NSPS: Abdicating Responsibility

Canadians elect our politicians so we can demand accountability from them, so that when we think the government is wrong, we can do something about it. Can the government manage a file any worse than it did the F-35? Sadly, the answer is yes. One need only look at the National Shipbuilding Procurement Strategy (NSPS).

The NSPS is beset with the typical problems that have impacted many procurements. In this case, however, the government has taken the unprecedented step of outsourcing, to Irving Shipyards Inc. and to Seaspan ULC, the multi-billion dollar decisions to select which companies will receive billions of dollars to develop, install and integrate the mission-critical systems into Canada’s fleet of combat and non-combat vessels.

This kind of abdication of responsibility is comparable to the government allowing the Canadian Association of Defence and Security Industries (CADSI) to establish defence policy, or the Bank of Montreal to establish fiscal policy.

First, some background. In a typical procurement, industry organizes itself as it sees fit in order to best respond to a request for proposal (RFP). For example, for the Maritime Helicopter Program (MHP), three consortiums entered the competition, each specifying all of its partners that would be held accountable to build the helicopter, develop and integrate the necessary systems, and support the helicopter throughout its lifetime. In selecting the Sikorsky aircraft, the government understood that it was also selecting General Dynamics Canada and L-3 as Sikorsky’s major partners. The government decision could then legitimately be applauded or criticized.

Not so with respect to the NSPS. The basic premise of the NSPS is flawed. It states, “For large ship construction, Canada will establish a strategic relationship with two Canadian shipyards, selected through an open and fair national competition, and designate them as sources of supply, one for combat vessels and the other for non-combat vessels.” In other words, the government would intervene in the establishment of the consortium. It preselected one member of the consortium and industry would somehow try to build the rest of the consortium. Fatal mistake!

The government selected Irving Shipyards Inc. for combat vessels, and chose Seaspan ULC for non-combat vessels. The next step would be to select the systems provider and integrator.

The government had two options and both were problematical. It could have tried to run an open, fair and transparent competition to select the systems integrator. This would prove near impossible given the shipyard’s pre-existing business preferences – how could all bidders really expect the same access to information? Furthermore, could the government take the risk of imposing on the shipyard a company that is incompatible with them? Obviously, in such a case, a long-term working relationship would not be viable.

Instead, the government chose the only other option open to it. It abdicated its role as procurement authority and allowed the shipyards to determine who is entitled to the billions of taxpayer’s money. According to published reports, Irving Shipyards has selected Lockheed Martin to partner with them, not via a competition but rather based upon “familiarity and experience”. I am sure that this decision is in the best interest of Irving Shipyards Inc. I am not as confident that it is in the best interest of the military, of the Canadian taxpayer or of the Canadian defence industry.

Is there away around this mess? Yes there is.

Alan Williams was ADM(MAT) from September 1999 to April 2005.
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