ARCHIVED - Investment Plan 2010/11 -2014-15
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Section 1: Investment Planning Context
1.1 Who We Are and What We Do
The Canadian Coast Guard (CCG) has a direct and important impact on the lives of Canadians. We help ensure the safe use of Canadian waterways, and we facilitate the smooth functioning of the Canadian economy.
A nationally recognized symbol of safety, CCG serves on three oceans, the St. Lawrence River and Great Lakes,
and other major waterways. Often CCG is the only federal presence in many remote, Aboriginal, and Arctic communities. Operating along the longest coastline in the world and in some of its most difficult weather
conditions, CCG operates 24 hours a day, every day of the year.
CCG addresses its mandate through the delivery of complementary programs that achieve results for Canadians. CCG’s programs are:
- Aids to Navigation
- Marine Communications and Traffic Rescue
- Search and Rescue
- Maritime Security
- Lifecycle Asset Management Services
- Waterways Management
- Environmental Response
- Fleet Operational Readiness
- Canadian Coast Guard College
A full description of these programs can be found on the CCG website at www.ccg-gcc.gc.ca and in the
CCG Business Plan. We serve clients in all sectors of the Canadian economy: the general public, commercial shippers, ferry operators, fishers, recreational boaters, coastal communities, port authorities and other government departments and agencies. For example:
- We provide services related to aids to navigation, icebreaking, search and rescue, pollution response,
and marine communications and traffic management to commercial fishers, commercial shippers, ports,
and recreational boaters.
- We respond to federal maritime priorities and natural or man-made emergencies. We provide support for various activities mandated under the Federal Emergency Response Plan and are involved both nationally and internationally in planning and exercises related to environmental response and search and rescue.
- We support DFO programs by providing vessels and maritime professionals to support science activities and
to help manage and protect fisheries resources. Internal clients include DFO Fisheries Management, DFO
Oceans Management, and DFO Science.
- We are a visible symbol of federal presence and provide the capacity to assert Canadian sovereignty in the
Arctic. We provide essential icebreaking services that enable shipping to move safely and efficiently through ice covered waters in the Arctic throughout the summer, and deliver food, cargo, and fuel to remote sites where commercial services are unavailable.
- We support the non-military activities of other government departments and agencies by providing
vessels, aircraft, marine expertise, and other maritime services, including support to maritime security
activities. Clients for these services include the Department of National Defence, the Department of
Foreign Affairs and International Trade, Environment Canada, Health Canada, Natural Resources Canada,
the Natural Sciences and Engineering Research Council of Canada, Public Safety Canada, the Royal
Canadian Mounted Police, the Canada Border Services Agency, and Transport Canada.
- A portion of CCG’s work has an international dimension. Because our maritime interests are shared with other countries, we work with related organizations at the international level to advance our common objectives. We participate in several international fora, providing expert advice on coast guard operational issues, and sharing best practices. We also work closely with the U.S. Coast Guard and other national Coast Guards, to coordinate activities that cross international boundaries, such as Search and Rescue.
1.2 The Assets We Use to Support Our Programs
In order to ensure the delivery of essential services, CCG manages a substantial number of physical and technical assets including a fleet of small, and large vessels; helicopters; land assets and other water-based assets, such as fixed and floating aids to navigation and communication towers; a fleet of vehicles, land-based cranes and forklifts; program-specific information systems; and assets and facilities used in support of CCG’s training needs at the Coast Guard College. Investment in CCG’s asset base is directly related to the overarching requirement to maintain effective capacity to deliver core Coast Guard programs and services, driven by:
- The need to adjust to economic, demographic and climate factors (e.g. increased shipping traffic in core
areas, increased activity in Canada’s Arctic).
- The need to take advantage of technological innovation (e.g. migration to electronic aids to navigation).
The CCG asset base is made up of 9,617 individual assets with values greater than $10,000. The assets can be divided into two broad categories:
- Program Infrastructure Assets – CCG manages $1.6 billion in shore-based assets in support of the Aids to Navigation, Marine Communication and Traffic Services and Life-Cycle Asset Management programs, as well as the Coast Guard College. These assets consist of land and non-vessel water based assets, fixed and
floating aids to navigation, communication towers, cranes, vehicles and program specific systems in addition to the facilities used in support of training needs of the Agency.
