Canadian Defence Review

 

November 22, 2011

 

Title: SNC-Lavalin bounces back

Sub-title: This Montreal-based international engineering giant has considerable defence sector capabilities.

 

As one of Canada’s leading engineering procurement, construction   and related services firms, it should not be surprising that SNC-Lavalin has had numerous opportunities to bid and work on defence sector projects. Yet while the company has been involved in a variety of initiatives ranging from supporting CF troops in Afghanistan and base construction, to naval projects, until recently, it has been relatively quiet about its involvement.

 

“We really don’t talk much about defence as much as we should,” admits Claude-Bernard Levesque, vice-president (business development) at SNC-Lavalin Defence Contractor, a division of the Quebec-based engineering giant’s infrastructure and construction unit. “That’s partly because we are so well-known for non-defence sector activities. But also (because of the large contracts we tend to compete for), we rarely publicize wins under $500 million.”

 

SNC-Lavalin has considerable civilian capabilities that it can leverage effectively to do defence-related work. Those core operations have generated considerable success lately. The company booked $1.78 billion in third quarter sales, up 17.7 percent compared to the same period last year. In addition, SNC-Lavalin’s 23,923 employees built up a $13.0 billion work backlog by the end of 2010, up near 20 percent from the $10.8 billion total at the end of the previous year.

 

Davie Canada Shipbuilding Joint-Venture Partner: new opportunities on the naval front

That said, not all of the news has been good. SNC-Lavalin was dealt a hard blow earlier this year, when the federal government decided to bypass central Canada by selecting Atlantic region-based Irving Shipbuilding and British Columbia-based Vancouver Shipyards to build the combat and non-combat vessel work packages as part of its National Shipbuilding Procurement Strategy (NSPS). These packages, which consist of 21 and seven vessels respectively, are forecast to create $33 billion in new business during the coming 20 to 30 years.

 

SNC-Lavalin had partnered with Davie Canada, which the team bills as the largest shipyard in the country, to deliver a highly attractive value proposition that was shortlisted in the bidding process. Hopes had ran high that a favourable outcome was at hand.  “Don’t forget that that our bid was 30 percent cheaper than one of the winning proposals, so we know that we are very competitive,” says Levesque. “However the federal government did not consider cost as a separate factor when awarding the contract, preferring to use other broader criteria.”

 

That said Levesque remains optimistic. “The partnership with Davie  is not dead,” says the industry veteran. “We fully expect to put forward bids on other naval projects in the near future. In the meantime, we will be working to compile a backlog of commercial projects.” One possibility says Levesque, is that SNC-Lavalin could position itself to do NSPS sub-contract work.

 

Opportunities will certainly abound. “As with all major defence and security procurements, the Industrial and Regional Benefits (IRB) policy will form an integral part of follow-on shipbuilding contracts,” reads the government statement announcing the prime contractor selection. “The selected shipyards will be required to identify business activities in Canada valued at 100 percent of the contract value, ensuring a dollar-for-dollar investment in the Canadian economy.”

 

Another promising area is the Canadian Coast Guard Vessel components of the NSPS. The government plans to purchase three new Offshore Fisheries Science Vessels (the first will be used to conduct fishing and acoustic surveys of fish and invertebrates. The other two will collect information regarding marine species as well as other physical, chemical and biological ocean) as well as an Offshore Oceanographic Science Vessel and a Polar icebreaker.

 

A long history of as a defence sector supplier

Despite SNC-Lavalin’s low key profile, the company has a long history as a leading defence sector supplier. For example its SNC-Lavalin Defence Programs Inc, (SLDPI) unit was formed to manage a contract to build 12 Maritime Coastal Defence Vessels project and the considerable In-Service Support and other related DND work that it landed. SLDPI now services approximately 50 DND vessels including tugs, R&D ships and several other classes.

 

Capabilities in this area range from engineering design services, supply chain management, to procurement and maintenance management. Of course it isn’t just SLDPI that benefits. The company also sub-contracts work to a network of more than 600 service providers, the majority of which are based in Halifax and Victoria. Last year, DND extended the company’s support contract for its Minor Warships and Auxiliary Vessels Programs for another year, and assigned additional mandates such as preparing the ex-HMCS Fraser for dismantling and disposal.

 

SNC-Lavalin also continues to provide remote camp site support in Afghanistan to the Canadian Forces based at the Kandahar Airfield. As of the end of last year, SNC-Lavalin had more than 300 employees at the airfield, to provide maintenance support, logistics, engineering, communications and other services. The company has achieved considerable recognition for its support to our men in uniform, including performance ratings averaging above 99%, for the program which has been extended through to December 2012.

 

Defence infrastructure supplier and systems integrator

One of the more obvious areas that SNC-Lavalin can add value to DND initiatives is by leveraging its capabilities as an infrastructure supplier and systems integrator, where it a already has a considerable record of success. SNC-Lavalin already manages more than 8,000 facilities on the civilian side, including buildings, workforce lodges, Canada’s only air-rail link, bridges and airports. These are skills that can easily be shifted over to the defence side should the needs occurs.

