Final Evaluation of the Structured Financing Facility — Final Report

Executive Summary

Program overview

The objective of the Structured Financing Facility (SFF) is to help ensure that shipyard capability exists for federal marine procurement and maintenance requirements. The program provides contributions to reduce the interest or leasing costs to customers of Canadian shipyards when building or modifying vessels or offshore marine structures.

The program began in 2001. It was renewed in 2007 with funding to March 31, 2011 and program authority until March 31, 2013. In June 2010, the Government of Canada announced a new National Shipbuilding Procurement Strategy (NSPS) to develop and implement a long-term approach to shipbuilding procurement to meet federal government needs. In this current context, the SFF is intended to act as a "bridge" to help ensure that Canadian shipyard capability exists in advance of the implementation of the NSPS.

Purpose of Evaluation and Methodology

The overall purpose of this evaluation was to assess the relevance and performance of the SFF; provide evidence-based information for decision making; and fulfill the Treasury Board Policy on Evaluation requirements. The evaluation covers the period from July 2007 to March 2011 for projects that were approved under the renewed terms and conditions. During this period, eight projects were funded.

The evaluation was based on multiple lines of evidence. Interviews were conducted to gather in-depth qualitative information. Five case studies were conducted covering buyers (including one foreign buyer) and builders on both coasts. The purpose of the case studies was to obtain an overall understanding of funded projects and to understand the impacts at the local level. Program documentation, files and data were also analyzed for the evaluation.

The evaluation encountered a number of challenges that limited the extent to which the relevance and performance of the SFF could be assessed:

• First, a baseline of Canadian shipyard performance and capacity was not established. This made it difficult to assess the impact of the SFF on revenues, exports, employment levels, skill levels, tonnage capacity, and capacity utilization levels.
• Second, post-project reporting was often incomplete and inadequate. This limited the ability to measure the impact of the SFF.
• Finally, the absence of a comparison group made it difficult to identify what the results would have been had the SFF not existed.

Conclusions

Relevance

In the 2010 Speech from the Throne, the federal government noted its commitment to support the sustainable development of the domestic shipbuilding industry through a long-term approach to federal procurement. From this perspective, the SFF supports the government priority and helps meet the need to help maintain capacity and ensure the presence of a competitive shipbuilding industry prior to the implementation of the NSPS. The SFF is also consistent with federal roles and responsibilities.

Performance

The SFF contributed to the creation of demand in Canadian shipyards. It played a role in reducing the price disadvantage relative to foreign bids to a point where the residual was small enough to tip the balance in favour of Canadian shipyards. For the period between 2007 and 2009, the $18 million invested by the SFF helped Canadian shipyards win $134 million in contracts. In total, SFF-funded projects made up 38% of total industry revenue.

It is difficult at this stage to determine whether these investments will contribute to ongoing demand because the current iteration of the program is fairly new and shipbuilding activities are fairly long term. However, Canadian shipyards have developed and strengthened niche markets in areas such as cruise ship refitting, tugboat building and electronic control systems, in part because of the SFF.

The success of Canadian shipyards in winning these projects contributed to the maintenance of shipyard capabilities that will be necessary to meet the future procurement and maintenance needs of the federal government. More specifically, SFF-funded work supported the retention of skilled staff in both large and medium-sized shipyards and the implementation of innovation and productivity improvements. The program had its greatest impact on medium-sized yards. There is also evidence to suggest that, without the program, at least one shipyard might have closed.

Overall, the ratio of administrative costs to total program costs and the funding level contribution were reasonable.

In terms of areas for improvement, the evaluation found that potential projects may be lost due to an inability to receive SFF approval early in the bid preparation process. The evaluation also found that smaller projects which could potentially contribute to meeting future federal procurement needs do not qualify under the SFF eligibility criteria.

Lessons Learned

The SFF has approved funding until March 31, 2011. Given this, there are no recommendations. Instead, the following lessons learned are presented in the event that the Government allocates new resources to the program or establishes a similar program in the future.

Lesson Learned 1: At the outset of a program, baseline data should be established. This will assist in measuring progress towards the achievement of outcomes.

Lesson Learned 2: The eligibility criteria of a program should consider allowing for the full range of projects that would support policy objectives to be eligible for funding.

Lesson Learned 3: The project approval process should be timely to ensure that bids are not lost due to approval delays.