- Fleet Assets – The CCG Fleet consists of 116 vessels, 989 small craft and 23 helicopters. These assets are used to support the programs and commitments of the Government of Canada through the CCG, the DFO and through other Departments.
- Aids to Navigation (AToN): These assets are devices or systems provided to assist mariners in determining their position and course, to warn of dangers or obstructions, or to advise them of the location of the best or preferred route. These assets include shortrange fixed aids (e.g., lighted fixed aids, daybeacons, ranges, fog signals, and sectors lights), short-range floating aids (i.e., buoys) and long-range electronic aids (e.g., Differential Global Positioning Systems and Loran-C stations).
- Waterways: Waterways management assets include waterways used by shipping and equipment used for conducting environmental assessments, managing channel dredging, performing channel monitoring surveys, the life cycle management of channels. Also included as waterways assets are ice cover control structures and equipment related to water level/depths.
- Marine Communication and Traffic Services (MCTS): These assets are used by 22 centres that deliver MCTS and associated peripheral sites grouped into five regions. MCTS has management and control responsibilities for communications equipment, other equipment for surveillance and trade support, and some real property. Typical MCTS centres have equipment such as communication, messaging, broadcast, and vessel traffic systems. They also utilize Direction Finding Systems, Digital Select calling systems, and antenna systems.
- Search and Rescue (SAR) Services and Environmental Response (ER) Services: SAR and ER assets are used as part of CCG’s services to make Canadian waters as safe and clean as possible by providing search and rescue resources and keeping the marine environment safe by monitoring and cleaning spills. The SAR assets include packages of specialized search and rescue equipment identified for various types of vessels and specialized rescue and first aid equipment for Rescue Specialists as well as specialized small craft. The ER assets include spill containment booms, skimmers, barges and other pollution control equipment.
- Lifecycle Asset Management Services (LCAMS): LCAMS’ heavy equipment is common equipment used to support multiple programs on the shore. This includes assets such as forklifts and cranes. Investments in this category are managed by the Equipment and Other Moveable Assets (EOMA) COE.
- Canadian Coast Guard College (CCGC): College assets are used by the College to support all training activities for CCG personnel. These assets include, for example, simulators, small craft and ER equipment. Investments in this category are managed by the Fleet COE.
The Fleet Asset Base has four components: larger vessels, small vessels, small craft, and helicopters.
- Large Vessels: The large vessel fleet consists of 39 vessels. The units range from heavy-duty icebreakers to inshore multi-tasked vessels, and air cushion vehicles. The largest vessels have an operational life up to 45 years, while other vessels in this category have operational life spans approximately 25 years.
- Small Vessels: The small vessel fleet consists of 77 vessels which are below 33m in length (eg. 47 foot Search and Rescue lifeboats). Small vessels have an operational life expectancy of 15 to 20 years.
- Small Craft: CCG also operates approximately 989 small craft, which have operational life expectancies ranging from 5 to 10 years.
- Helicopters: CCG operates 23 rotary wing aircraft. These aircraft have an expected operational life of 25 years. Additional details regarding CCG’s asset base are included in Appendix A.
1.3 Our Investment Requirements1.3.1 Condition of Assets
CCG has a number of significant investments in progress, particularly in the Fleet category. These investments will significantly improve the condition of the vessel fleet as new assets are delivered over this planning cycle and beyond. Since 2005, the Government has provided $1.4 billion for up to 14 new large vessels, including a new Polar Icebreaker. These are the first significant investments in the Canadian Coast Guard’s large vessel fleet in more than 20 years.
CCG’s small vessel fleet has a healthier age profile due to the fact it has benefited from regular investments over time. The regular investments in the small vessel fleet are attributable to the lower cost to replace these assets.
Despite these investments, the level of investment in CCG’s asset base falls below a long-term sustainable level. Investments over time have not kept pace with the aging asset base over its operational life. Our shore based Program Infrastructure assets are particularly affected since they have not benefited from new funds to the same degree as the Fleet.
