|Canadian Defence Review
August 7th, 2015
Shelter producers await HQSS decision.
New federal guidelines suggest that the supplier that offers the best value proposition will be the big winner
With Canadian politicians’ busy angling for votes, the defence industry’s attention is naturally turning to the post October 19th election environment. With one big exception: the folks at Public Works and Government Services Canada continue to beaver away at existing mandates.
One of the most important of these is the department’s decision regarding the much-awaited Headquarters Shelter Systems (HQSS) program. As its name implies, this multi-year initiative is slated to provide the Canadian Armed Forces with command facilities for use in a variety of missions ranging from sovereignty enforcement, to peace support and international humanitarian assistance.
Final HQSS bids, which could generate nearly $400 million worth of work for the winner, - when in-service support is included, - were slated to be filed by the end of August. One PWGSC official admitted that the program would be given extra scrutiny, due in-part to the highly sensitive nature of the election campaign, but that work at the ministry would proceed. That’s a good thing. Because the updated soft-walled tactical shelter systems and ancillary equipment that defence personnel will be getting to support their multiple roles, are crucial pieces of defence kit.
A wide range of sizes, configurations and options
According to the Department of National Defence the projected Headquarters Shelter Systems, which will come in as many as three different sizes, will include space for command post functions such as operations, office, utility and planning areas and will be connectable to in-service vehicles and vehicle-mounted shelters. Options will include tactical lighting and HVAC equipment, and a semi-rigid flooring system.
Like many Harper Government defence procurement initiatives, HQSS, which has been in the works for at least five years, has been beset by repeated delays. The program started as a bid to buy a few shelters for a few specialized military headquarters. However over the years the effort has morphed to encompass medical, billeting, offices and other facilities.
“It wasn’t as much the nature of the components that increased the program’s complexity, but the scale which simply grew and grew,” says Bob Parsons, managing director of HDT Expeditionary Systems Limited, who has followed HQSS’s progress for nearly half a decade. “This naturally led to increased scrutiny, as Industrial and Regional Benefits, and later Industrial and Technological Benefits became growing factors, following the introduction of the Canada’s new defence procurement strategy.”
HDT Expeditionary Systems: value proposition is key
Parsons has a point. HQSS will be one of the first major federal defence programs to be reviewed based on the government’s new Industrial and Technical Benefits Policy’s “value proposition” guidelines. The rules were set up to ensure that future defence and Coast Guard procurements in excess of $100 million “result in the creation of high-skilled jobs and economic growth across the Canadian economy.”
PWGSC’s evaluation of the HQSS bid proposals will thus extend far beyond the six mandatory guidelines that it has set out regarding the products themselves (modularity, simple construction, mobility, availability, climate protection and collaborative work spaces). That means that the overall value proposition that bidders such as HDT Expeditionary Systems Limited, Weatherhaven, DEW Engineering, CAMEC Systems Corp. and various subcontractors, propose, will be especially important.
“PWGSC’s broader focus is great news for us,” says Parsons. “HDT Expeditionary Systems has a lot to offer. If our bid is accepted we expect to generate 200 full-time jobs, and will be investing massively here in Canada, particularly in our Belleville facility.”
Parsons makes a good case. Headquarters shelter systems are HDT’s Ohio parent’s (HDT Global), core business. The company, which claims to be the largest supplier of similar systems to the US Armed Forces, boasts of an installed base of 100,000 shelters around the world, including 150,000 heaters and 50,000 air conditioners, all of which were manufacturer in-house. “The fact that we make much of our own kit is a huge advantage,” says Parsons. “It means that we can better tailor individual units into an overall design that promotes maximum efficiency.”
According to Parsons, the broad scope of the US military’s international deployments means that HDT will likely be able to supply the Canadian Armed Forces with close proximity support, wherever they may one day be operating.
“We are currently active in about 75 countries,” says Parsons. “That includes places such as Sweden which has Arctic conditions, Africa where it is really hot, desert areas where it is really dry, as well as in war zones such as in Syria and Iraq.” As if that weren’t enough, HDT Expeditionary Systems has a established a long and proven track record with the Canadian Department of National Defence through its supply of Chemical, Biological, Radiological and Nuclear (CBRN) protection systems and deployable climate control shelter systems (DCCSS).
