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INVESTMENT PLANNING CONTEXT

1.1 WHO WE ARE AND WHAT WE DO

The Canadian Coast Guard 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, Coast Guard 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, Coast Guard operates twenty-four hours a day, every day of the year.

The Agency 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 Services
  • Maritime Security
  • Shore-Based Asset Readiness
  • Waterways Management
  • Icebreaking Services
  • Environmental Response Services
  • Fleet Operational Readiness
  • Canadian Coast Guard College

A full description of these programs can be found on the Canadian Coast Guard’s website at www.ccg-gcc.gc.ca and in its business plan.

We serve clients in all sectors of the Canadian economy: the general public, shipping industry, commercial shippers, ferry operators, commercial fishers, recreational boaters, coastal communities, ports, channel owners and operators and other government departments and agencies. For example:

  • We are mission-ready twenty-four hours a day, seven days a week and operate in almost all conditions. When extreme weather hits and other vessels are being called into port, Coast Guard vessels are often asked to head out to sea to save lives, to break ice to free trapped vessels, or to provide whatever assistance is needed to enable safe passage.
  • We are a visible symbol of federal presence and provide the capacity to assert Canadian sovereignty, especially in the Arctic.
  • We support on water safety and security by responding to mariners in distress, disasters and emergencies with one of the most effective maritime search and rescue systems in the world, supported by the air assets of the Canadian Forces and the volunteers of the Canadian Coast Guard Auxiliary.
  • We contribute to Canada’s overall economic prosperity by providing essential support for our country’s $160 billion global and domestic marine trade industry. For instance, we maintain and service approximately 17,000 marine aids of all sizes that mark safe passages through our waterways. We also provide essential icebreaking services that enable shipping to move safely and efficiently through ice covered waters in Eastern Canada and the Great Lakes throughout the winter, and in the Arctic throughout the summer. Icebreaking services keep most Canadian ports, especially Montreal, open for business year-round, prevent flooding along the St. Lawrence River, and support ferry operators, fishers, and coastal communities.
  • We are the lead federal agency for all ship-source and mystery-source pollution spills in waters over which Canada has jurisdiction, including the capacity to respond to oils spills in the Arctic.
  • We support science activities by providing a platform for scientists from DFO and other federal government departments, Environment Canada, Natural Resources Canada and the Natural Sciences and Engineering Research Council of Canada. We facilitate important scientific activities and research such as science surveys essential for determining biomass and stock assessments leading to fisheries allocations; charting to enable safe navigation; freshwater research in the Great Lakes; seabed mapping to help establish Canada’s claims under the United Nations Convention on the Law of the Sea; and research to assess the changing ocean conditions and the impacts of climate change.
  • We support the security and enforcement activities of DFO with vessels dedicated primarily to fisheries enforcement to ensure an orderly and sustainable fishery that complies with fisheries regulations. We also support the maritime security activities of the Royal Canadian Mounted Police (RCMP) by participating in joint programs on the Great Lakes and St. Lawrence Seaway, as well as maritime security activities of the Department of National Defence, the Canada Border Services Agency, and Public Safety Canada.
  • We support other non-military activities of other Canadian government departments such the Department of Foreign Affairs and International Trade, Health Canada, and Transport Canada.

1.2 THE ASSETS WE USE TO SUPPORT OUR PROGRAMS

In order to ensure the delivery of essential services, Coast Guard 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 the asset base is directly related to the overarching requirement of maintaining 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); and,
  • the need to take advantage of technological innovation (e.g. migration to electronic aids to navigation).

1.2.1 Description

The Canadian Coast Guard’s asset base is made up of 15,211 individual assets with values greater than $10,000. The assets can be divided into two main categories: Program Infrastructure and Fleet.

Program Infrastructure Assets

Program Infrastructure Assets are maintained every day for the benefit of all Canadians as CCG ensures a safe and secure, efficient and environmentally responsible transportation system in Canadian waters.

