Ships Start Here. But where are the jobs?

Apparently, the Halifax Shipyard isn’t feeling the love and needs to buy some.

Watch your mail for a glossy, 16-page magazine brought to you by Irving Shipbuilding later this month. Every homeowner in the Halifax Regional Municipality is supposed to get one, paid for by Irving.

Entitled “Irving Halifax Shipyard: Canada’s Future Naval Fleet,” the cover of the magazine shows an ethnically and gender-balanced selection of seven tradespersons and supervisors posed in the foreground, flanked by a partially-completed hull, and flags of all the provinces, territories, and Canada itself.

Inside you’ll find pictures of some of the shipyard’s smiling employees — young men who have returned home from Alberta and women the company has helped break into non-traditional trades, assisted by the group Women Unlimited. There are diagrams of the first Arctic Patrol Vessel under construction and reminders at the bottom of each page to visit Irving’s public relations site on the shipbuilding program — www.shipsforcanada.ca — where you can find time-lapse videos and statistics trumpeting how many hundreds of millions of dollars have flowed to companies in Nova Scotia and across Canada because of the National Shipbuilding Strategy.

“We think it’s a great story,” Kevin McCoy, president and CEO of Irving Shipbuilding told about 100 people attending a Halifax Chamber of Commerce breakfast meeting yesterday. “We want people to understand that ships are here.”

The magazine celebrates the fact that, five years after the project was announced, work is well underway, and it attempts to bring visibility to a megaproject taking place under tight security in a mammoth assembly hall thousands of commuters whiz by every day. It’s boilerplate public relations.

The interesting question is: Why has the shipyard chosen this moment to engage with the public?

McCoy didn’t take questions and Irving Shipbuilding spokesperson Sean Lewis said the company won’t be disclosing how much it paid to produce and distribute the high-quality magazine.

Where’s the money?

After the glossy photos, the meat of the magazine is numbers. The publication says Irving Shipbuilding has committed to spending $1.1 billion since the federal procurement program was announced five years ago — $530-million in Ontario and $480 million in Nova Scotia — compared with just $45 million in Quebec.

“This is real,” said Patrick Sullivan, CEO of the Halifax Chamber of Commerce, which actively championed the Ships Start Here campaign in 2011. “This is real money being spent.”

Sullivan recounted how his new son-in-law was one of hundreds of tradespeople who worked for 18 months to build the massive state-of-the-art assembly hall along north Barrington Street. Now, after a six-month absence working in Saskatchewan, Sullivan says the electrician is coming home for a full-time job at the Irving shipyard which currently employs 1,300 people. With more on the way.

“We will be hiring an additional 100-200 journeymen ironworkers, pipefitters, welders, and supervisors between now and the end of December,” McCoy told the business audience, “and most will average $88,000 a year.”

McCoy says the first of up to six Arctic patrol vessels — the Harry DeWolf — is about one-third complete. Maritime Fabricators on Windmill Road in Dartmouth started cutting steel for the hull of the second ship two weeks ago.

The upcoming mail-out from Irving says, so far, it has awarded contracts to more than 200 companies across Canada. Based on purchase orders issued until the end of June, Irving says that in Nova Scotia, it has committed $480 million in spending related to the modernization of the shipyard and the construction of the Arctic vessels.

Much of that $480 million earmarked for Nova Scotia has already been spent. The brochure says modernizing the Irving shipyard cost about $350 million. What it neglects to say is that $260-million came from taxpayers in the form of a 30-year loan Irving won’t have to repay if it can maintain current employment levels over the long term.

Based on the purchase orders so far, Irving projects $243 million has been spent or will be spent on wages. But spending over what specific period is hard to define.

Procurement for the Arctic Offshore Patrol vessels is “about 90 per cent complete,” according to Chris Blanchard, the supply chain manager at Irving Shipbuilding, but some of the purchase orders related to the Arctic vessels will continue to roll out over the next four-to-five years. Irving projects its spending on the ships will generate $178 million in spending by consumers, as well as a comparatively modest $79 million in taxes for federal, provincial and municipal governments.

So most of the $480 million going to Nova Scotia firms that Irving is celebrating in its mailer has either already been spent, mostly on building the assembly hall, or is about to be spent on completing the Arctic ships.

Where did the money go? About 40 companies located in Nova Scotia — examples include Dexter Construction, Cherubini, Alumintech, Clean Earth, EMCO and Anixer — got contracts. Bluedrop Training & Simulation added at least eight new jobs at its Bedford office after securing a pivotal $15 million contract to train personnel on the new computer control systems aboard the Arctic vessels.

Those are real impacts and real jobs, but how much additional spending can Nova Scotia workers and companies expect to see in the coming years?

More warships, more jobs

The Conference Board of Canada says they can. It projects 2,400 direct jobs will be created at the shipyard during peak construction over the next decade — but only if the federal government follows through on a plan to build up to 15 warships for the Canadian Navy (that’s in addition to the Arctic Patrol ships underway now).

By the end of this year, Ottawa has committed to issue a tender to buy an off-the-shelf warship design. Once the design is nailed down, Irving expects to sign a contract with the federal government to become both the prime contractor and builder of those bigger ships.

Even under the best of circumstances, any contract related to building combat ships for the Navy is still years away. But inking it would sustain employment at the yard for another 20 years.

What about contractual work for Nova Scotia companies? Irving is putting out some big numbers in its mailer, but as we’ve seen, some of that is spin.

Still, while few Nova Scotia companies can compete with behemoths like Lockheed Martin or Ontario-based GE Canada (which was awarded the electrical work to supply power to the Arctic vessels), some opportunities exist for companies that can convince these big players to buy products and services from them.

Nova Scotia companies who aren’t feeling the love or seeing much trickle-down effect might consider the example of Aspin Kemp & Associates.

In 2014, the firm opened an office in Summerside, PEI (it already had operations in Dartmouth, Singapore, and Owen Sound, Ontario). It was awarded a $50 million contract from GE Canada later that same year to install electrical components on drill ships that GE owns through its Marine Offshore division. The subcontract with Aspin Kemp in PEI was an offset that GE’s defence division needed so it could buy equipment outside Canada to install on the Arctic Offshore Patrol Vessels.

Under the rules for leveraging Canadian content from defence purchases, every dollar spent on buying components for the ships outside Canada must be offset by purchases inside Canada. It doesn’t matter if the product is related to healthcare or film production — commercial videos count! If Lockheed Martin buys computer control systems from the US, it must spend the same amount of money buying something else within Canada. And 15 per cent of the amount must go to Canadian companies with fewer than 250 employees.

So far, about $24 billion in Canadian content has been leveraged in these ways from defence spending, with $9 billion “in progress” through the Arctic Offshore Patrol Ships program

Like love, money will find a way. For local companies still hungry for a piece of the ever-elusive pie, representatives of Irving Shipbuilding and the Department of Innovation, Science and Technology sent them home comforted by the prospect there should be twice as much money and business flowing through creative offsets once the federal government orders those fighter jets and warships for the Navy.

Until then, Nova Scotians  will have to judge whether the pictures and numbers in the forthcoming PR blitz jive with their sense of the impact “Ships Start Here” is having on their own lives and the economy.