High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
The National Shipbuilding Procurement Strategy (NSPS) is a groundbreaking program by the Canadian federal government to determine which of four Canadian shipyards will build the next generation of naval vessels. This program will not just impact specific shipyards but, depending on the yards chosen, will provide hundreds of jobs and heavily impact the economies of the regions in which the yards are located.
Signed in June of last year, the NSPS project looks to establish a strategic relationship with two Canadian shipyards, selected through an open and fair national competition, and designate them as sources of supply, one for combat vessels and the other for non-combat vessels. The project also contains separate strategies for ship repairs and small vessel construction.
The cost of all parts of the proposal is expected to exceed $35 billion.
The CBC reports that Irving Shipbuilding of Halifax Novia Scotia, which holds the current contract to build 80% of Canada’s Surface Combatant fleet, is the odds-on favorite to win the grand prize… a massive contract to build up to 15 warships at a total cost of $25 billion over the next several decades. Of the yard’s ability to meet the proposed requirements the company’s president, Maine Maritime Academy alumni Steve Durrell, recently said, “We’ve been careful to ensure that all of the work that we’re doing, all the processes we’ve implemented are scalable, scalable to be able to implement the new work. Most visibly you will see the physical plant change.”
Due to the size of the contract, and the potential for new jobs, Durrell has been supported by Nova Scotia officials who have invested $ 100,000 in a public relations campaign which includes advertising, videos and an informational website. But this amount is small compared to the bid itself. One competitor, Vancouver Shipyards, has reportedly spent more than $1 million just to prepare their bid which contains over 30,000 pages of documents in 125 binders.
Chantier Davie Canada shipyards, a Canadian-Korean consortium, decided not to bid for the new navy ships instead focusing it’s efforts on the non-combatants. A report by The Standard, a newspaper covering the region just West of Niagra Falls, reports that, if approved, the proposal to build these ships could bring $8.5 billion and over 500 jobs to Lake Ontario. The non-combatants portion of NSPS includes the construction of a new oceanographic research ship, three fisheries research vessels, a polar icebreaker, and two navy support ships, with an option for a third.
Canadian shipyards on each coast are waiting for news on the proposals which were submitted in July 2011. According to the government website, each proposal has been reviewed and the short-listed shipyards are being assessed based on their shipbuilding experience, capability and ability to perform. In addition, each is being evaluated on their “commitment and value propositions”.
John Dewar, Upper Lakes’ vice-president of strategic services and a supporter of Chantier Davie’s proposal said, “I am expecting an announcement probably next week.”
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