Coast Guard manages over $1.5 billion in program infrastructure assets that are essential to the delivery of its services. Program Infrastructure assets are divided into the following services:

  • Aids to Navigation Services:
    In order to provide access to a reliable navigation system and support a safe, accessible and efficient marine environment, CCG owns several assets that play important roles to deliver this service. The following devices and systems 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:
    • Short-range fixed and floating marine aids including visual aids (lighthouses and buoys), aural aids (fog horns) and radar aids (reflectors and racons).
    • Long-range electronic positioning systems such as the Differential Global Positioning Systems (DGPS).

  • Waterways Management Services:
    Navigability in Canadian waterways is highly influenced by water levels and the bottom condition of shipping channels. The monitoring and maintenance services help ensure safe, economical and efficient movement of ships in Canadian waterways. The program requires assets to manage channel dredging, to perform channel monitoring surveys, to support environmental protection, and to perform lifecycle management operations to commercial channels and the Canso Canal in Nova Scotia. Other assets include ice booms, ice islands, marine structures, and equipment related to water level and depth forecasting.
     
  • Marine Communications and Traffic Services (MCTS):
    Many assets are required to provide communications and traffic services for the marine community and for the benefit of the public at large. These assets form Coast Guard’s communication backbone and are used on a daily basis to transmit information from 22 MCTS centres and 202 remote sites strategically located across Canada. The program manages communications equipment, equipment for surveillance and trade support as well as some real property. Typically, MCTS centres are equipped with the following:
    • Equipment such as communication, messaging, broadcast, and vessel traffic management information systems.
    • Direction Finding System, Digital Select Calling System, and Communication Control System.

  • Environmental Response (ER) Services:
    ER assets are used as part of CCG’s services to minimize the environmental, socio-economic and public safety impacts of marine pollution incidents in Canadian waters by monitoring, investigating and managing ship-source and mystery-source pollution spills into the marine environment. Assets used in the ER program include vessels, spill containment booms, skimmers, barges and other pollution control equipment.
     
  • Search and Rescue (SAR) Services:
    SAR assets are used to aid in distress monitoring, communication, preparedness and search and rescue activities for on-water SAR situations. The following are SAR assets:
    • Specialized search and rescue equipment for various types of vessels and various types of rescue operations.
    • First aid equipment for rescue specialists.
    • Specialized small craft.

  • Icebreaking Services:
    Icebreaking services are provided through and around ice-covered waters in Eastern Canada and the Great Lakes throughout the winter, and during the summer navigation season in the Arctic to ensure safe, economical and efficient movement of ships in Canadian waters. Coast Guard uses icebreakers as well as ice-routing and information (forecasts, warnings) and ice reconnaissance to deliver the program. Icebreaking assets include Heavy Icebreakers, Medium Icebreakers, High and Medium-Endurance Multi-Tasked Vessels, Air Cushion Vehicles, as well as an Icebreaking Operations Data Information System.
     
  • Lifecycle Asset Management Services (LCAM):
    This program ensures that the capability, reliability, availability and value of Coast Guard’s assets are satisfied at minimum life cycle cost, thereby improving the efficiency of all program delivery. In order to deliver the effective lifecycle management services of Coast Guard’s asset base, common heavy equipment is needed such as forklifts, vehicles and cranes.
     
  • Canadian Coast Guard College:
    The Canadian Coast Guard College is dedicated to delivering high quality, up-to-date maritime training and services in a progressive, bilingual and client oriented facility. To do so, many assets are used to support all training activities for Coast Guard personnel such as simulators, small craft and environmental response equipment.
Fleet Assets

CCG’s Fleet includes a wide range of vessels, varying in size from heavy icebreakers that operate in Canada’s Arctic and keep the St. Lawrence Waterway open year-round for shipping traffic, to small rigid-hulled inflatables that carry out rescue and patrols on inland waterways.

Coast Guard’s fleet consists of 116 vessels, 23 helicopters and approximately 1,000 small craft. These assets are used to support the programs and activities of the Government of Canada, including those of CCG, DFO, and other departments and agencies. All Fleet assets are procured to support Fleet Operational Readiness program activity.

Fleet assets are divided into four major categories: large vessels, small vessels, small craft and helicopters.