CCG’s asset base has a total historical cost of just under $2.1 billion; however, the estimated replacement cost is over $14.0 billion (constant dollars – the cost if the assets were all replaced in 2010). The wide discrepancy between acquisition cost and replacement cost can be explained primarily by the long asset operational life of many of CCG’s assets which has been assured through exceptional care and maintenance. For example, 100% of the large vessel fleet is older than 15 years, with certain vessels dating back to the 1960s. Because raw material and labour costs have changed significantly since these vessels were built, and since the technology expected to be part of modern vessels (e.g. navigation systems) has increased exponentially, the replacement cost of CCG assets has grown as shown in the following table.
The depreciated value of CCG’s asset base is only 4.1% of the estimated replacement cost. Specifics regarding the results of investments that have occurred in the previous planning cycle are described on the following pages.
1.3.2 Result of Previous Investments
126.96.36.199 Program Infrastructure Assets
CCG’s shore-based Program Infrastructure has endured the deterioration of its physical condition and the technological obsolescence of its assets. To help alleviate the worsening state of its assets, in 2003, the CCG received additional funding through the National Capital Spending Plan (NCSP). The $47.3M annual funding received through the NCSP was distributed between shore-based infrastructure assets which received $27.3M annually, with the remaining $20M allocated to the refurbishment of the vessel fleet. In 2007, this allocation changed to $22.3M and $25M respectively. The additional funding received through the NCSP enabled the CCG to begin to address the advanced state of deterioration of its shore asset base.
Since the inception of the NCSP, CCG has implemented refurbishment and replacement capital projects to bring its shore-based assets back to baseline condition.
Although the number of assets in poor condition has been reduced, there are many more assets and site deficiencies that need to be addressed.
The average age and deteriorating physical condition of the asset base will have an impact on the reliability and performance of CCG’s assets. The cost to operate and maintain the asset base is continually escalating. Effective cost management is further strained by the increasing need to manage both old and new assets. Often CCG has to maintain old technologies for its clients while investing in new technologies. This means that often CCG cannot fully realize the benefits and efficiencies afforded by new technologies.
Work has been conducted to address the highest risk assets on a priority basis leading to a reduction in the risk of failure and related service disruptions, and a reduction in potential liability risks. Past investments have also focused on addressing codes and standards, health and safety issues, and ensuring due diligence is performed. Most importantly CCG has managed to ensure the continued provision of services.
Despite these investments, the CCG shore-based infrastructure continues to deteriorate. Although the number of assets in poor condition has been reduced, many more assets/sites remain to be fixed. Significant strategic investments will be required for some years to enable the CCG to move forward effectively. As a first step towards the rehabilitation of the asset base, CCG will develop a more detailed inventory of the condition of its shore based assets.
188.8.131.52 Fleet Category
In order to provide the required services to Canadians, CCG needs a highly adaptable fleet that is safe, reliable, cost effective and efficient at delivering a wide variety of programs and services, both now and in the future. The current CCG large vessel fleet, in its age and deteriorating condition, is struggling to provide existing mandated service and lacks the flexibility and capacity to adapt to evolving requirements.
From the mid-1980s until the mid-2000s there were no significant investments in the large vessel fleet. As a result, over half the large vessel fleet has exceeded its operational life and all vessels are past the half-way point in their recommended operational life. The age and condition of the large vessel fleet has resulted in escalating maintenance costs which will continue to increase as vessels age. Over the last five years, CCG has seen a 64 percent increase in refit and maintenance costs. The reliability of the fleet has also suffered as increased breakdowns occur and mandated programs become more difficult to deliver. Over this same period, CCG vessels spent a total of 26,692 days in maintenance and refit with breakdowns accounting for 20 percent or 5,408 days. While CCG has become more proactive in scheduling maintenance and in planning refits to avoid service disruptions and potential breakdowns, long-term sustainability of the existing vessels remains a critical issue. At a certain point, no intervention can keep a vessel in operation.
