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Shipyard resurgence: Insights from Victoria Shipyards

By BCShippingNews 26 November 2018
Shipyard resurgence: Insights from Victoria Shipyards
By Darryl Anderson, Managing Director, Wave Point Consulting Ltd.

A very significant milestone was reached in the Canadian shipbuilding industry earlier this year when the first foreign warship since the Second World War arrived in Canada to undergo modernization. The New Zealand Secretary of Defence Helene Quilter and Commanding Officer Commander (Navy) Steve Lenik, Royal New Zealand Navy, transferred Her Majesty’s New Zealand Ship (HMNZS) TE KAHA into the care of Lockheed Martin) and Seaspan Victoria Shipyards Co. Ltd. (VSL) in Victoria on April 26, 2018.

During a discussion at the handover ceremony, Joe O’Rourke, Vice President and General Manager for VSL stated that a “material change had occurred in Canadian shipbuilding as a result of the successful upgrades to the Canadian frigates.” The opportunity to work on a foreign warship is rare in Canada’s shipbuilding and ship repair industry. “Winning the New Zealand Navy work speaks to the capabilities of the women and men of Seaspan and leaves us well positioned for realizing similar opportunities in the future.”

Recognizing that a profound shift in Canadian shipbuilding had occurred, BC Shipping News sat down with O’Rourke for an extended conversation in September 2018. The focus of the interview was on Joe’s insights on Victoria Shipyards’ resurgence (including the New Zealand frigate work) and emerging industry needs that include the rise in importance of electrical, welding and logistics/supply chain capabilities. The conversation concluded with a discussion on constructive ways that shipyards and ship owners can work together.

Seaspan’s Victoria Shipyards

Seaspan’s Victoria Shipyards operates within the federally owned Esquimalt Graving Dock, the largest solid bottom commercial drydock on the West Coast of the Americas. The VSL’s work roster includes the Halifax Class Modernization Project; in-service support for Canada’s fleet of submarines as a subcontractor to Babcock Canada; and several complex refit and repair projects, from cruise ships to specialized vessel conversions. Victoria Shipyards is the largest shipyard in Canada in terms of employment. During the summer of 2018, there were 1,100 trades people on site, dipping down a bit in September. Currently, the shipyard has six different programs underway including CCGS Sir John Franklin and the Ruby Princess cruise ship that arrived on September 29, 2018.

New Zealand Frigate Project

VSL was awarded work on the Frigate Systems Upgrade for the RNZN’s ANZAC Class frigates as a subcontractor for Lockheed Martin Canada. VSL will refit and install the new systems on two vessels with an expected completion date of 2020 for the entire contract. The (HMNZS) TE KAHA arrived in the first quarter of 2018 and the (HMNZS) TE MANA, the RNZN’s second ANZAC Class frigate, is scheduled to arrive in 2019. There will be a brief period of overlap when the TE MANA reaches Victoria.

The vessels will undergo extensive upgrades to their surveillance, combat and self-defence capabilities, allowing them to match current and future threats and address obsolescence of some existing systems. The work for the New Zealand Navy is being performed based on a firm fixed-price contract with provisions for changes. At the beginning of October 2018, the work on the TE KAHA was approximately fifty per cent complete.

According to O’Rourke, New Zealand officials have indicated that the performance of the shipyard has been “stunning” to date concerning progress on the TE KAHA. The project is still scheduled for completion based on the initial project timeline.

Centres of excellence in electrical and welding work

With vessels getting larger and more complex, O’Rourke was asked for insights into how lessons from past and current projects, including the Halifax Class Modernization Project, the Victoria In-Service Support Project and the non-combat vessels under the National Shipbuilding Strategy, were being applied to the New Zealand Navy project. O’Rourke stated that Seaspan has developed “centres of excellence” is two areas (electrical and welding) that are critical for a successful modern shipyard. For example, electrical work can be extensive on government research and naval vessels as well as cruise and LNG-fuelled ships.

O’Rourke explained that Victoria Shipyards does all the electrical work from system design through to installation, including the testing and trial stages to ensure that the proper electrical signal is reaching the right equipment. The original equipment manufacturer still does product testing and verification.

