(Ottawa, ON; 17 Jan. 2015) The Conservative government announced Friday it has signed a contract for five Arctic patrol ships for the navy vessels, with the possibility of a sixth depending on a number of circumstances related to the operations of the contracted Irving shipyard.
The announcement cleared up any questions of how many ships the federal government would in fact purchase with the $3.1-billion budget for the Arctic/Offshore Patrol Ship program. The government further announced that the program budget was being expanded to $3.5-billion to ensure the delivery of up to six ships, a milestone, according to government officials, in the federal government’s, $35-billion National Shipbuilding Procurement Strategy launched in 2010 as a co-operative program with industry to support qualified Canadian shipbuilding and create upwards of 14,500 jobs over a quarter century.
The program includes supply ships and warships for the navy, patrol vessels and an icebreaker for the Coast Guard, and the Arctic/Offshore Patrol Ships (AOPS) to be built by Irving Shipbuilding in Halifax. Because the initial plan called for up to eight vessels, and the program was designed to deliver between six and eight, there is some debate over the decision by government ot accept sfive an perhaps six if the shipyard is capable. Friday’s contract with Irving Shipbuilding guarantees only five ships, but there is strong desire for a sixth if Irving can get it done. According to sources, the president of Irving Shipbuilding, Kevin McCoy, has said he believes the company will build the sixth ship.
The contract includes costs for the ship and the shipbuilding, and a separate fee charged by Irving to account for profit. If Irving keeps its costs down enough to get the sixth ship built, the fees go up. If the costs go up, the fees go down. This incentive payment program will reward Irving so that our overall profit is maximized
Could such a pursuit of low costs and higher profit lead Irving to pressure subcontractors to reduce their costs and help Irving win the work on as many new vessels as possible? Certainly McCoy says Irving applies that streamlined approach inhouse too.
Production is expected to begin in September during the lead up to the next federal election with the first ship due in 2018. And a new ship will be launched every nine months after that.
The much richer combat-ship program will follow at Irving’s Halifax shipyard. That program is worth roughly $25 billion and specifices the construction of 15 combatant ships to replace the Halifax-class frigates and Iroquois-class air defence destroyers.