Prior to our SSI Americas User Conference earlier this month I attended the second of two workshops focused on developing a National Network for Innovative Marine Research and Training in Canada. The first was held at the University of British Columbia (UBC) in Vancouver and the second at Memorial University in St. John’s.
The timing of these workshops is no surprise. Although there was general agreement that the network should not be focused on or driven solely by the National Shipbuilding Strategy (NSS) I think everyone realizes this is where the momentum comes from and why participation has been good.
And even though the network is supposed to be broader than the NSS and more inclusive than just shipbuilding, it was generally agreed by those involved in the design, engineering, and construction of ships in Canada that a national network focused on those areas is something that is sorely needed.
Despite an effort to not focus on NSS, I can’t help coming away from the workshops mostly with thoughts about the NSS, and what it means for SSI and for ship design, engineering and construction in Canada. I have been involved in non-Canadian national shipbuilding and research programs, often helping customers and the industry to make the case that engineering work, as well as construction, should be done domestically, rather than shipped overseas. In virtually every one of those cases (with the exception of our US team) we have been an international supplier supporting some part of a domestic process. This is the first time where SSI has truly been one of the domestic suppliers arguing for preference due to that fact that we are a domestic supplier. And it’s more difficult than I expected.
Arguing that another business should make decisions, based on nationality alone just doesn’t feel like it fits either SSI as a company or Canada as a country. Don’t get me wrong, I am not saying that the NSS is focused on doing things in Canada no matter what. In fact: I’m saying that I trust that people in the government with more knowledge and insight than I have sat down and determined that the NSS, as a whole, is better for Canada.
Our job as domestic companies in domestic opportunities is to ensure the right people, whether in industry or government, have all of the information we think they need to make decisions in our favor. The fact that we’re a domestic company has initial value to the Canadian government due to the economic spin-offs of buying and investing at home. But other than the prime contractors, most companies are not selling to the government directly so this value isn’t always directly considered. This is where Industry Technical Benefits (ITB) and the quality of the prime contractors’ value proposition to government come into play. For some organizations and situations these direct strategies do work.
However, I feel that the true value of some types of technology can only be assessed as a value proposition when looked at from a viewpoint even broader than that of the prime contractor – for example when it impacts long term operation, maintenance and lifecycle costs. Assessing this value typically falls to the owner operator, the government in this case. Unfortunately, I dare say that sometimes the government isn’t best positioned to assess the detailed value proposition of industry specific technology, especially in an industry like shipbuilding.
For example, in modern shipbuilding I believe that for a long term shipbuilding program the detail design team should be co-located at the shipyard, even if subcontracting that work to a 3rd party. This is especially true as shipyards look to solve business challenges, and become more agile, with technology like PLM, production automation etc… While software and hardware advances will allow these pieces of the business to spread out in the future I don’t believe the current level of technology, and more importantly culture, within a shipyard make that ideal today. This is especially true as shipbuilding programs become more complex and the demand for real-time visibility, and as-built (and ideally as-maintained) models becomes common place.
However, as with Halifax Shipyard on the Canadian Arctic Patrol Ship (AOPS) program (and I can only assume the Canadian Surface Combatant as well) there may well be business drivers within the shipyard that outweigh the inefficiencies of performing the engineering work offsite, and indeed even out of country (not the least of those reasons may be the lack of skilled people). Halifax Shipyard has a long history of shipbuilding, and clearly knows their own business better than anyone else. Coming full circle, we should only expect the shipyards to do those things that are in the best interest of their business.
In the end I would propose it is the responsibility of the buyer (the government) to create an environment in which the best interests of the shipyards are aligned with the best interest of the government. That’s far easier to say than to do. It requires a more complete view of the landscape than it might be feasible to develop.
Coming back to the example above, regarding the disadvantages of not co-locating engineering with the shipyard and not integrating them directly into the shipyards business processes: Why should the government care if it creates some inefficiencies within the shipyard provided the vessels are delivered at or below an agreed upon cost? Well, in case it isn’t obvious by now, I’m arguing that there is a bigger picture here. Building the engineering expertise in Canada, including the expertise with the software and tools used to perform the engineering, will be applicable on future shipbuilding programs, but also in the operation, maintenance, repair and refit of the delivered assets. We all know this is where the majority of the cost of a vessel is incurred. In the bigger picture I believe it makes sense to be able to do this work effectively in Canada, and leverage the work done, and expertise gained, during construction to do so.
You then need to take things one step further. Considering that familiarity with particular ship design and engineering tools is very geography-centric it is unlikely that outsourced engineering will use the same toolset commonly found near the shipyard. This means that even if the buyer (the government) requires delivery of an as-built model as part of the technical data package for a vessel, very few people will have the skills to use it. The lack of on demand translators between common shipbuilding software, and the lack of any effective standard formats, renders the information largely useless when it comes to any significant (re)engineering work. This may not be relevant today as it is not yet common to keep truly as-maintained models or leverage them in this way. But these assets have a lifecycle measured in decades and organizations like the US Navy are actively trying to implement approaches like this. It is fairly likely that it will become relevant long before the assets are retired.
In conclusion I want to make it clear that I don’t have an answer, and that I don’t believe there is a single right answer. My overly-simplistic view is that businesses are, and should be allowed to be, self-absorbed organisms that are going to behave in their own self-interest 99.9% of the time. In order to align the behavior of the businesses involved in government shipbuilding programs with the goals of the government, the government needs to create an environment in which it is in the best interest of the businesses to behave in particular ways.
Of course, many of the elements of the NSS including the weight placed on the value proposition and related ITB requirements, in bids are intended to do exactly this. The single example here, obviously near and dear to SSI, is only one example of many thousands of areas where this thinking could be applied. It would be infeasible to analyze and control bidders to this level of granularity without possibly creating inefficiencies and stifling innovation in the process. The challenge becomes how to strike an appropriate balance? Obviously I don’t feel that the results in this one area (so far) indicate that the balance was successfully struck. But my opinions may be unbiased as part of the leadership of a self-absorbed organism focused on its own best interest.