Canada: Technical Briefing on the NSPS

Yesterday, Office of the Auditor General of Canada released the Fall 2013 report that examined a number of issues which government has been struggling to address. The report also covered the National Shipbuilding Procurement Strategy (NSPS).

The audit covered both NSPS and the military acquisition projects for three ships—the joint support ship, the arctic offshore patrol ship, and the Canadian surface combatant. The Auditor General examined whether the departments designed and are managing the NSPS in a way that will help sustain Canadian shipbuilding capacity and capability to procure federal ships in a timely, affordable manner.

Specifically, the audit examined how risks, analyses, long-term support requirements, lessons learned, key controls, governance, oversight, and performance measures were integrated into the design of the NSPS and implemented accordingly.

The audit also examined how National Defence and Public Works and Government Services Canada (PWGSC), in consultation with the Treasury Board, managed the acquisition of the three military ship projects to align with the NSPS, including risk management, support to decision makers, and challenge function.

Conclusion of the Auditor General

The audit concluded that National Defence, Public Works and Government Services Canada (PWGSC), Industry Canada, and Fisheries and Oceans Canada have designed and are managing the National Shipbuilding Procurement Strategy (NSPS) in a way that should help sustain Canadian shipbuilding capacity and capability. The competitive process for selecting two shipyards that was led by PWGSC resulted in a successful and efficient process, independent of political influence, carried out in an open and transparent manner.

Following the selection, the shipyards negotiated changes to the terms of the draft umbrella agreement that was included in the request for proposals (RFP) to ensure they would be compensated for their capital investments should a project be cancelled, delayed, or reduced in scope. Based on lessons learned from the RFP issued under the NSPS and the negotiations that came after the winning bidders were selected, Public Works and Government Services Canada should consider how the terms of future RFPs could be made clearer and more explicit as to the extent of negotiations of post-bid changes with successful contractors.

As the 30-year Strategy is still in its early stages, not all performance measures are in place. Departments have identified potential risks and how they intend to mitigate these risks. To ensure that Canada acquires federal ships in an affordable manner, PWGSC, supported by Industry Canada, National Defence, and Fisheries and Oceans Canada, needs to regularly monitor the productivity of shipyards in terms of competitiveness, cost-effectiveness, and efficiency, including measuring progress against the target state.

The audit also concluded that National Defence and PWGSC—in consultation with the Treasury Board of Canada Secretariat—are, to date, managing the acquisition of military ships in a timely and affordable manner following the National Shipbuilding Procurement Strategy. Because budget caps were established early in the planning process, National Defence has reduced the expected number of military ships or their capabilities to remain within budget.

The NSPS audit report

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SBT Staff, November 27, 2013