“Most shipyards in the past would just run the cable,” O’Rourke said. “Shipyards might have been reluctant to become so deeply involved but past industry slowdowns and evolving customer requirements have resulted in successful shipyards not only adapting to the trends but anticipating future needs.”

While not at liberty to discuss the specific details of work on the New Zealand Navy’s vessels, O’Rourke used the new Canadian Offshore Fisheries Science Vessel (OFSV), currently at VSL, to provide perspective on the electrical work required — “that ship needed 80,000 terminal points.”

Welding is another area that is evolving for shipyards. Driving the changes are complex customer needs and regulatory oversight. Welding test levels can be very basic visually and extend right up to radiographic testing. To address the issues, O’Rourke said that “Seaspan has developed an integrated welding approach and is increasing its ‘intellectual bandwidth.’ Adding a staff member with a Doctorate in Welding Engineering is an example of the level of expertise and experience that the company is striving to achieve.”

The centres of excellence in electrical and welding, along with the company’s experience, allow the shipyard to compete for the larger international packages of work such as the New Zealand Navy project. Creating the centres of excellence requires a significant investment in people and equipment. Thus, there is a risk that the market opportunities for such deep expertise may not materialize as quickly or be a steady requirement. O’Rourke noted that flexibility is essential for VSL to be competitive.

Logistics/supply chain capabilities in shipyard performance

Logistics plays a vital part in VSL’s success — especially given the extensive upgrades and modernization work currently underway at the Government of Canada’s Esquimalt Graving Dock. For example, the south pier is currently being rebuilt and lay down space is tight.

Supply chain, procurement and logistics are all vital to delivering ships. Goods and materials need to arrive at the right time and in the right condition and quantity, according to O’Rourke. For example, for the New Zealand Navy project, VSL is working with suppliers across the world — two years of discussion and effort went into working with the vessel’s design authority to identify both the quantity and quality of supplies and equipment that would be needed. This would often require lengthy discussions with possible suppliers before an order could even be placed.

Once the project requirements are identified, the goods are purchased and the necessary work orders are created to allow the labour force to start work. During the construction phase, working with supply chain partners also means addressing the need for deviations and finding the next acceptable alternative. An agile supply chain is required to support the procurement process.

Concerning costs, O’Rourke acknowledged that for many supplies used in shipbuilding there is an additional cost of getting supplies and equipment to Canada and then to Vancouver Island. Seaspan has a Supplier Relationship Management Program which requires all suppliers and contractors who wish to do business with Seaspan or an affiliate company to be pre-qualified based on their demonstrated ability to manage the health and safety, environmental and quality aspects of the materials and/or contracted work. In addition, suppliers must satisfy the technical and commercial requirements of the scope of work or equipment. He emphasized the fact that suppliers need to understand that the cost of labour can account for about half the cost of a project. Thus, components that have long lead times in the supply chain as well as other more commonly available goods, must, in both instances, provide a 100 per cent service delivery and on-time performance guarantee. It is an artificial cost saving “if labour is delayed and can’t do their work because the necessary supplies are not available,” he added.

Best practices in selecting and working with a shipyard

 “VSL is building on its record as a trusted partner for both government and commercial clients in successfully managing complex projects,” O’Rourke said. “We develop relationships with our returning customers that are based on honesty and integrity, and these values are ingrained in the workforce.”

For upgrades and work involving multi-facilities or multi-systems, O’Rourke reflected on the fact that it is important that ship owners select their shipyard early in the process and have a representative of the yard involved in planning discussions. Not only are they able to offer insights that will lead to improved workforce efficiency but they can provide real insights that can add value based on their experience. “The more complex the work, the more important it is to engage the shipyard early in the process.”

Conclusion

With operations in North Vancouver and Victoria, Seaspan Shipyards has emerged as a Canadian leader in the shipbuilding and ship repair industry. With modern facilities and a dedicated workforce, the company has proven itself to be a reliable partner on a range of projects for governments and private sector clients from around the world.

Through its work, VSL is creating jobs and generating economic benefits — O’Rourke noted that one of Seaspan’s main strengths was having a local labour force that not only provides stability for multi-year projects such as the RNZN vessels but also allows the company to take advantage of new opportunities.

Darryl Anderson is a strategy, trade development, logistics and transportation consultant. His blog Shipping Matters focuses exclusively on maritime transportation and policy issues.