Seaspan Whipped into Ship Shape

A federal shipbuilding contract promises to reshape not only a North Vancouver shipyard, but the North Shore itself and the province’s entire manufacturing sector.

Seaspan shipyard, North Vancouver | BCBusiness
Seaspan’s Cavalier docked for repairs at the company’s North Vancouver shipyard.

A federal shipbuilding contract promises to reshape not only a North Vancouver shipyard, but the North Shore itself and the province’s entire manufacturing sector.

It’s 4:30 on a Monday afternoon in early June, and Seaspan Marine Corp.’s North Vancouver shipyard is deserted. Well, almost deserted. Sparks fly from a gaping hole in the belly of the Cavalier, one of Seaspan’s 54 tugboats, which is in dry dock for repairs. Including its hulking bulbous keel, usually invisible underwater, the ship stands five storeys high. Among the occasional yard workers who pass on bikes (bicycles are the most efficient way to get around, and stray two-wheelers litter the yard), two figures in suits and ties are conspicuous here on the northern edge of Burrard Inlet. They are Brian Carter, president of Seaspan’s shipyards, and John Shaw, vice-president of program management for the shipyards, both out in their 14-hectare yard to pose for media photos.

The reserved, boyish 42-year-old Carter is the straight man to resident jester Shaw. The latter is a formidable bundle of energy, quick to offer a barb or quip, which is not to say he isn’t serious. He’s just deliriously happy, because he knows Seaspan’s main shipyard – one of three owned in B.C. by Seaspan – will not be deserted for much longer. “In four years I expect there to be between 500 and 800 workers here, with an engineering and management staff of about 70,” he says. “We’re also going to need suppliers for everything from doorknobs to main engines, radar and radio equipment.”

Shaw is referring, of course, to the $8-billion in work Seaspan is expecting from the federal government beginning later this year. The government unveiled its National Shipbuilding Procurement Strategy in June 2010, a long-term plan to revitalize Canada’s marine industry and shipyards, building ships for the coast guard, navy and Department of Fisheries and Oceans. In the bidding process that ensued, Seaspan was shortlisted and ultimately won the right to be Ottawa’s prime contractor in building seven non-combat vessels. According to the agreement, the company, owned by the Washington family of Montana, will invest up to $200 million of its own cash to transform its B.C. operations into ground zero for what many hope will become an international commercial shipbuilding centre.

To do this, Carter says, Seaspan will need to develop a vast, interconnected “ecosystem” of supporting partners and suppliers, which will develop capacity to grow and innovate like never before, promising a cascade of spinoff benefits in the local, provincial and national economies. If everything goes according to plan, this contract will only be the beginning. “We’re not looking at this as just seven ships,” confides Carter between snaps of the shutter in the shipyard. “We’re looking at this as a sustained shipbuilding enterprise for Canada in perpetuity.”

Image: Paul Joseph

To really understand the opportunity presented to B.C. by the federal shipbuilding strategy, it helps to meet Cameron Ius. At 32 years of age, he is halfway through an apprenticeship to become a journeyman millwright, splitting his time between in-class training at BCIT and Seaspan’s Vancouver Shipyards Co. Ltd., where he learns on the job.

Ius’s grandfather was a shipbuilder in North Vancouver, his father is employed at Seaspan’s nearby dry dock and his brother has worked as a safety officer at Vancouver Shipyards for 10 years. The federal shipbuiding strategy means Ius and many others like him will have the opportunity to build a lasting career. “I really like working for Seaspan; if they have work and can keep me busy, I’ll stay here as long as I can,” he says. His wife is expecting a baby in September, and he cannot contain his glee at mention of the federal contract. “I should be able to retire off of this,” he says.

A millwright is a specialist at installing, maintaining and repairing industrial machinery and mechanical equipment. In a shipyard, a millwright is a coveted jack of all trades. The day before our interview, Ius installed a main engine in a tugboat, and today he is reassembling an anchor winch. The world is his oyster, which is both good and bad for Seaspan, since his skill set will prepare Ius to work in virtually any mill, refinery, diamond or coal mine on the planet. While he wants to stay here, he acknowledges that “there are hundreds of other things” he could be doing.

