Evidence of meeting #19 for Government Operations and Estimates in the 44th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A recording is available from Parliament.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Ms. Cianfarani.
We'll now go to our second round and Mr. McCauley. You have five minutes.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Thanks, Mr. Chair.
Gentlemen, welcome.
I have a couple of questions for you.
We're talking about productivity. How is it at ISI compared to say, peer countries right now? I've seen anywhere from one-eighth of the productivity to one-quarter of the productivity at peer countries' shipyards. Have you done that comparison?
Conservative
President, Irving Shipbuilding Inc.
Our productivity is lower than that of other shipyards in North America that are building ships of a complexity that is similar to what we're doing right now.
Conservative
Kelly McCauley Conservative Edmonton West, AB
How much lower?
Again, I mean a ballpark estimate. I'm not going to hold you to it as a.... Is it one-half or one-fifth?
President, Irving Shipbuilding Inc.
I think it would vary by the shipyard. It's within 20% to 30% of Bath Iron Works in Maine, for instance, which would be one that is right down the road.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Here's a similar question.
On COVID, how did our peer countries deal with this at their shipbuilding sites? I mean no offence, but we hear a lot at this committee about COVID. I've contacted or looked at some of our peer countries, and they've been able to steam through that without a million lost work hours, as I think you commented.
How has it affected other shipyards compared to...?
President, Irving Shipbuilding Inc.
It's had a severe impact on shipyards. I was just in BAE shipyard in Glasgow last week. We had very direct discussions about the impacts. Their impacts were not quite as bad as ours, but they were bad.
I think it's probably appropriate to point out here there was a risk-averse approach to COVID taken in Nova Scotia. That had a very direct impact on us. We followed the lead of the medical authorities—
Conservative
Kelly McCauley Conservative Edmonton West, AB
I appreciate that. Let me just move on.
I want to chat about the AOPS a bit. As my colleague mentioned, it had been reported previously that it was $400 million per ship. Now, I know not every single one costs that, but for the first five it was an average of $400 million. Then when the sixth one came out, the cost was announced as $800 million. When my colleague talked about $400 million per ship, he was talking about the average for the first five that had been reported. Now it's $800 million. The last two for the Coast Guard are now, I think, $750 million per ship.
Walk us through this. As you're gaining experience and your productivity's increasing quite dramatically, the costs should be coming down rather dramatically. How is it that they're going the other way so dramatically?
President, Irving Shipbuilding Inc.
Let's try to get the numbers correct so that we're all speaking on an equal footing here.
As I mentioned earlier, the 800—
Conservative
Kelly McCauley Conservative Edmonton West, AB
What is the cost? We've been asking for years and we never get a straight answer from anyone. What is the cost per ship for the first five?
President, Irving Shipbuilding Inc.
The approximate cost for the first six ships is $500 million per ship.
Now, you have to remember that the first ship contains a significant number of non-recurring engineering costs—
Conservative
Kelly McCauley Conservative Edmonton West, AB
No, I understand that. The first one may be $750 million, and then the costs come down, yes.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Where did it get reported that the sixth one was $800 million, then, and why are the costs for these two Coast Guard ships so high?
President, Irving Shipbuilding Inc.
I was not here at that time. My assumption is that it was a contract for five ships that was modified to be a contract for six ships.
Conservative
Conservative
Kelly McCauley Conservative Edmonton West, AB
Is $750 million per ship for the Coast Guard accurate, then?
President, Irving Shipbuilding Inc.
I don't know where that $1.5-billion number came from. We recently submitted an estimate, and that was not the number we submitted.
President, Irving Shipbuilding Inc.
We're in negotiations with the Coast Guard on that right now, but it is nowhere near $1.5 billion.
Conservative
Kelly McCauley Conservative Edmonton West, AB
You understand how a lot of these numbers bounce around, because we ask questions and we don't get answers.
What is the estimate, then?
President, Irving Shipbuilding Inc.
We have yet to negotiate the terms and conditions of the contract. The terms and conditions drive how much it's going to cost to build the ship.