Contracting For Transportation

The Canadian navy's sea-lift capacity has been mentioned previously in these quarters, in the context of the rumoured Conservative plan to pay-off the existing Protecteur-class replenishment ships a full two years before their replacements, the Joint Support Ships come into service. This issue resurfaced, indirectly, in Eric Lerhe's comments about the recent tank purchase, and the transportability of CF equipment. As it stands now, if the CF has to deploy a new squadron of tanks, in a cost effective manner, within the next six years, it will have to do so by chartering commercial sea lift, because the military currently doesn't have the required sea lift capacity.

Aside from the tanks, the low cost of shipping equipment by sea, versus air, will guarantee a requirement for sea lift in support of CF operations abroad, as has been the case with Afghanistan, where virtually all Canadian equipment was delivered by chartered air and/or sea lift. Even after the three new JSS come online, a requirement for occasional sea chartering will most likely remain to meet the requirements of unexpected deployments.

In this context, it is worth noting a recent study of Canadian contracting for transportation. As was briefly mentioned in the Ottawa Citizen April 11, an internal audit of contracted transportation has led to a military police investigation surrounding contracting irregularities on almost $100M in contracts. The investigation stems from an August 2006 Chief Review Services Audit of Contracting for Transportation that found problems with the vast majority of sampled contracts. While the study compared sea-based contracts favourably with air-chartering, the evaluation pointed to significant problems with sea-lift contracting. Without going into the full contracting minutia, some of the highlights for seaborne transportation include:

  • Only 9% of contracts were signed by the proper authority
  • 82% of the investigated contracts exceeded the contract ceiling
  • Another 82% of the contracts did not properly define the deliverables
  • 18% of the contracts lacked proper supporting documents

Although chartering may generally be a cost effective means of providing a short-term capability, as required, this investigation certainly raises questions about the manner in which the CF has obtained contracted transportation in the past. Although the Citizen article notes that DND has already dismissed one employee as a result of the investigation, the study calls into question the price paid to date for contracted transportation. Minister Gordon O'Connor recently cited a figure of $11M a month for air chartering in support of the Afghan mission alone. If one looks at the last fiscal year, this $132M cost for air chartering would represent over 16% of the $813M incremental mission cost of operations in Afghanistan, and this doesn't include the cost of transporting the equipment by ground to the airport, or account for any equipment sent by sea.

Given the magnitude of the costs involved in contracting for transportation, and the associated contractual problems, the three proposed JSS, which will cost a little over $48M/year each under the new accrual accounting system, sure don't seem like such a daunting investment. The project is currently still in the definition phase, and a contract is not expected until 2008, with Initial Operational Capability coming in 2013. ThyssenKrupp Marine Systems Canada Inc. and SNC-Lavalin ProFac Inc are currently competing for the final bid, which will result in the ship being built in a Canadian shipyard.

Given that the JSS' sea-lift capability will come in addition to their vital replenishment at sea functions, the government should get on with the purchase.

Anyone interested in the ability of the Canadian shipbuilding industry to complete this project can check out VAdm (Ret'd) Peter Cairns' article "Shipbuilding and Industrial Preparedness," in Canadian Naval Review, Volume 2, No. 3.