Final Evaluation of the Structured Financing Facility — Final Report
3.0 Findings (continued)
Issue 4. Has the SFF helped ensure that shipyard capability exists for federal procurement and maintenance needs in 2009 and beyond?
Finding: The SFF has played a role in ensuring that shipyard capability exists in Canada for federal procurement and maintenance needs. The program helps maintain skilled staff at both medium and large-sized shipyards.
The objective of the Structured Financing Facility is to help ensure that shipyard capability exists until there is sufficient government procurement to provide the activity base to make the industry self-sustaining. The SFF is currently envisioned as an interim measure to maintain shipyard capability until such time as the NSPS is implemented. (The exact implementation date for the NSPS is unknown but is expected within three years.) In order to meet the expected procurement requirements of the NSPS, Canadian shipyards must maintain and enhance the following capabilities:
- Project management expertise and development
- Development of partnerships (provinces, other enterprises)
- Business practices demonstrating continuous improvement ,and
- Infrastructure investment.
The contribution of SFF-funded projects to developing each of these capabilities is as follows:
- Project management — Project management practices (e.g., the Earned Value Management System) are used in all the recipient yards. The Earned Value Management System is an established practice recognized as a value-added feature of operations.
- Development of partnerships — Relationships are fostered between the large yards and neighbouring post-secondary institutions to foster skills and training relevant to the industry (more below). The supply chain for marine industries is such that many component parts are sourced from small and medium-sized enterprises. Specifically, 65% to 85% of total project costs (equipment or work elements) are Canadian-sourced, implicating other businesses generally in the shipbuilding delivery process that takes place in a yard. As well, sub-contracting is a common and growing practice in yards, necessitating the establishment of a network of partners in some form or other to deliver a ship.
- Business practices — A range of business practices in support of continuous improvement were identified in project profiles. One yard is applying Lean manufacturing principles, on more than one project. Another yard is using asset betterment approaches. Mobilization, maintain, and demobilization (MMD) practices are occurring in recipient yards alongside other types of occupational health and safety training. Where feasible, yards are seeking ISO certification, recognizing the value to the business enterprise of doing so.
- Infrastructure investment — One of the large yards noted that it has an infrastructure investment plan in place that assigns a percentage of profits to ongoing infrastructure development. However, this process is likely independent of whether or not SFF funding was received. Other yards reported that the challenging circumstances facing the marine industry create challenges to the development and enhancement of infrastructure.
Evidence shows that the SFF helps to maintain skilled staff at both medium and large-sized shipyards. By helping bring work to medium-sized shipyards, SFF funding has increased the likelihood that the shipyards will be able to bid on the smaller vessels under the NSPS. Furthermore, interviewees indicated that East Isle would likely have closed without SFF-funded projects.
As for large-sized shipyards, both WMG's Vancouver Drydock and the Irving Halifax Shipyard (both of which received SFF funding) were recently short-listed as potential suppliers (among the five) to build the larger ships under the NSPS. Interviewees at these yards indicated that SFF-funded projects helped the shipyards maintain capacity. The conclusion that can be drawn is that SFF funding has aided these yards in developing their capabilities and consequently their potential to be short-listed as potential NSPS suppliers. However, although the program augmented activity in Western Canada shipyards, these yards reported that it was not essential, to their survival as refit and life extension for Canadian Navy and Coast Guard ships provided a source of relatively steady work.
It must be noted that although the SFF is not the sole cause for the shipyard capabilities evident in recipient yards, SFF funding nonetheless played an instrumental role in facilitating projects where these capability enhancements were being implemented.
Issue 5. Were the shipbuilders and ship owners targeted by the program appropriately aware of the SFF and its potential benefits?
Finding: Industry Canada promotes the program and its potential benefits to Canadian shipbuilders. Promotion of the program on the international stage is more limited.
A portion of the program budget is targeted to promotions and advertising. Communications material is available for distribution via print and electronic media. Within Canada, program officers use shipyard site visits for outreach and program promotion as well as to fulfill program requirements.
On the domestic front, roughly 30 shipyards in Canada are of sufficient size to undertake work that meets current SFF criteria. Industry Canada contacted these shipyards at the start of the renewed program to ensure they were aware of the SFF, and the program continues to communicate with shipyard representatives. Most shipyard representatives interviewed actively encourage and assist customers in their applications for SFF funding if the project is eligible for funding.
On the international front, promotion is largely limited to attending marine industry conferences. Representatives from Industry Canada attend international tradeshows in New Orleans, Hamburg, and Oslo and have created communications material to support these efforts. The program does not collect data that would enable an assessment of the awareness levels of potential buyers (domestic or foreign).
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