The small vessel fleet has fared more positively than the large vessel fleet due to the relative affordability of small vessel investments. A major component of CCG’s small vessel fleet is the 47 Foot Motor Life Boat. Since 1995, thirty-one new 47 Foot Search and Rescue Lifeboats were acquired to modernize the Coast Guard’s Search and Rescue (SAR) capability. These vessels were acquired through various funding sources, including: Program Integrity; the recent Economic Action Plan (EAP), Coast Guard’s own A-base funds and the Lifeboat Replacement Program.
Program Integrity, which sunset in 2004-05, provided $47.5 million over five years to lessen the “Rust Out” of the vessel fleet. This funding was subsequently replaced by $12 million annually in ongoing funding for the vessel fleet through the Transformational Plan, which was designed to restore the federal government’s ability to deliver critical programs. More recently, $175 million was provided to CCG under EAP, enabling improved life-cycle maintenance for existing vessels and the replacement of many small vessels.
Since the implementation of the Fleet Renewal Plan (described below in Section 2.4.2) in 2005, CCG has embarked upon a series of major vessel procurement projects to address the most urgent requirements of the fleet. The Fleet Renewal projects are ongoing and the new vessels remain to be delivered.
To respond to the deteriorating condition of the large fleet and to bridge gaps until new vessels are delivered, CCG had to conduct costly Vessel Life Extensions (VLEs) in an attempt to keep aged vessels operational and sustain program delivery. VLEs are not considered to be part of the standard vessel life-cycle management process but more of an emergency means to prolong the life of a vessel to meet program demands until a replacement can be acquired. The preferred lifecycle management practice is to conduct Mid-Life Modernizations (MLMs) on vessels half-way through their operational lifecycle. In future, through the implementation of the Fleet Renewal Plan and of the investments proposed in this Investment Plan, CCG hopes to minimize future VLEs and return to MLMs in order to ensure long-term cost-effective life-cycle management of the Fleet.
As part of its regular business planning CCG is updating its Fleet Renewal Plan to cover the period from 2010 to 2040 in order to provide a solid foundation for building the Government of Canada’s civilian fleet of the future, which must be multi-capable, adaptable and sustainable to meet the projected operational readiness and service delivery demands of clients and Canadians in general.
1.4 Investment Funding Available to CCGCCG receives its investment funding through a variety of sources. For this planning cycle, the funding sources include:
- A-Base Major Capital Funding – CCG is provided with an annual Major Capital (Vote 5) Budget for investment in the Agency’s infrastructure.
- External Funding Sources – when investment needs arise that exceed the annual Major Capital budget, CCG pursues special project-based funding from Cabinet.
- Economic Action Plan – as a part of the Government of Canada’s response to the Global Financial Crisis of 2008-09, CCG received special funding that was intended to generate economic activity as well as bring benefits to Canadians through the delivery of CCG programs. This funding was allocated on an exceptional basis and applies only to the first year of the planning cycle of this Investment Plan.
The following table summarizes CCG’s funding profile across funding sources for the 2010/11 to 2014/15 planning horizon.
The loan to DFO’s Real Property COE is related to a decision to consolidate CCG’s Dartmouth Base Operations at the Bedford Institute of Oceanography (BIO). This loan to Real Property will be returned to CCG in future years.
Further description/analysis of each funding source is included in the following pages.
1.4.1 A-Base Major Capital
CCG’s annual Vote 5 A-Base budget 2010/11 allocation of $129.4 million is largely committed to maintaining the key assets required to deliver program and services, leaving little funding available for new investment initiatives or for major expenditures such as Vessel Life Extensions.
The following chart shows how CCG Vote 5 funds are consumed by pre-existing expenditure commitments:
Of CCG’s Vote 5 A-Base budget allocation, 72% is committed to existing spending envelopes such as: vessel refit; helicopter refit; shore-based infrastructure refit; Waterway Restoration; Vessel Maintenance Management Requirements (VMMR), and the Small Craft Acquisition Program (SCAP). Most of the envelopes are not adequately funded to cover all required expenditures. As such, the work that is undertaken within the envelopes has to be prioritized to ensure that the most urgent and important items are addressed.
