[PPT] - November 7, 2013 Michelle MacDonald, Senior Industrial Benefits PowerPoint Presentation

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Atlantic Supplier Session November 7, 2013

Michelle MacDonald, Senior Industrial Benefits Advisor (Marine), Atlantic Canada Opportunities Agency (Ottawa Office) www.acoa.gc.ca

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1. Large Ship Construction
Combat Vessels - to be built at Irving Shipbuilding (est. $29.3B)
Ships to be built - Arctic Offshore Patrol Ships (AOPS) and Canadian Surface

Combatant Ships (CSC)

Non-combat vessels - to be built at Seaspan Marine (est. $7.3B )
Ships to be built - Offshore Science Vessels, Joint Support Ships (JSS), Polar

Ice Breaker (PIB), Medium Endurance Multi Tasked Vessels, and Offshore Patrol Vessels.

2. Small Ship Construction
116 vessels estimated $2 B (over 30 years)
3. Maintenance and Refit
$500 M - $600 M annually

Canada’s Industrial and Regional Benefits (IRB) Policy, will apply on projects with value of

ver $100M. The selected shipyards will be required to identify business activities in Canada

valued at 100 per cent of the contract value, ensuring a dollar-for-dollar investment into the Canadian economy.

National Shipbuilding Procurement Strategy (NSPS)

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NSPS Combat Work Package (Irving Shipbuilding)

Shipyard Infrastructure Upgrades ($300M) 2013-2015
Arctic Offshore Patrol Ships (AOPS)
Acquisition of up to eight fully supported Arctic/Offshore Patrol Ships
Key sub-contractors – Lockheed Martin Canada, General Electric, Odense Marine

Technology, Fleetway, Lloyd’s Register

On track to cut steel 2015, with first vessel delivery for 2018
Status: Definition Phase (up to $288M)
Canadian Surface Combatants (CSC)
Most complex ships under the NSPS, up to 15 warships which will replace

Canada's destroyers and frigates

Procurement Strategy engagement and analysis began November 2012
Anticipated procurement strategy decision for Fall 2013
Status: Industry Engagement

NSPS Update

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NSPS Update

NSPS Non-Combat Vessels Work Package (Vancouver Shipyard)

Shipyard Infrastructure Upgrades ($200M) 2012-2014
Offshore Science Vessels
Offshore Fisheries Science Vessels (3) and Offshore Oceanographic Science Vessel (1) – critical

to department’s science mandate, as well as other gov’t departments and agencies.

Key sub-contractors - RAlion, Thales, Imtech, CSC
Project Status: Construction Engineering Phase ($13.2M).
Builds in late-2014 (OFSV) and 2016 (OOSV).
Joint Support Ships
Acquisition of 2-3 support ships to provide refueling and replenishing of ships at sea.
TKMS design selection
Build will occur prior to Polar Ice Breaker in late 2016.
Project Status: Definition Phase. ($1.4M).
Polar Ice Breaker
Coast Guard’s future Flagship, the Polar Icebreaker, CCGS John G. Diefenbaker
To be in service 2021-22
Designer: STX
Project Status: Design Phase ($11.9M).

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Small Ship Construction

116 vessels at less than 1,000 tonnes displacement, estimated to cost $2 B (over 30 years)
Open to Canadian shipyards other than ISI/VSY.

Upcoming Projects:

Canadian Coast Guard to procure up to 21 vessels over the next seven years ($488M):
For the Department of National Defence:
Large Tugs (up to 6)
Small Tugs

Maintenance and Refit

$500-600M annually

NSPS Update

Search and Rescue (SAR) Lifeboats (10)
Channel Survey and Sounding Vessels (2)
Near-Shore Fishery Research Vessels (2)
Specialty Vessels (3)
Special Nav-Aid Vessels (2)
Mid-Shore Science Vessels (2)

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National Defence –Sets Requirement/Technical Authority
Public Works and Government Services Canada –Contracting Authority, Canadian

Controlled Goods

Industry Canada –Industrial Regional Benefits Authority
Regional Agencies –Advocacy and Business development, SME supplier

development capacity

Canadian Shipyards
Provincial Governments – Business development, investment attraction
Industry Associations
Universities, Academia and Research facilities

NSPS – Key Players

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We are the regional voice in the federal IRB procurement policy and practices to support the growth and development for the Atlantic Industry. This includes:

Advocating for Atlantic interests interdepartmentally and with national and

international industry.

Ensuring the application of IRB policy on Federal Procurements.
Positioning industry to benefit from Federal investments.
Establishing a cohesive engagement of Regional players - Industry; Associations;

Provincial Governments.