  • Large Vessels: Coast Guard currently operates a fleet of 39 large vessels divided in 9 classes. The full operational life of large vessels varies from one class to the next and range from 25 to 45 years with proper life-cycle management practices.
  • Small Vessels: The small vessel fleet consists of 77 vessels within 6 vessel classes. Small vessels have shorter operational life expectancies ranging from 15 to 20 years.
  • Small Craft: Coast Guard operates approximately 1,000 small craft with operational life expectancies ranging from 10 to 15 years.
  • Helicopters: Coast Guard's rotary wing aircraft fleet consists of 23 helicopters which have operational life expectancies of 30 years.

Additional details regarding the Coast Guard's asset base are included in Appendix A.

1.3 OUR INVESTMENT REQUIREMENTS

1.3.1 Condition of Assets

Coast Guard has a number of large investments in progress, particularly with regard to its Fleet. These investments will improve the overall condition of the vessel fleet over the next five years and beyond as new assets are delivered and put into service. Since 2005, the Government of Canada has committed $1.4 billion to purchasing new large vessels, including a Polar Icebreaker. These are the first significant investments in the Canadian Coast Guard’s large vessel fleet in more than twenty years.

CCG’s small vessel fleet has recently benefited from a regular stream of investments and are therefore closer to following an appropriate lifecycle management schedule. The small vessel fleet is much easier to invest in due to the lower cost and complexity of replacement or refurbishment.

Despite these important investments, more are needed if Coast Guard is to achieve a sustainable life-cycle management plan for its assets. Over the past few decades, investments have not kept pace with the aging asset base, leaving CCG with the challenge of replacing and refurbishing an overwhelming number of assets that are at the end of their operational life. Shore-based Program Infrastructure assets are particularly affected by this trend since they have not benefited from increased funding to the same degree as the Fleet.

Coast Guard’s asset base has a total historical cost of just under $2.0 billion; however, the estimated replacement cost is over $14.0 billion in constant dollars (the cost if the assets were all replaced in 2010).

The wide discrepancy between the historical acquisition cost and the replacement cost can be explained by the assets’ long operational life. Many of CCG’s assets have been kept in service through exceptional care and maintenance. As of 2010, 100% of Coast Guard’s large vessels are older than fifteen years; with certain vessels entering into service as far back as the 1960s. Raw materials and labour costs have changed significantly since these vessels were built. The cost of modern marine technology (e.g. navigation systems) required for today’s new vessels have increased considerably, further increasing CCG’s total re-investment cost.

The valuation of Coast Guard’s assets and their estimated operational life is illustrated in the following table.

Table 1: Historic Cost, Net Book Value, Replacement Cost and Operational Life of CCG Assets
Asset Type # of Assets Historic Cost
($000)
Accumulated Depreciation
($000)
Net Book Value
($000)
Estimated Replacement Cost ¹
($000)
Estimated Operational Life
(years)
 
Program Infrastructure
Aids to Navigation 9,030 124,735.8 77,503.8 47,231.9 493,578.5 5 to 40
Waterways Management 21 1,045.2 535.5 509.7 3,907.0 3 to 20
Marine Communications and Traffic Services 2,542 141,698.9 82,237.0 59,461.9 559,996.7 3 to 40
Icebreaking Services 28 3,115.6 2,233.0 882.6 11,720.9 3 to 20
Search and Rescue Services 328 14,991.9 8,477.6 6,514.3 59,906.6 3 to 25
Environmental Response Services 890 43,982.6 38,672.4 5,310.2 173,208.3 3 to 25
Shore-Based Asset Readiness 1,069 46,237.4 34,617.3 11,620.1 182,709.0 3 to 40
Coast Guard College 160 8,024.3 7,814.6 209.6 31,707.0 3 to 20
 
Fleet
Vessels ² 116 1,472,635.0 441,026.0 1,031,609.0 11,887,700.0 15 to 45
Helicopters 23 37,161.0 4,992.0 32,169.0 502,400.0 30
Small Craft and Other Assets 1,004 96,317.0 26,896.0 69,421.0 100,000.0 5 to 10
 
Total 15,211 1,989,944.5 725,005.2 1,264,939.3 14,006,834.0  

¹ The Estimated Replacement Cost figures are provided in “constant” dollars and represent the cost of replacing the assets in 2010. Coast Guard is currently developing a new costing methodology to evaluate the replacement costs of its Fleet and Program Infrastructure assets. Figures presented in this table will be revised in the 2012/13 to 2016/17 investment plan.

