Public Accounts Committee on May 25th, 2021

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I will repeat my question, Ms. Thomas. Do you think Public Services and Procurement Canada should be more transparent and report more frequently to Parliament on the progress of the shipbuilding strategy, given the enormous cost of every delay for Canadians and for government budgets?

[Casey Thomas]

Concerning reports, since our audit focused on deadlines, I cannot tell you right now whether the frequency of reports is adequate. I don't know whether I have understood the question, as technical problems caused me to miss a good portion of the previous conversation.

If that's okay with you, I could answer you in writing, after the meeting. It would be my pleasure to do so if it helps complete what I just said.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I will send you my question because I don't want to take up my colleagues' time.

[The Chair, Conservative, Kelly Block]

Thank you, Mr. Berthold.

We will now go on to Ms. Yip for six minutes.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you. My first question is for Mr. Sargent.

Could you tell us why there are two polar icebreakers needed for the Coast Guard operations in the north, when the audit report shows that only one polar icebreaker is noted?

[Timothy Sargent]

To take the second part of your question first, it had always been part of the Coast Guard fleet renewal strategy that we would have two polar icebreakers. Until very recently, only one of those icebreakers was funded. I would assume, although my colleagues from the Office of the Auditor General can speak for themselves, that that is why they focused on that one—on just the one polar icebreaker.

As to why the Coast Guard requires two polar icebreakers, it's important to understand that you can't run something as big and complicated as an icebreaker for the full 12 months of the year, year in and year out. There will always be times when you need to take it in for routine maintenance and routine refit. For three months out of every 12, we would normally expect the icebreaker to essentially be in the shop, as I say, for routine maintenance and routine repair.

If you want to have year-round coverage in the Arctic—which is very much the goal to do all the things a polar icebreaker needs to do to meet supply, to assert Canadian sovereignty, for search and rescue, for Arctic science—you need to have two polar icebreakers so you can cover off those three months.

The other motivation that is quite important is that if a polar icebreaker gets into trouble in the high Arctic, it's going to need another polar icebreaker to go to its rescue. Rather than relying on another country—which might take a very long time to get to the scene of the problem—having two polar icebreakers means that if one is in trouble, the other one can go in and rescue it.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

The polars are being built at separate yards. How are you ensuring that there is commonality in the construction of these ships?

[Timothy Sargent]

Both the yards are using the basic design, which was completed, if memory serves, in 2014. When we separated the yards, it was in part because we wanted to get one of these ships in service by 2030, which is when the Louis S. St-Laurent will come to the end of its useful life. I'm going to ask Andy Smith, who is the deputy commissioner of shipbuilding, to expand a little on the commonality.

[Andy Smith, Deputy Commissioner, Shipbuilding and Materiel, Canadian Coast Guard, Department of Fisheries and Oceans]

Thanks very much.

With respect to commonality, both shipyards will leverage the design that was done—the ship design, the hull form and the general layout of the ships—and that has been completed. In the interest of minimizing in-service costs, we will identify a number of key systems for which we are looking to incentivize the yards to select the same equipment. It really doesn't matter which shipyard proceeds first in that selection process—for example, main engines, propellers, shafting and some of the bigger equipment. When they do their procurement process, we'll be looking to have one shipyard have the option to have the other shipyard select the same equipment from the same supplier.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

Mr. Matthews, acknowledging that current vessel life extension efforts are effectively at their maximum, how do you address the concern that this will be cutting it close?

[Bill Matthews]

There are two things.

Number one, I'll speak to the new-build projects and maybe turn to my colleagues from National Defence and Fisheries and Oceans to talk about any other mitigation measures for the existing fleets.

This means it is absolutely critical to work with existing yards on nailing down schedules that are precise as possible. I want to reiterate that shipbuilding is never risk-free. We're still talking about COVID and what the impact might be. We need to ensure that we have really good clarity on the schedules. Advance warning of any bumps in schedules means the Coast Guard and the Royal Canadian Navy can take appropriate actions to adjust if there are scheduled delays.

I'm not sure if Jody or Tim want to add to that.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Do you feel that the navy and the Canadian Coast Guard will be able to meet domestic and international obligations?

