patrol Ships, Offshore Fisheries Science Vessels, Joint Support Ships and Polar Icebreaker projects have been awarded to those shipyards. The contracts have covered the refinement of the ship designs, pre-production work and, in certain cases, construction of the vessels.

Construction of the Arctic/Offshore Patrol Ships and the Offshore Fisheries Science Vessels – the first vessels to be built under the large-ship construction program – is expected to be fully under way before the end of 2015.

Small-ship construction and ship repair, refit and maintenance programs

The NSPS also includes a small-ship construction program and a ship repair, refit and maintenance program. The small-ship construction program is open to Canadian shipyards other than the Halifax and Vancouver shipyards selected under the large-ship construction program.

It entails construction of 116 vessels for the Canadian Coast Guard and the Royal Canadian Navy. In 2013, the federal government announced the procurement of 18 to 21 new vessels for the Canadian Coast Guard under the small-ship construction program; however, no construction contracts have yet been awarded.

The ship repair, refit and maintenance program is open to all shipyards. Since 2013, the federal government has awarded a number of contracts for the refit and life-extension of several Canadian Coast Guard ships.

Estimated costs

The infographic provides a breakdown of current estimated costs for the large-ship construction program, the most expensive component of the NSPS. The estimated costs of acquiring the ships under that program for the Canadian Coast Guard and Royal Canadian Navy amount to nearly $38 billion.

The three Royal Canadian Navy ship projects alone (Arctic/Offshore Patrol Ships, Canadian Surface Combatants and Joint Support Ships) account for more than 85% of the estimated acquisition costs of the large-ship construction program.

Large-ship construction program: Estimated Aquisition Costs

The cost of the other two components is considerably less. For the small-ship construction program, the federal government estimates total costs at $2 billion. For the repair, refit and maintenance program, the estimate ranges from $500 million to $600 million a year over the next 30 years.

All told then, the cost of constructing the large and small ships, as well as the annual ship repair, refit and maintenance work under the NSPS, could amount to $60 billion over three decades.

Next stage

It may be too soon to determine whether the NSPS will change the landscape of shipbuilding in Canada. However, progress has been made over the past five years to get the shipyards and some of the ship projects ready for production.

If current construction schedules are maintained, during the next five years Halifax Shipyard and Vancouver Shipyards should construct and deliver almost a quarter of the large ships ordered under the NSPS.

Related Resources

Auger, Martin. The National Shipbuilding Procurement Strategy: A Five-Year Assessment. Publication no. 2015-35-E. Parliamentary Information and Research Service, Library of Parliament, forthcoming.

Byers, Michael, and Stewart Webb. Blank Cheque: National Shipbuilding Procurement Strategy Puts Canadians at Risk. Canadian Centre for Policy Alternatives, December 2013.

Lerhe, Eric. The National Shipbuilding Procurement Strategy: An Update. Strategic Studies Working Group Papers. Canadian International Council and Canadian Defence and Foreign Affairs Institute, February 2013.

Office of the Auditor General of Canada. “National Shipbuilding Procurement Strategy.” Chapter 3 in Fall 2013 Report of the Auditor General of Canada, 2013.

Shadwick, Martin. “The National Shipbuilding Procurement Strategy and the ‘Ambition-Capability Gap.’” Canadian Military Journal, Vol. 14, No. 2. Spring 2014.

Wood, Ian, ed. National Shipbuilding Procurement Strategy: Charting the Course. Centre for Foreign Policy Studies, Dalhousie University, Halifax, 2014.