Seaspan is going to need thousands of skilled workers like Ius, and where they are going to come from is a question that institutions like BCIT are racing to answer. Paul Dangerfield, BCIT’s vice-president of international education and research, says its Burnaby campus will be a central hub for training the journeymen, engineers and managers needed in B.C.’s modern era of shipbuilding. The primary demand will be for millwrights, welders, steel fabricators, electrical and mechanical engineers and business managers skilled in operations management and supply-chain logistics.

Within two years, BCIT plans to create a shipbuilding “centre of excellence” together with Victoria’s Camosun College and possibly others, which would add specific shipbuilding content to the colleges’ existing vocational and management programs. For example, welders will learn how to safely work in confined spaces, like the belly of a ship.

BCIT itself will have to up its knowledge base: Dangerfield says he and his colleagues are scrambling to study best practices of the world’s biggest shipbuilding centres – looking to South Korea, China, Brazil and California, in particular – to inform their growing shipbuilding curricula. Robotics and computers are being used more than ever in all areas of shipbuilding, he adds, so they need to be able to train the technicians and technologists in those areas as well.

The simultaneous demand anticipated for workers in various B.C. resource industries – including mining, liquid natural gas, pipelines and oil and gas – is not a bad thing, he says. “Shipbuilding has added a cornerstone that is giving the overall system of employment stability, which is in turn helping those other areas. And as the employment is stable, so too is the training.”


Image: Paul Joseph
Brian Carter, president of Seaspan’s shipyards, is
readying the company’s Vancouver Shipyards for the
500 to 800 workers that will operate out of the 14-
hectare yard.

Competition for human resources

Mature returning students like Ius will be a significant component of the new workers Seaspan will rely on for the federal shipbuilding work. He already has extensive work experience gleaned from 10 years of full-time carpentry before he made the career decision to retrain at BCIT. Quality of life and proximity to the city will be important factors attracting the workers Seaspan will need, says Brian Carter, who doesn’t seem too worried about competing with resource industries for workers. He says many skilled workers in places like the oil sands will welcome a lucrative opportunity to “come home” for good, despite the Lower Mainland’s higher real estate prices.

Perhaps more than any other Seaspan manager, John Shaw’s fingerprints are evident throughout the winning bid – all 17 binders and 25,000 pages of it, which cost the company $2 million to put together. It was Shaw’s job to stickhandle the bid. “It was easy,” he says with a laugh. “Everybody was energized.” But the long hours exacted a personal toll: his running gag is that instead of National Shipbuilding Procurement Strategy, NSPS really stands for “nights, Saturdays and probably Sundays.”

Sitting in his office overlooking six enormous silos of the Fibreco Export Inc. wood chip plant next door (the air is sweet with the smell of damp sawdust, even indoors), Shaw explains that maximizing the spinoff benefits to the B.C. and Canadian economies was the key to getting the federal contract. Not that Seaspan had a choice. Federal procurement contracts in excess of $100 million in value, by the dictate of what’s known as the Industrial Regional Benefits, or IRB, policy must demonstrate 100 per cent Canadian content. That means Seaspan must source labour, materials and services directly from Canadian suppliers and manufacturers, using Canadian materials. “We will have the obligation to meet 100 per cent Canadian content in dollar value, and we will flow those requirements down to our partners and to our suppliers,” says Shaw.

In addition to a company investment of up to $200 million, Seaspan also had to commit to reinvesting 0.5 per cent of the total federal contract value in the marine industry. That investment will target three areas: human resources, including supporting apprenticeship programs; technology, with investments in research and development; and industrial development, with Seaspan investing in improving the supply chain in Canada.

The IRB policy ensures that federal money spent to build ships for Canada stays in Canada, providing a potential bonanza for B.C. companies in particular. A report commissioned last year by Seaspan to document the economic impacts of a successful bid estimates that more than 4,000 full-time direct and indirect equivalent jobs will be created over the next eight years. “That would be conservative; it might be more,” says the study’s author, Ed Mansfield, a statistician and partner with business consultants MNP LLP. The MNP team also analyzed the potential supply chain for the projects, concluding that the materials needed to complete the seven non-combat ships can be sourced mostly within B.C., and definitely within Canada.