While Parsons admits that predicting the future is not easy, HDT Expeditionary Systems continues to examine other steps to bring value to Canada. One promising development is the continuing drop in the value of the loonie, which is making Canadian exports cheaper in foreign markets. This could provide a boon to the country’s manufacturing base which was hit hard when the dollar was trading at parity with the greenback.
“HDT Global is currently looking to set up a facility to build CBRN filters, so why shouldn’t we do that in Canada?” asks Parsons rhetorically. “The business case is looking better all the time. Furthermore the shelter systems themselves are an identified market segment with considerable export potential, so if we equip our Belleville facility to produce HQSS components, we’d have all the tooling in place to seek out foreign orders too.”
Weatherhaven: does a Canadian OEM have an edge?
It remains unclear just how PWGSC will interpret the new value proposition guidelines. However initial speculation suggests that Burnaby British Columbia based Weatherhaven, which bills itself as the only Canadian-owned original equipment manufacturer in the defence shelter space, will be an HQSS contract front-runner.
According to Ray Castelli, its CEO, Weatherhaven already has built up considerable credentials as a supplier to the Department of National Defence over more than three decades, and of shelter systems for the past two. Weatherhaven accomplishments include successful completion of mandates such as the $130 million Medium Support Vehicle Systems shelter program (which it entered in partnership with DEW Engineering) back in 2009.
“We have a proven track record of success through our strategy of developing new tools for the Canadian military, engaging local engineering and design, building that into a program, and then using that knowledge, capability and the local endorsement to export these products around the world,” says Castelli. “We have already done this in three different segments – expandable containers, field hospitals and re-deployable temporary camps, - and hope to build on those successes.”
The stakes in the HQSS program are particularly high for Weatherhaven. That’s because while Canada is fairly open about allowing international competitors to bid on domestic defence contracts, other countries aren’t so nice. Castelli cites several US regulations, ranging from the Berry Amendment, to Obama administration Buy American policies and US small business “set asides,” as making it almost impossible for Weatherhaven to compete on a level playing field there.
Weatherhaven compensates in part through innovation in areas such as developing shelters for a helicopter repair center for Boeing and for a CH-47 medium helicopter cockpit training facility. “Canada, which has a particularly harsh climate has long been a world leader in shelter development,” explains Castelli. “So once shelter products have been accepted here, they often become the standard in many other places.” Weatherhaven’s international credentials include sales in about two dozen foreign markets, including joint ventures in countries ranging from the United States, to South Africa, Peru and Brazil. The company was also recently acquired by a local venture capital firm; this suggests that it will have solid financial backing going forward.
Camec Systems Corporation: building alliances
Of course any program the size of HQSS is bound to attract significant international attention, so it should comes as little surprise that Utilis International and Utilis SAS would push the efforts of their Canadian trading arm, Camec Systems Corp.
According to Sébastien Sibeud, its president, Utilis SAS, which bills itself as a “front-runner in the development, marketing and manufacturing (of) metal frame soft skin shelters, containerized components and service solutions for field hospitals, personnel and equipment decontamination,” is quarterbacking an alliance between Camec, and two other Canadian players – Tulmar and Proxamis – to bid on HQSS.
“Our team of engineers has studied (DND’s) needs and designed a product adapted to its specifications,” says Sibeud. The plan to supply commercial off-the-shelf solutions (COTS), bolstered by a strong Canadian component on the ground, suggests that effective pricing could be one of the bid’s strong points. While exact role definitions have yet to be fully publicized, Tulmar and Proxamis will likely leverage their In-Service Support capabilities. “Camec has designed a plug and play product to our customer’s needs which we can support with a strategic network,” says Sibeud. “(We) are in it to win.”
Improving defence capabilities
The HQSS bid review process promises to be quite challenging. For example short-listed suppliers will be asked to build prototypes of their wares and a final section is expected to only take place after election. The good news is that there appears to be some urgency to the program. PWGCS admits that the Headquarters Shelter System program will “dramatically improve the Canadian Army’s capability to plan, coordinate and command its forces, by providing a modern command post shelter system for all unit and brigade headquarters.”
The project is expected to address existing capability deficiencies with in-service modular tent systems by providing protection to equipment and personnel from elements, configuration flexibility and efficient climate control. In short, HQSS shows all signs of being a priority for which-ever government shows up for work after the next election.
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