Preserving capacity, General Tom Lawson, Chief of the Defence Staff, Keys to Canadian SAR
Issue link: http://vanguardcanada.uberflip.com/i/274231
M MaritiMe www.vanguardcanada.com FEBRUARY/MARCH 2014 37 recognizing that not all requirements will be affordable – require- ments may have to be adjusted to acquire the optimal number of vessels. These tradeoffs, normal for complex warship construc- tion, will be difficult but necessary to achieve a final design. But they will come with challenges. As a senior naval officer recently asked: "Where is the 'sweet spot' between capability and cost?" How do you find the balance between quantity and quality of ships, as well as ensuring lowest long-term in-service support costs, all while maximizing the federal investment in the navy? It is a hotly debated question at the moment. There are many cost issues to contend with, some of which are being discussed, others which remain cloaked in uncertainty. The RCN high level requirement is 15 combatants in two variants: an Area Air Defence and Task Group Command and Control (AAD/TG) variant and a General Purpose (GP) variant. In short, two types of ships, with multiple areas of commonality across plat- forms, and one shared hull design. The exact number of ships to be built is speculative at this point as there are too many variables to even guess at a rough order of magnitude. The Crown and the RCN have only the most ru- dimentary idea of what those high level requirements will cost without an RFP or cost indicators for non-recurring engineering available. (It's worth noting that fewer and fewer federal websites or public engagements discuss the number of ships. Fifteen, the number that was once the cornerstone of the NSPS competition, has been replaced by buzzwords about maximizing Canadian industrial participation, increased economic development, and shifting the focus from developing a war-fighting navy to job cre- ation programs.) But cost is the driving issue, regardless of how best value is de- fined, because the buying power of the government will be the most critical factor to achieving success. Associated with that are other key cost factors such as the impor- tance of adhering to a shipbuilding schedule and keeping labour costs low to facilitate maximum value and, more importantly, to encourage competition in the future international market. In commercial shipbuilding, best value is simply defined as the product that provides the owner the highest technical merit, or quality, at the lowest possible price. Consequently, commercial shipbuilders take a "design and build to cost" approach and de- liver the quantities ordered based on the budget and schedule provided. They will use innovation, sub-contracting and competi- tion at all levels of production to deliver best value. Naval shipbuilding under NSPS should be no different. Owners (the taxpayers) have a budget limitation that must be respected. To achieve best value, the shipyards must be provided a target number of ships to build, and then deliver the quantities of ships as defined in their assigned work packages, through build strate- gies that include competitive pricing beyond the component level to the block and even ship level, if that is what is needed to meet their commitments. This is based on an assumption that Canada meets its com- mitments in the packages brought to the shipyard, and that the shipyards are held accountable to achieve cost and performance targets. Both the government and the shipyards must be tied to this effort through the Umbrella and Construction Agreements and held to comply. Only then can best value be achieved through naturally occurring value propositions driven by competition, as happens in commercial shipbuilding. Otherwise it's a guessing game. For the other government stakeholders, there are different con- siderations for "best value." For PWGSC, the government's con- tractor for this program, a best value competition requires a fair, open and transparent process – open not only to all Canadian industry, but also to "offshore" industry willing to invest in Can- ada. This ensures the RCN can benefit from the best technology available in the world. PWGSC must also now provide a "chal- lenge" function to validate the RCN's requirements, ensuring all are necessary before they are delivered to industry. For Industry Canada, best value means applying the new In- dustrial and Technology Benefits policy, which will reward com- petitors for bringing Key Industrial Capabilities (KICs) to their teams, and conducting evaluation of bids that must incorporate regional distribution of work and Canadian content value. Finally, Treasury Board will have to be vigilant to ensure that all government policies, plans and procedures are followed and that expenditures are managed in accordance with government regulations. All of this to say, the discussion about value for money is not linear. It's not just about military requirements, and it's not solely about the defence procurement policy. Best value can only be achieved in a competitive environment when the purchasing party and the supplier community are put into a scenario where, in the end, the ship designs meet the combat and government require- ments, within a recognized budget. Best value for Canada is a complex and balanced equation that includes capability, price, jobs, technology, regional distribution of benefits, and competitive fairness. It's hard to say at this stage in the process if NSPS, with all these demands, can be all things to all people. However, the goal remains to get "most bang for the buck" for the navy, leveraging as much economic impact as possible and developing a sustainable marine industry.