Mansfield says the $8 billion in work will represent a massive GDP boost for B.C.; he anticipates an average annual GDP contribution of about $500 million over the first 10 years beginning in 2013. More than half of that $500 million will come from direct purchases by Seaspan; meanwhile, the ripple effect will be more like a tsunami, including indirect supplier and service spending and spinoff expenditures in the general population.

One company that expects to reap the benefits of the coming boom is Chilliwack-based Mussell Crane Manufacturing, a B.C. success story with a long history of supplying federal military contracts. Founded and owned by aboriginal businessperson Fred Mussell, the company builds cranes to order, in addition to other custom metal manufacturing. Depending on the project, anywhere between 20 and 40 people are employed full-time. Company project manager Christine Baker says Mussell Crane has been supplying cranes to Seaspan’s Victoria Shipyards Co. Ltd. for a decade; she anticipates the federal contract could mean as much as $4 million in work for the company. “You can’t move steel without a crane,” she deadpans.

Baker herself has spent her entire career (she is 61) working for companies big and small involved in military procurement to the Canadian government, and she says she has seen a transformation. “I’ve watched lots of manufacturing go to other places on the continent and across the planet,” she says. “What the federal government is trying to do is to get manufacturing back to Canada, which is a great thing.”

Mussell Crane demonstrates what could start coming back. The company bought a machine shop in 2007 and since then has offered custom manufacturing services. “There’s a huge technology gap here now, and the problem is a lot of companies that used to exist to do government and heavy equipment work don’t exist anymore, or exist in a form that they don’t actually build stuff anymore,” notes Baker. Filling this gap has been a huge advantage to the company: if customers want something different, not just something out of a catalogue, Mussell Crane is capable and willing to build one-off devices.

Mussel Crane is a “tier one supplier” to Seaspan, meaning it will likely deal directly with Seaspan, as opposed to indirectly supplying the lower tiers in the supply chain. While Mussell Crane is active at the outset of the project and then gets out of the way, Baker says a complex, interdependent web of suppliers will have the opportunity to cash in over the long-term. “Companies that sell steel, wiring, paint, drive and electrical systems are the people who are going to have ongoing work for decades,” she says. “If this thing goes commercial after that, it’s a forever type of thing.”

To ensure that those companies can supply the demand, and help Seaspan fulfil its Canadian content obligations, Western Economic Diversification Canada, a department of the federal government, sprang to action immediately following the announcement of the successful bid. The function of WEDC in this case, said a spokesperson in Ottawa, is to help Western Canadian small and medium-sized enterprises connect with Seaspan and its suppliers to participate in providing materials and services.

To that end, WEDC hosted an event on May 23, attended by more than 600 people representing 300 small and medium-sized companies. One attendee was Warren Keane, who heads North American operations for Atlas Products International, a U.K.-based company that specializes in what it refers to as “supply chain automation.” “The challenge for us is getting in front of Seaspan and talking to them now before they ramp up and get really busy with the project,” says Keane, who is based in Victoria. He says the WEDC meeting was invaluable, providing the opportunity to meet with Seaspan and its potential suppliers face-to-face. Atlas Products hopes to sell Seaspan a secure way of shifting all paper office invoicing and business orders to electronic format, but the competition is intense. “It’s a challenge differentiating yourself from others because there are a lot of people knocking on the door,” explains Keane.


Image: Paul Joseph
John Shaw, Seaspan’s chipper vice-president of
program management, was pivotal in crafting the
17-binder, 25,000-page, $2-million bid that ultimately
won the contract.

Waiting to sign on the dotted line

John Shaw says it’s still too early to determine the cast of supporting businesses needed to build the seven boats. For one thing, Seaspan has not signed any contracts with the federal government yet: Seaspan has won the bid to be the federal government’s “prime contractor” for the seven vessels, and in January signed an “umbrella agreement” with the government that outlines its role and responsibilities. The first contract to build three scientific research vessels is expected to be inked by the end of this year, with construction commencing in 2013.

Before the first ships can be built, Seaspan must fully assemble the team that will oversee the contract – a process that will start at the top senior levels and work its way down the personnel chain. In the next two years alone, says Shaw, the company will be filling between 30 and 80 management spots. Seaspan has also just started to tackle the modernization of its shipyard by hiring an outside team to do the detailed engineering, and it is in negotiations to hire a project management firm to oversee the design and construction of those facilities.