Facilitating strategic engagement of Atlantic industry through targeted industry

days, contractor regional tours; and global supply chain outreach activities for aerospace, land and marine procurements.

In response to the NSPS unique sourcing arrangement for ship procurements –

ACOA’s engagement response is the Atlantic Shipbuilding Action Plan.

ACOA's IRB Role – Advocating and Responding to Opportunities

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To capitalize on and leverage opportunities related to NSPS procurements, ACOA developed the Atlantic Shipbuilding Action Plan (ASAP) ASAP is a long term strategy focused on:

Informing SMEs of potential opportunities by facilitating SME access and

identification to shipyards, Tier 1 and 2 subcontractors;

Proactively addressing SME capacity building - certifications, process improvements,

innovation gaps and skills development through ACOA programming tools;

Strategically engaging with Canadian shipyards and defence stakeholders to understand

their current and planned activities;

Leading Atlantic wide outreach, supplier development opportunities and industry

engagement to leverage industrial regional benefits; and

Coordinating with both federal and provincial partners to identify and address skills

and labour force issues and challenges.

Atlantic Shipbuilding Action Plan

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The IRB policy

Ensures Canadian companies can derive benefit from federal procurement
Contractually commits prime contractors to place work in Canada
Promotes industrial and regional development objectives
Encourages business that makes good business sense
Benefits can be direct or indirect

ACOA’s role

Regional voice in IRB procurement policies and practices
Along with IC and the other RDA’s contributes to the development,

evaluation and negotiation of IRB strategies

Lead point of contact for Prime contractors on development of regional IRB

strategies and Atlantic industry engagement

Facilitate industry engagement to lever IRB commitments

IRB’s – The Policy and ACOA’s role

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What is the IRB Policy

The IRB Policy ensures that Government of Canada defence and security

procurements generate high value-added business activity for Canadian industry.

The IRB Policy requires companies undertake business activities in Canada valued

at 100 percent of the value of the defence or security contract they have been awarded by the Government of Canada. (Typically in procurements valued at $100M and above)

The IRB obligation is a contractual commitment and part of the overall government

procurement contract.

Also known as "offsets", IRB policies are a common part of global defence and

security procurements and are practiced in one form or another in 48 countries around the world.

Canada currently has more than 60 defence and security procurements that are

subject to the IRB Policy and a portfolio of nearly 2,000 transactions and more than 700 distinct recipients.

The Government of Canada's IRB Policy is administered and managed by officials

in the IRB Directorate, located within the Aerospace, Defence and Marine Branch

f Industry Canada.

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Procurement Process and the IRB Policy

Industry Canada, as the Government of Canada's IRB Authority, works

with other federal government departments in the procurement process.

It is most commonly the Department of National Defence (DND) and

the Canadian Coast Guard that are purchasing equipment or services.

Public Works and Government Services Canada (PWGSC) is the
rganization that handles all the contracting services for each project.
The IRB Policy is part of the PWGSC procurement contract, and

defines separate IRB terms and conditions that govern the application of the Policy.

Industry Canada works closely with Regional Development Agencies

(RDAs) that are active members of the evaluation of the policy.

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Procurement Process and the IRB Policy

Once the Government of Canada decides on a procurement strategy for a

particular project, a notice is released to the public. This can take the form

f a Request for Information (RFI) or a Letter of Interest (LOI) and it is

published on MERX, Canada's electronic tendering service.

Interested bidders (potential IRB contractors) then begin the search for

Canadian capabilities and possible business partnership opportunities that meet the IRB requirements to be outlined in the Request for Proposals (RFP).

In due course, the Government of Canada, through PWGSC, publishes

the specific project RFP. As part of a response to an RFP, bidders will need to submit an IRB proposal, along with their technical and pricing

proposals. The IRB proposal contains plans that outline how the bidder

will meet the IRB obligation

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Types of IRB Transactions

An IRB transaction is the actual business activity between the IRB contractor and

the Canadian company. This business activity can take many forms but is usually takes the form of a purchase of a product or a service.

IRB contractors can meet their IRB obligations with two classes of business

activities: either "Direct" or "Indirect" IRB transactions.

Direct IRB transactions are IRB transactions containing work directly related to

the product or service that the federal government is procuring; this could include production of parts or maintenance directly on the Canadian equipment purchase. Work on approved Global Value Chain (GVC) platforms will be considered to meet a direct work requirement, as it offers significant technological opportunities on similar platforms that the IRB contractor is providing to Canada.

Indirect IRB transactions are IRB transactions containing work or investments

that are not related to the Canadian purchase. Work within the IRB contractor's

ther business lines which meet the IRB eligibility criteria, is considered indirect.

