Seaspan, Ottawa reach deal on three ships

Budget for Coast Guard vessels almost three times original estimate

North Vancouver’s Seaspan Shipyards has reached an agreement in principle with the federal government to build the first three offshore fisheries/Coast Guard vessels under Ottawa’s national shipbuilding program.

The agreement, announced Friday, sets a “target” price of $400 million for the three offshore fisheries science vessels and a “ceiling” of $544 million, said senior government officials.

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The total budget to put the three vessels into service — including training, project management costs and contingencies — is up to $687 million, almost three times the project’s originally estimated cost of $244 million.

That’s likely one reason for protracted contract negotiations between Seaspan and Ottawa leading up to Friday’s agreement, which will form the basis of a construction contract.

Officials said Friday the original $244 million estimate, developed in 2004, didn’t contain provision for inflation, project management, engineering or design costs and didn’t include enough contingency.

Before agreeing to the new figures, the federal government had Seaspan’s estimates vetted by an expert third party, which found them “fair and reasonable,” said officials.

Under the terms of the contract, the shipyard will receive extra incentive payments if the three ships come in under the $400- million target budget or are delivered ahead of schedule.

The government will not pay more than the ceiling price of the contract, even if costs run higher.

Government officials said Ottawa will have staff on site at the North Vancouver shipyard while the vessels are under construction to monitor costs and progress on the ships.

Some of the extra money needed to complete the project will come from already-completed helicopter and hovercraft projects, which were finished under budget.
The lion’s share — about $300 million — will be moved from an approximately $3-billion budget for 10 multi-task 65-metre and 75-metre Coast Guard vessels that Ottawa plans to build at Seaspan after the massive navy joint support ships and polar icebreaker are completed.

The imminent signing of the construction contract means work on the federal vessels will start very soon at the North Vancouver shipyard, said Brian Carter, president of Seaspan Shipyards. “This is an important day for Seaspan,” he said. “We’re very, very close to that important milestone.”

Once construction of the offshore fisheries vessels is underway, the workforce in the trades at the shipyard is expected to swell from about 200 currently to more than 500 workers.

He added that the contract will mean spinoff work for suppliers across the country. Seaspan has already contracted to spend more than $200 million with 137 companies as part of its work on the national shipbuilding program.

The first vessel is expected to be finished early in 2017, with the other two following later in that year.

The vessels will be operated by the Canadian Coast Guard and used by fisheries scientists to do assessments of fish stocks and the marine ecosystem, as well as respond to marine emergencies.

The federal government and Seaspan have yet to reach an agreement on the two massive navy joint support ships, which will also be built at Seaspan under the national shipbuilding program.

In 2013, both the parliamentary budget officer and the auditor general raised questions about whether the $2.6 billion set aside by Ottawa will be enough to build the two ships.

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