Thank you very much, Mr. Chair.
As my colleague noted, Public Services and Procurement Canada also welcomes the Auditor General's report and is committed to working with its partners to ensure that Canada's Arctic waters are safe and secure. We are in full agreement with the Office of the Auditor General that such equipment must be acquired in a timely manner.
For Public Services and Procurement Canada, that means supporting our federal partners with the procurement of equipment and capabilities needed for effective Arctic water surveillance, which is being done through Canada's national shipbuilding strategy.
The national shipbuilding strategy is one of the largest and most significant endeavours undertaken by Canada. It focuses on not just equipping the Royal Canadian Navy and the Canadian Coast Guard with much-needed vessels, but also strengthening Canada's shipyards and rebuilding Canada's marine industry, which is an important source of high-skilled jobs.
That includes small‑ and medium‑sized businesses which make up some 90% of Canadian marine industry firms.
The shipyards that are awarded contracts under the national shipbuilding strategy are responsible for sourcing things like materials and technology for their respective shipbuilding projects.
Through the provisions of the government's industrial and technological benefits policy, which focuses on generating economic benefits here at home, hundreds of Canadian businesses are securing that work. Those businesses are growing, investing in innovation and getting traction in export markets.
While acting as an economic driver and successfully delivering a number of vessels, as well as completing repair and refit work, the strategy is also facing significant challenges. Due to the pandemic and other global events, we have several new factors to deal with, such as inflation, commodity pricing and supply chain disruptions, which have all affected the cost and availability of materials. This is on top of increasing labour shortages. The report from the Office of the Auditor General is quite valuable as we work to counter the impacts of these challenges.
I would like to give an update on the action plan to address the recommendations provided to our department.
Part of our management action plan to address the report's findings outlines ways to make sure that delivery schedules are more accurate, including by making improvements to how we monitor and report on the progress of the projects. The goal is to identify potential delays and cost overruns earlier in the process.
The action plan maps out continued efforts to ensure that we are properly and effectively integrating schedule, costs, and scope in how we measure performance.
In addition to the implementation of this management action plan, the government's efforts to acquire equipment in a timely manner are also supported by the integration of a third shipyard into the national shipbuilding strategy. Bringing on a third shipyard is a significant factor in addressing the concerns raised in the AG's report that are under discussion today.
Specifically, the third yard will be responsible for building one of the two polar icebreakers and six program icebreakers for the Canadian Coast Guard. In June of last year, the Government of Canada announced the beginning of negotiations with Chantier Davie of Lévis, Quebec to become the third strategic shipbuilding partner under the NSS. That process is in the very final stages of completion. Contracts for each polar and program icebreaker will be negotiated following the signature of an umbrella agreement with the third shipyard. Of course, the lessons we learned from the revised approach to project management, costing and scheduling will be applied as we draw up and manage these new contracts.
In conclusion, Mr. Chair, I think it is also worth noting that we have seen, around the world, how shipyards typically increase their efficiency over time as they mature. Canadian shipyards are no exception. This is particularly true for longer production runs of ships. For example, Canada has seen good progress in the Arctic and offshore patrol ships program, with three ships delivered so far and the cost per ship decreasing. As we continue to deliver on the NSS, and as the Canadian industry continues to gain more experience along the way, we expect to see even more efficiencies.
Mr. Chair, I can tell you that PSPC will continue to work with its partners to mitigate the project delivery risks for the NSS, so the Royal Canadian Navy and the Canadian Coast Guard get the vessels they need to do the job.
Thank you. I'll be happy to take your questions.