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IRB Eligibility Criteria

Causality IRB contractors must demonstrate that decisions to place business activity with a

Canadian company have a link to their IRB obligation. They need to prove to Industry Canada that the business activity would likely not have happened had it not been for the IRB requirement.

Incrementality Allows IRB contractors to use current suppliers on a particular business activity.

If an IRB contractor has an established business relationship on a particular part or service and, because of an IRB obligation, they choose to increase this work, the increase is eligible for IRB

credit. This ensures that the new work that has a link to the IRB obligation is counted but work

that was occurring before the IRB obligation is not factored in.

Timing IRB contractors must complete their obligations within a specified period of time. The

IRB period usually begins with the first formal notification to industry for a specific project and is completed at the end of the overall procurement contract. The period that IRB contractors have to compete their obligations vary from project to project.

Eligible Party This means the company that provides the IRB work to a Canadian company. An

IRB contractor and its major suppliers are eligible parties to the contract.

Canadian Content Value (CCV) CCV is measured in Canadian dollars and is the portion of the

selling price of a product or service associated with the work actually performed in Canada.

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IRB Requirements

The Bidder’s IRB proposal must equal a minimum of 100% of the bid price,

measured in Canadian Content Value (CCV).

Achievement period is for the duration of the contract.
30% of IRBs must be identified at contract signing, 30% one year later and

remaining 40% over the life of the project.

A minimum number of or percentage of the value of the contract may be

included as part of the contract, including:

SME transactions (15%)
Direct transactions (project specific)
Technology List transactions (Key Industrial Capabilities) (5%)

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IRBs and Canadian Content Value

CCV is measured in Canadian dollars and is the portion of the selling

price of a product or service associated with the work actually performed in Canada.

The Canadian company calculates the CCV for the IRB contractor.
All proposed IRB transactions must be valued in terms of the CCV .
Only the Canadian labour and materials of a particular work package is

counted toward an IRB contractor's obligation.

For example if an IRB contractor places a $1million contract with a

Canadian company and the CCV of the particular work package is 65 percent then the contractor would receive credit for $650,000.

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IRB Policy Improvements

Strategic Plans from Contractors with Major IRB Obligations (in effect):

Strategic plans from Contractors with major corporate obligations to Canada will be

required. The prime will be asked to provide a medium and long-term outlook on its

broad corporate plans for Canada. This will encourage more strategic relationships between primes and Canadian companies in terms of investments and subcontracts.

Banking of Industrial and Regional Benefit Transactions (in effect):

Contractors will be offered a limited form of banking of IRB transactions both in advance of award, and in the event of over-commitment of IRB transactions. It will allow new business opportunities to be secured when they are most likely to arise.

Enhanced Priority Technology List (EPT) (in effect):

The new Enhanced Priority Technology List aligns the IRB Policy with the emerging critical technologies of the Canadian military and encourages the development of advanced technologies in the Canadian aerospace and defence sector.

New Investment Framework (IF)—R&D and Commercialization (in effect):

The IF will encourage primes to invest in long term, innovation-focused activities in Canadian SMEs. It will encourage long term, strategic relationships, leading to increased R&D activities, market-driven technology development and more robust business development approaches.

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How to get involved

Canadian companies are able to optimize participation in IRB by following some key steps: Identify opportunities

Research upcoming and current procurements and identify who the contacts are at the major

IRB contractors;

Study the bidder's/IRB contractor's products and those of their suppliers;
Contact an IRB manager and/or officials at the Regional Development Agencies for specific

project information and advice;

Prepare a marketing plan that demonstrates how your product or service is competitive and

how it could fit with the bidder's/IRB contractor's business activities;

Make sure your company has the appropriate accreditation (ISO, Controlled Goods);
Keep your company website up to date; and
Register on the Canadian Company Capabilities List

Make contact with bidders or current IRB contractors

Make direct contact with the IRB contractors and their major suppliers and present your

marketing plan.

While IRB officials can help point companies toward each other, it is up to you to make

contact and sell your product or service. Network

Gather additional intelligence; and make contacts through trade associations, industry days,

conferences and trade shows.

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How to get involved

Engaging with IRB contractor major suppliers

In most projects, the IRB contractor will ensure that their major suppliers are involved in their IRB plan, which means Canadian companies can then look to work with some of the major suppliers of some of these large IRB contractors. Each IRB contractor leverages their major suppliers to help them deliver their IRB

bligation, including:

Best efforts:

No formal arrangement, suppliers do their best to utilize Canadian sources to help

ut the IRB contractor.

Flow down:

IRB contractors contractually flow down IRB commitments to their major suppliers.

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