 

The same applies to its engineering expertise. For example SNC-Lavalin is a major player in Canadian Forces base construction, upgrade and improvement efforts*. Among its many initiatives in this area, it has work on the design contract for the hangar, and maintenance, training and simulation facilities at the Canadian Forces Base (CFB) Petawawa, and the design of the maintenance hangar at CFB Trenton. SNC-Lavalin is also highly active on the environmental front both in the private sector and on the defence front. For example the DND awarded the company two remediation mandates at 5 Wing Goose Bay base in Labrador.

 

Security and surveillance for infrastructure

SNC-Lavalin also boasts considerable capabilities on the infrastructure security fronts, such as the protection of embassies, secure areas and nuclear installations, says Levesque. “The fact that we now own Atomic Energy Canada has given us a whole new outlook into this competency, we which are looking to build up internally in the years to come.

 

Another increasingly emerging security challenge for many countries is border protection points out Levesque, not just against military threats, but against economic migrants from poorer countries, who struggle to seek new opportunities elsewhere. These challenges play out across the globe in places ranging from the Rio Grande River in the Southern United States to the Mediterranean sea, where Europe struggles against tides of refugees from North Africa and the Balkans. “We have the ability to coordinate a certain level of perimeter security and border surveillance integration,” says Levesque. “This could lead to export opportunities down the road.”

 

Levesque is not kidding. These types of projects can mean big dollars for defence sector suppliers. For example EADs is currently under contract in the deserts of the Arabian Peninsula, to strengthen a 13,000 kilometre perimeter about the oil rich Saudi kingdom to keep out poor migrants from neighbouring Yemen, Oman, and other neighbourhood players.

 

SNC-Lavalin already has an impressive portfolio of accomplishments in the perimeter security area, ranging from the design of the intrusion alarm and related security systems at the Cold Lake and Goose Bay bases, a video protection plan for Paris, which included the installation of 1,000 video cameras, and port video surveillance facilities at the Dunkirk Port. The expectation is that over time, SNC-Lavalin’s global footprint could lead to new mandates in this key area too.

 

Capital equipment projects in country partner

Another major opportunity for SNC-Lavalin to develop new business during the coming years say company officials would be to partner with foreign Original Equipment Manufacturers (OEMs) that want to supply product to the Canadian Armed Forces, by helping them to “Canadianize” their offering. The company could contribute procurement, local management, fine tuning, In-Service Support and other services as part of a team effort.

 

One example of such an initiative was the strategic partnership that the SNC-Lavalin formed last year with Force Protection, to collaborate on the Canadian government’s Tactical Armored Patrol Vehicle program. Force Protection was selected as a pre-qualified bidder for the program, in part because the CF is already using Force Protection’s Cougar vehicle for personnel transport, and is well aware of the merits vehicle’s merits.

 

Closure date to file completed Requests for Proposal (RFPs) was on August 29th, so for now, everyone is sitting on pins and needles until the contract is finally awarded, likely in June of next year. If the result is favourable, primary manufacturing would be completed here in Canada and the companies would work together to help the Defence Department “get the best value for its money.”

 

In fact SNC-Lavalin is so large, and has so many arms building a total picture of all of its DND related opportunities and initiatives isn’t easy. For example the company also currently has a modest involvement in the Department of National Defence’s quest for upgraded Fixed Wing Search and Rescue Aircraft capabilities. To date, SNC-Lavalin has submitted a white paper regarding industry consultation on the program, and may be looking to broaden its participation further as the project picks up momentum. SNC is also looking to get involved in the MSVS initiatives, possibly on the support side through fleets management where the company has existing capabilities.

 

Sidebar: *Major SNC-Lavalin base construction initiatives

·        CFB Halifax: Syncrolift upgrade and design of new submarine maintenance shed. Technical investigation and engineering support at Fleet Maintenance Facility Cape Scott

·        CFB Petawawa: Support facilities for Medium to Heavy Lift Helicopter (CH-47 Chinook).

·        CFB Trenton: Maintenance Hangar development, work on the Canadian Forces Land Advanced Warfare Centre

·        CFAD Bedford:  New Bedford Armoury, Storage Magazines, CFAD Bedford Salvage Facility

·        CFB Bagotville: Transport, Electrical, and Mechanical Engineering (TEME) Facility

·        CFS St. John's: Pleasantville Consolidation Project

·        CFB Gagetown: Wastewater Treatment Plant Upgrades, Canadian Forces Weather and Oceanographic Services (CFWOS) Renovation and addition, Stormwater Management Study

·        CFB Greenwood: New Hornell Centre, Recapitalization of Hangar 14 to Accommodate C-130J

·        Various Locations: LAV III Storage Facilities, Aerodrome Precision Approach and Landing Systems Infrastructure, Site Adapt of Vimy Trainee Quarters, Sewage/Water Treatment Plant Optimization Program.

 

Peter@peterdiekmeyer.com

 

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