² The large and small vessel distribution by class and size can be found in Appendix A - Table 16.

1.3.2 Result of Previous Investments

1.3.2.1 Program Infrastructure Assets

Many of Coast Guard’s shore-based Program Infrastructure assets have deteriorated and are falling behind in technology. In 2003, to help alleviate the worsening state of its assets, CCG received $47.3 million in additional investment funds through the National Capital Spending Plan (NCSP). Since 2007, these funds have been distributed between shore-based infrastructure assets and fleet assets with $27.3 million and $20 million allocated per year respectively. This permanent increase in funding has enabled Coast Guard to finally begin addressing the advanced state of deterioration of its shore-based assets.

Since the NCSP’s inception in 2003, Coast Guard has planned and implemented multiple refurbishment and replacement projects in an effort to bring its shore-based assets back to baseline condition. Although the total number of deteriorating assets is decreasing, many more assets and site deficiencies need to be addressed if CCG wishes to have a modern and reliable asset base.

The average age and deteriorating physical condition of the asset base will have an impact on their reliability and performance. The cost to operate and maintain the asset base is continually escalating. Effective life-cycle management is further strained by the increasing need to manage both old and new assets with very different technological components. These differences make it difficult for Coast Guard to divest itself of old technologies resulting in the inability to fully realize the benefits and efficiencies afforded by new technologies.

Efforts have been made to prioritize and address assets demonstrating the highest level of risk of failure or service disruption. This has resulted in an overall reduction of all risks including the risk of potential liability. Past investments have also focused on the ability to address gaps with regards to codes and standards, health and safety issues, and ensuring due diligence is performed. Most importantly, Coast Guard has managed to ensure the continued provision of its services.

Despite these investments, shore-based infrastructure continues to age and deteriorate. The total number of assets in “poor condition” continues to decrease; however, a large number of assets remain in need of investment. The continued use of significant strategic investments will be required to enable Coast Guard to effectively operate now and into the future. In order to completely rehabilitate its shore-based assets, in 2010/11 Coast Guard started the process in drafting asset condition reports for Aids to Navigation and MCTS; these reports present a high level assessment of the asset base for the programs. The development of an asset class plan is also under development. These documents will provide both a more comprehensive condition inventory and an effective plan to address any shortcomings.

1.3.2.2 Fleet Assets

In order to provide its services and programs to Canadians, both now and in the future, Coast Guard needs a safe, reliable, highly adaptable, cost effective and efficient fleet of vessels and helicopters.

Large Vessels

Due to its age and overall deteriorating condition, Coast Guard’s large vessel fleet is struggling to provide its existing mandated services and because many of these vessels are purpose-built, it lacks the flexibility and capacity to adapt to evolving requirements. From the mid-1980s to the mid-2000s, no significant investments were made to the large vessel fleet. As a result, all of these assets passed the halfway point of their recommended operational life with over half of them exceeding their 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. Between the mid-1980s and mid-2000s, Coast Guard’s large vessels spent a total of 27,388 days undergoing maintenance and refit, with breakdowns accounting for approximately seventeen percent or 4,786 days of this total. The reliability of these assets continues to suffer as breakdowns occur and it becomes more difficult to deliver mandated programs.

Facing a peak in the number of breakdowns in 2007/08, Coast Guard became more proactive in scheduling maintenance and planning refits. These efforts resulted in a thirty-two percent decrease in overall breakdown time. Although this is a significant improvement, the long-term sustainability of existing large vessels remains a critical issue. In time, Coast Guard will face the unavoidable reality when no amount of intervention or investment will keep old vessels in operation.