[Bill Matthews]

I think, Madam Chair, we'll have to let Defence, Fisheries and Oceans and the Coast Guard answer that.

[Jody Thomas]

Thank you, Madam Chair.

I think that question would be best answered by the commander of the Royal Canadian Navy.

[VAdm Craig Baines]

Thank you, Madam Chair.

As schedules are refined over time and we manage the transition between the Halifax class and CSC, our intent is obviously to maintain the appropriate operational flexibility for the Government of Canada. We have full confidence that once those schedules are better known, we'll be able to come up with an appropriate transition plan for the Halifax class frigates.

Thank you.

[Timothy Sargent]

Madam Chair, let me say on behalf of the Coast Guard that we're committed to making sure we continue to deliver critical services until the new ships are delivered. Up to now, we've employed a variety of interim measures, including purchasing used icebreakers, as well as vessel life extension. We'll do what we need to do.

[The Chair, Conservative, Kelly Block]

Thank you very much, Ms. Yip.

We will now go to Monsieur Blanchette-Joncas for six minutes.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

I will come back to the question I put to Mr. Matthews earlier.

Huge investments in the national shipbuilding strategy seem to be eroding owing to political decisions. I am very concerned by this. It seems to me that leadership, in this whole process, comes from political power, which hinders the sound management of public funds.

I have concerns about what is to come. I wish I did not have to say it to you like this, but I have the disagreeable impression that this anticipated slide could not be contained as long as you are only executing the government's political orders. Right now, I feel that you are abdicating your advisory responsibility.

I would like to hear your comments on this.

[Bill Matthews]

On the schedule delays, Madam Chair, I have a few points to offer here.

Number one, the initial schedules, way back when, were indeed not realistic. As time marched on, people realized that those initial schedules just weren't going to hold, and there were adjustments made.

The other piece here is that we learned that seeing labour force or production gaps in the shipyards is detrimental to the overall strategy. When you see a production gap.... The Irving shipyards afford a great example. We saw that there would be a gap between ships and that there was risk to the labour force. That leads to long-term costs, so actions were taken to close those gaps.

Those are the kinds of risks that are being managed from a program perspective.

To the original point, this was more a matter of budgets and schedules, way back when, just not being realistic. We continue to learn as the yards gain experience in terms of building up their expertise, but also in understanding on what schedule they can deliver.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I heard and understood what you said about learning from past experiences. The Auditor General's recommendation, under point 2.49, is the following:

Public Services and Procurement Canada should consider the experience of the first 2 shipyards in determining a schedule to achieve target state for the third shipyard.

Is Vancouver Shipyards—Seaspan—considered to have met the target? If not, when can we reasonably expect the company to apply this and meet its target?

[Bill Matthews]

Thank you, Madam Chair.

An important recommendation for the Auditor General as we work through the third yard process.... I mentioned earlier that the early days of the national shipbuilding strategy were characterized by overly optimistic forecasts—on all sides, frankly. Taking those lessons learned, both in terms of schedules but also in terms of the challenges in reaching target states for both VSY and Irving shipyards—and they have not yet reached target state—is important as we work with Chantier Davie to go through the third yard process.

I will turn to Simon Page to add some details concerning target states.

[Simon Page, Assistant Deputy Minister, Defence and Marine Procurement, Department of Public Works and Government Services]

Thank you, Madam Chair.

Thank you for the question, Mr. Blanchette-Joncas.

As for the Vancouver shipyard, we have not yet achieved target state, as Mr. Matthews specified, but we are nearly there. We are working on a corrective action plan to deal with the last elements of achieving target state. Out of the 158 elements to consider, we have a few left to examine at the Vancouver shipyard. All those lessons will be useful to us in the qualification and the framework agreement processes with the Davie shipyard.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Page.

When will the Irving shipyard meet the target?

[Simon Page]

Concerning the Irving shipyard, a full assessment will be carried out in fall 2021. Our goal is to obtain the assessment results in early 2022. We will quite possibly find that it is in the same position as the Vancouver shipyard and develop an action and correction plan to finalize the process.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Regarding the Davie shipyard, can you tell us when it should meet its target?