Of the remaining budget ($35.7M or 28% of the Vote 5 A-base) that is available for decision, additional refit requirements and the costs associated with unplanned ship breakdowns, leaves only $16M to replace the existing capability and capacity of CCG assets that are past their life-cycle with newer technology assets, and $6.6M for investments in assets that will provide CCG with new and expanded capabilities. This very minimal funding source represents the only available funds from the Vote 5 A-Base budget to replace and update our aging asset base which is required in order to address the growing needs of CCG’s clients and stakeholders.
While CCG was the beneficiary of significant Economic Action Plan (EAP) funding in 2009/10 and 2010/11 that allowed the Agency to complete several priority investments, the Agency’s ability to undertake future investment initiatives will be limited in future years when EAP funding is no longer available.
1.4.2 External Funding Sources
The Agency has sought Cabinet approval for additional funding for investments that are not affordable within the major capital funding allocation of the Agency (known as B-Base funds).
CCG received $2.2M of additional funding from the Federal Budget 2010 to provide navigational safety information services for two newly created navigational areas (NAVAREAs) in the Arctic Ocean.
A more significant example of additional funding is related to the acquisition of the new Polar-class icebreaker which will cost approximately $800.0M. This single project would consume CCG’s entire A-base major capital allocation for more than the five-year planning period if it were not funded separately. This funding is provided on a one-time basis.
Over the planning horizon of this Investment Plan, CCG will receive additional funding of $915.0M to renew a portion of its large vessel fleet. Without the external funding, these projects would otherwise have been unaffordable. Table 4 outlines the additional funding that will be managed by the Major Crown projects group.
The funding outlined in Table 4 will be allocated to five Major Crown Projects. These strategic investments are described as follows:
- Mid-Shore Patrol Vessels (MSPV) – TEC $227M
- 9 new MSPV are being constructed to replace existing capacity provided by vessels nearing the end of their operational life. As part of the Fleet Renewal Plan, these are not one-forone replacements, but rather a number vessels determined by program requirements and Government of Canada decisions and priorities. Five of the MSPV will be used primarily to support Fisheries and Oceans Canada conservation and protection programs in the Maritimes, Quebec and Pacific Regions. The other four vessels will be used in a joint program with the Royal Canadian Mounted Police to enhance the maritime security along the Great Lakes - St. Lawrence Seaway system. The first vessel should be ready for service in 2011. All nine vessels will be delivered by 2013.
- Offshore Oceanographic Science Vessel (OOSV) – TEC $144.4M
- The OOSV project will acquire a replacement vessel for the Canadian Coast Guard’s largest science vessel – CCGS Hudson built in 1963. Its replacement is critical to fulfillment of the Department’s science mandate as well as those of other government departments and agencies. The OOSV Project is currently in the definition and design phase and delivery of the vessel is anticipated for 2013.
- The Offshore Fisheries Science Vessels (OFSV) - TEC $244M
- The OFSV project will acquire three (3) OFSV for the Canadian Coast Guard (CCG) Fleet. The OFSV will replace three (3) ageing Coast Guard ships on the East and West Coasts of Canada that provide a platform from which critical scientific research and ecosystem-based management can be performed. The OFSV Project is currently in the definition and design phase and all vessels are expected to be delivered by 2015.
- Polar Icebreaker – TEC $800M
- In 2008, the government took the decision to replace Coast Guard’s most capable Arctic icebreaker, CCGS Louis S. St-Laurent, built in 1969, and to decommission it in 2017. Budget 2008 provided $720 million for the procurement of a new Polar Icebreaker, which is being designed with greater icebreaking capabilities than the one it is replacing, allowing it to operate for longer periods in the Arctic. This new vessel will allow the Coast Guard to more efficiently continue its work to strengthen and protect Canada’s sovereignty in the Arctic.
- Air Cushion Vehicle (ACV) – TEC $27.3M
- The new ACV will replace CCGS Penac at the Canadian Coast Guard Sea Island Hovercraft Base in Richmond, British Columbia. It will provide for ongoing Search and Rescue coverage in the area, allowing the CCG to continue fulfilling its mandate and maintain current levels of service. A contract for the construction of the ACV will be awarded in 2010-2011 with delivery expected in late 2012.
