Thank you, Mr. Chair.
I am Simon Page, assistant deputy minister, defence and marine procurement branch at PSPC.
Good afternoon, Mr. Chair and committee members.
Thank you for inviting me to appear before you today to discuss the national shipbuilding strategy, or as we often refer to it, the NSS.
More than a decade ago, the Government of Canada launched the NSS as Canada’s long-term plan to renew the fleets of the Royal Canadian Navy and the Canadian Coast Guard, and it is helping rebuild a domestic marine industry and create sustainable jobs in Canada.
Since then, we have seen five large ships and numerous small vessels delivered to the Royal Canadian Navy and the Canadian Coast Guard, as well as the completion of dozens of ship repair, refit and maintenance projects at shipyards across Canada.
Between 2012 and 2021, contracts awarded under the NSS have contributed an estimated $21.2 billion to Canada's gross domestic product for an average of nearly $2 billion annually. Over the past decade, these contracts have also created or maintained more than 18,000 jobs a year, through the marine industry and its Canadian suppliers.
This past year, construction and design work continued on a number of vessels. Deliveries of completed vessels included new search and rescue lifeboats to the Canadian Coast Guard and a second Arctic and offshore patrol ship delivered to the Royal Canadian Navy.
Several repair, refit and maintenance contracts were also awarded on behalf of the Canadian Coast Guard and the Royal Canadian Navy, generating hundreds of jobs and significant economic benefits to communities across Canada. We also made progress towards selecting a third shipyard under the NSS to build icebreakers for the Canadian Coast Guard. We hope to have more to share on this in the coming months. These are important achievements, but despite the successes, the NSS continues to face significant challenges.
As indicated in the Auditor General's 2021 report, shipbuilding is highly complex and challenging work.
The delivery of ships has been slower and more costly than originally anticipated. During the early years of the strategy, expertise both at the shipyards and within government was still developing as new workforces in modernized shipyards were building entirely new classes of ships.
This has led to ongoing challenges with respect to planning, management and oversight of projects and related activities. Canada had limited recent experience in the planning of shipbuilding projects when original delivery schedules and budgets were established more than a decade ago.
Much has changed since then, and preliminary budgets did not fully consider refinements in build requirements and plans, inflation costs, changes in exchange rates, or labour rates and material costs—all of which have risen significantly over the last decade.
The marine industry is also facing challenges with attracting and retaining a workforce, as well as developing skills and capabilities. Of course, industries around the world have experienced added challenges due to the pandemic, and Canadian shipbuilding is no exception. COVID has put immense pressure on workforces, working practices and supply chains and has resulted in rising costs of materials as well as delays in building projects.
Although we are still assessing the full impact of the pandemic on our projects, we anticipate further adjustment to project schedules and budgets will be required.
These are serious problems that several industries are facing at the moment. It is true that we have made some progress since the inception of the NSS, but we know we need to apply lessons learned now so we can keep delivering in the future, especially as global challenges persist.
I can tell you that the government continues to work closely with shipbuilding partners to do just that, and now that the shipyards in Canada have gained the experience required to set more realistic schedules, we are better positioned to tackle emerging challenges and manage risks.
To address these challenges we have made significant enhancements over the past number of years in how we manage the strategy. This includes strengthening risk management tools and processes so that we can make more informed decisions. We are actively working with the shipyards to address issues related to overall performance using proven tools such as earned value management and actively managing specific risk registers through a rigid governance system.
We are engaging with the marine sector to develop an HR strategy that aims to support industry in its ongoing work to recruit new workforce talent.
The strategy relies on the active involvement of the marine sector, including the large shipyards, and relies on a common understanding of the challenges to be tackled and the joint development of solutions.
We know that the strategy is a decade-long initiative and ongoing enhancements will be required.
That concludes my remarks. I would be pleased to answer the committee's questions.
Thank you.