What is certain, says Shaw, is that more of Seaspan’s suppliers and partners will be moving to North Vancouver to be closer to the Seaspan shipyard, where the ship construction will take place. Seaspan won’t need to acquire any new land for the shipyard, but does need space for its suppliers close by, and improved transportation links to get new workers and materials efficiently to the site, which means change is coming to the North Shore.

City of North Vancouver Mayor Darrell Mussatto says the biggest change to his city will be “24 hours a day, seven days a week activity at the shipyard,” noting that a plan to accommodate this upheaval is already in the works. The City recently rezoned a piece of undeveloped land adjacent to the shipyard, called “Harbourside,” comprising nearly 400,000 square feet of commercial/light industrial zoned land. (“A developer’s dream,” Shaw quips.) While details are still in flux, the proposal includes the potential for 800 new homes at the site. “There’s a good opportunity for the City when we redevelop the Harbourside land; there will be both residential and industrial-commercial office use that will be needed for the shipyard,” says Mussatto.

But the development of Harbourside is already controversial. Building residential units at the site will require an amendment of the City’s official community plan, but even if that happens, many, including Seaspan CEO Jonathan Whitworth, have gone on record expressing doubts that future Seaspan workers will be willing, or even be able to afford, to live there.

Anticipating a huge spike in car commuting from across the Lower Mainland, Mussatto says another priority will be to upgrade public transit to avoid future gridlock. “We’re trying to see if workers can get out of their cars and use alternative forms of transportation, whether it’s public transportation or other means,” he says. The City is currently negotiating with the Squamish Nation to complete a walking route between the North Vancouver SeaBus terminal and the Seaspan shipyard, in addition to expanded SeaBus sailings and hours.

Cameron Ius, representing a new generation of Seaspan workers, says that avoiding future gridlock will be challenging. He doesn’t much like North Vancouver, he says, because it is expensive, and he has found it to be “uptight” – for example, prospective rental owners routinely disallow dogs. A stable job at Seaspan will make it realistic for him to move from his current rental in Maple Ridge to Burnaby, cutting down a two-and-a-half-hour daily car commute to work. But he still plans to drive to work.

John Shaw says the volume of workers and materials flowing to Seaspan’s North Vancouver shipyard will increase gradually, and measures are being taken now to improve traffic flow and reduce congestion, both for commuters and materials transport. He notes there are at least two traffic projects currently on the go, including a new overpass over the CN Rail tracks along nearby Fourth Avenue.

The important thing, Shaw suggests, is not to turn a positive into a negative. In the big picture, it’s hard not to see these growing pains as the signs of good things to come – a huge increase in jobs and demand for B.C. products and services that could continue for decades. To ensure that this happens, Minister of Jobs and Infrastructure Pat Bell says the province is firmly onboard, to the tune of about $40 million so far. In July last year, before the successful bid was announced, the province announced it would offer training tax credits for marine industry employers to encourage the training of new workers. Bell says the province has also kicked $5 million into Seaspan’s so-called “value proposition” monies to develop homegrown shipbuilding expertise. This is in addition to $20 million pledged by B.C. Ferries toward developing local expertise in ship repair and maintenance.

Bell offers a reality check on the prospect of establishing a perpetual international commercial shipbuilding centre that will be immune to the historical boom-and-bust cycle of the shipbuilding industry. B.C. companies will not be able to compete with low labour cost jurisdictions in many parts of the world, he says, so the goal must be to focus and build on the specific expertise and technology required to construct the seven ships. “Our best chance of a long-term, sustainable industry is to be a niche player, specifically in that mid-sized market – the coast guard cutter, icebreaker market,” he says. “That’s where I think we could help supply the international need for those types of ships.”

The hope at Seaspan’s Vancouver Shipyards is that the company will enjoy the best of two worlds: grow to accommodate a new international and commercial niche, while continuing to function as the shipbuilder of choice to the Canadian federal government. Shaw’s mischievous grin returns at the prospect of the latter. The lifespan of the seven non-combat ships is about 30 years – at which time the government will have to sell them off and hire someone to build more. “I’m hoping in 30 years we can start doing this all over again,” he says.