Note that some of the investments have an implementation timeline of longer than the 5-year planning horizon of this investment plan. For example, the Polar Icebreaker project was initiated in 2009/10 and will continue until 2019/20. The $929.5M Major Crown Projects budget figure above reflects only the funds that have been allocated for the years within the five-year investment planning horizon covered by this document.
1.4.3 Economic Action Plan Funding
The Economic Action Plan (EAP) funding has provided a welcome short-term infusion of investment funding which achieved the double benefit of generating economic benefit for Canada and addressing some of CCG’s outstanding investment requirements that were not affordable within CCG’s available funding envelope.
Budget 2009/10 provided the Canadian Coast Guard with $175M of EAP funding, spread over two fiscal periods. The bulk of the EAP funding, $112M, was targeted at CCG’s large vessel fleet. There were five Vessel Life Extensions (VLEs) that were carried out on vessels in poor condition that were nearing the end of their planned lives. CCG will use the extended operational life of these ships to bridge through to the planned large vessels replacements in the Fleet Renewal Plan.
The EAP funding also enabled $38M worth of planned refit work on the remainder of the Fleet’s large vessels. The refit and repair work consists of general repair, refit, maintenance and updating obsolete systems aimed at improving the reliability of CCG program delivery. The remainder of the EAP funding was used to work expedite acquisition of much needed small vessels and small craft.
1.5 How We Make Investment Decisions
In 2008, the Commissioner of the Canadian Coast Guard directed the organization to improve the integration of its planning activities across the Agency. The transition from Long-Term Capital Planning to Investment Planning necessitated by a new Treasury Board policy provided an additional impetus to review the planning approach in use for investments at CCG.
In response to the new TBS policy, the Agency has moved the focus of its investmentplanning from “assets” to “program requirements” by implementing a Capability Gap Analysis which identifies program needs in terms of the assets or acquired services available to meet those needs. By focusing on program requirements and assessing our current and future capability to deliver those programs, we now look at alternatives to “one-for-one asset replacement” in a more formal way. This ensures continued innovation in program delivery where it makes sense.
There has been a much greater emphasis placed on a better understanding of the condition of CCG assets. A systematic survey program is being put into place for the fleet and shore-based assets. Shore-based asset and vessel condition surveys will allow CCG to better understand its maintenance and reinvestment issues, a fundamental component in effective decision making. Thus far, condition surveys have been completed for fleet assets and are integral in updating the CCG’s Fleet Renewal Plan. Work progresses on the condition surveys of the shore-based assets, and this work will be integral to the remediation of our critical Program Infrastructure.
Prior to the current planning cycle, CCG’s Long-Term Capital Planning was conducted according to the DFO planning process. Under that process, CCG led two Centres of Expertise (COEs) for planning investments: Fleet COE and Equipment and Other Moveable Assets COE. These COEs were created to focus on the unique capital investment requirements that result from having very different categories of assets in the Agency’s asset base. In previous planning cycles, this approach has proved extremely effective in addressing the planning needs of CCG. The COEs have developed deep, unique and specialized expertise in their respective fields, so it makes sense to continue this structure into the future. (CCG’s Organization Structure as it relates to Investment Planning is described in Appendix B.)
In this Investment Plan CCG has updated its planning approach to include greater integration between the COEs at key decision points. In the past, each of those COEs submitted longterm capital plan content to DFO for inclusion in the Departmental plan.
However, the plans of the two COEs were not specifically integrated to provide a CCG-wide picture of investment plans and requirements, and this approach did not facilitate making trade-offs between investments across COEs. That integration is now in place.
The plan is still developed with integration into the DFO plan in mind. CCG’s proposed investments have been submitted for consideration to TBS in the context of the DFO Investment Plan. However, the CCG Integrated Investment Plan is expected to be more useful as a management document within CCG than the two separate plans completed in years past, and will ensure that projects in both COEs make the most sense for the Canadian Coast Guard Agency.
A detailed description CCG’s Integrated Investment Planning Framework is included in Appendix C.
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