National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 1 National Shipbuilding Procurement Strategy (NSPS) Background Technical Briefing July 21, 2011

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 2 Objective To provide a brief background of the NSPS To provide an overview of the NSPS Governance Structure To provide an outline NSPS Large Ship Procurement Process, in particular the evaluation process

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 3 NSPS Background Why a new Strategy? Navy and Coast Guard fleets require renewal Government and other studies determined that individual procurements would not sustain the shipbuilding industry To end the boom and bust in federal shipbuilding All of our allies have an “NSPS” in some form Need to maximize limited budgets for fleet renewal – value for money for taxpayers Requested and supported by industry and associations

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 4 Establish a strategic relationship with two Canadian shipyards and designate them as source of supply to build Government ships over 1000 tonnes displacement, where: 1.One shipyard will build the combat vessels package Arctic/Offshore Patrol Ship, Canadian Surface Combatant 2.The other will build the non-combat vessels package Offshore Oceanographic Science Vessel, Offshore Fisheries Science Vessel, Polar Icebreaker, Joint Support Ship Set-aside smaller vessels for competition by other than the two selected yards and their affiliates Repair, maintenance and refit – Business as usual Web Site: National Shipbuilding Procurement Strategy

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 5 Enhanced Measures Unprecedented lengths to ensure the fairness, openness and transparency of this historic procurement process Regular meetings with the shipyards to develop procurement approach and Request For Proposal documents An internationally recognized third party expert (FMI) has benchmarked the capability and performance of the yards A leading consulting firm (KPMG) assisted in development of the procurement process Fairness Monitor involved to provide independent assurance that activities are conducted in a fair, open and transparent manner –interim report at RFP release: “… decisions are made objectively, free from personal favouritism and political influence, and encompasses the elements of openness, competitiveness, transparency and compliance.” Robust governance, empowered decision making, dispute avoidance and resolution – Arms length from politics

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 6 NSPS Governance Structure DM-Level Governance Committee DM/PWGSC (Chair), DM/DND, DM/DFO, DM/IC plus ex officio membership ADM-Level Interdepartmental Steering Committee ADM/PWGSC (Chair), ADM/DND, ADM/DFO-CCG ADM/IC plus ex officio membership NSPS Secretariat PWGSC (Lead), DND representatives, DFO-CCG representative, IC representative, PWGSC representatives & other resources NSPS Interdepartmental Working Group DG/PWGSC (Chair), DG/DND, DG /DFO-CCG, DG/IC plus ex officio membership

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 7 A National Competition to select 2 Canadian Shipyards: Issue a Solicitation of Interest and Qualification (SOIQ) to all Canadian shipyards to establish a short list of potential shipyards for the competitive RFP (Sept 2010) Issue a Request for Proposals (RFP) to the short-listed shipyards (Feb 2011)  Evaluate Proposals and select 2 shipyards (Summer 2011)  Finalize an Umbrella Agreement (UA) with each selected shipyard (Fall Winter 2012)  Negotiate Contracts for the individual projects Overview - Procurement Process

Vancouver Shipyards Vancouver, British Columbia Solicitation of Interest and Qualification (SOIQ) A SOIQ was issued to all Canadian shipyards to establish Short-Listed Respondents (SLR) for the competitive RFP process The SOIQ used criteria that were simple and concise while comprehensive, fair and open 5 SLRs were established from the SOIQ Irving Shipbuilding Inc. Halifax, Nova Scotia Seaway Marine & Industrial Inc. St. Catharines, Ontario Davie Yards Inc. Lévis, Québec Kiewit Offshore Services Marystown, Newfoundland National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 9 Request for Proposals (RFP) RFP documents developed in consultation with Shipyards One RFP has been released: Shipyards may submit proposals for one or both work package(s); and A shipyard may only win one work package, not both Shipyard selection will be based on best value to Canada

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale NSPS Evaluation Plan Provides direction to the NSPS Evaluation Organization Focus is on ensuring a fair evaluation Aligned with criteria & methodology included in RFP Imposes a structured process which includes: –Verification of compliance to all mandatories –Evaluation against rated criteria –Tabulation of overall scores –Determination of highest-ranking compliant Bid for each work package.

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 11 Proposal Evaluation 1 – Mandatory (Pass/Fail) 1a. Administrative1b. Legal1c. Financial 2 – Shipyard’s Current State and Plans (60%) 2a. Current State2b. Plans 3 – Cost to Canada for Upgrades and Improvements (20%) 4 – Shipyard’s Financial Situation (10%) 4a. Financial Capability 4b. Source of funding for Improvements 5 – Value Proposition (10%) The final selection of the successful yards will be done within the established governance process approved by Cabinet and in accordance with the published terms of the RFP

Umbrella Agreements (UA) & Shipbuilding Contracts UAs will be negotiated with the 2 selected shipyards to establish the framework by which Bidders’ productivity improvement and value proposition commitments will be measured and monitored over the duration of the Strategy Ensuing contracts for shipbuilding projects will be: Negotiated in accordance with the rules established in the UAs; Subject to separate Government approval; and Used by the selected shipyards to deliver the productivity improvement and value proposition commitments detailed in the UAs National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale

National Shipbuilding Procurement Strategy Secretariat Secrétariat de la stratégie nationale d’approvisionnement en matière de construction navale 13 Overall Schedule for NSPS Process MilestonePlanned Completion Date Hire 3 rd party Experts (TAS, FMI, FM) Complete pre-qualification & issue results Issue Request for Proposals to pre-qualified Shipyards Select 2 Shipyards Summer 2011 Complete the Negotiation of the Umbrella Agreements Fall 2011 Initiate Contract Negotiations for Initial Projects (Science Vessels, AOPS) Fall 2011 / Winter 2012