Small Vessels

The small vessel fleet has fared more positively than its large counterpart due to the relative affordability of small vessel investments. Since 1995, thirty-one new Search and Rescue (SAR) Lifeboats were acquired to modernize the Coast Guard’s SAR capability. These vessels were acquired through various funding sources, including: Program Integrity; the Lifeboat Replacement Program; the Economic Action Plan (EAP), and Coast Guard’s own regular investment funding source.

Fleet Renewal

Since implementing a fleet renewal planning process in 2005 (described in Section 2.4.2), Coast Guard has undertaken a series of major vessel procurement projects to address the Government of Canada’s most urgent requirements.

To respond to the deteriorating condition of large vessels and to bridge gaps until new ones can be delivered, CCG needed to conduct costly Vessel Life Extensions (VLE) to keep aged vessels operational. VLEs are not considered to be part of the standard vessel life-cycle management process; they are an emergency instrument meant to prolong the life of a vessel. The preferred life-cycle management practice used with naval and coast guard fleets around the world is to conduct Mid-Life Modernizations (MLM) on vessels half-way through their operational lifecycle. As Coast Guard continues to implement its Fleet Renewal Plan and Integrated Investment Plan, it hopes to minimize and eventually avoid the use of VLEs and return to using much more cost-effective MLMs.

Coast Guard is continuously updating its Fleet Renewal Plan and is working to develop the next iteration of the plan which will cover the 2011 to 2040 period. This document will provide a solid foundation to build the Government of Canada’s future multi-capable, adaptable and sustainable civilian fleet: a fleet able to meet the projected demands of clients and Canadians in general.

New vessels have entered or will enter into service as a result of CCG’s most recent investments, including:

  • CCGS Mamilossa, an Air Cushion Vehicle entered into service in the Quebec region in March 2009.
  • CCGS Kelso, a Near-Shore Fishery Research vessel entered into service in the Central and Arctic region in September 2009.
  • CCGS Viola M. Davidson, another Near-Shore Fishery Research Vessel entered into service in the Maritimes region in March 2010
  • Awarded the contract for the procurement of nine new Mid-Shore Patrol Vessels, the first of which should be ready for service in 2012.
1.3.2.3 Economic Action Plan Investments

Coast Guard benefited from the Government of Canada’s Economic Action Plan in 2009/10 and 2010/11. It received $175 million in additional funding to refit and extend the operational life of some vessels and procure new vessels including the acquisition of new environmental response barges and small craft. In line with all EAP programs, these funds must be entirely expensed prior to the end of the 2010/11 fiscal year.

At the time this document was written, not all EAP projects were completed. The spending profiles presented below are therefore projections and may differ slightly from actual funds expensed.

It is important to note that the funding expensed above and beyond the allocated $175 million threshold will be sourced directly from the Coast Guard’s own investment budget. These additional funds were required to offset project management costs and some unexpected costs that arose from the various EAP initiatives.

Table 2: Economic Action Plan Expenditure Profile (Thousands of Dollars)
Economic Action Plan Spending 2009/10 (actual) 2010/11 (projected) Total
 
Vessel Life Extensions
CCGS Bartlett 18,543 3,448 21,991
CCGS Tracy 10,609 3,000 13,609
CCGS Limnos 6,906 2,814 9,720
CCGS Tanu 350 8,173 8,523
CCGS Cape Roger 1,689 9,069 10,758
Subtotal Vessel Life Extensions 38,097 26,504 64,601
 
Other EAP Projects
Near-Shore Fishery Research Vessels 2,910 23,969 26,879
SAR Lifeboats 8,546 11,400 19,946
Small Craft 8,258 5,321 13,579
Environmental Response Barges 1,425 11,020 12,445
Vessel Refit 23,601 15,048 38,649
Subtotal Other EAP Projects 44,740 66,758 111,498
 
Total 82,837 93,262 176,099

The Near-Shore Fishery Research Vessel procurement projects targeted by the Economic Action Plan are not scheduled for completion until 2011/12. As a result, Coast Guard will be funding approximately $7.3 million from its own investment budget, in 2011/12, to ensure these vessels can be brought into service as planned.

1.4 INVESTMENT FUNDING AVAILABLE TO CCG

CCG 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.

The following table summarizes CCG’s funding profile across funding sources for the 2011/12 to 2015/16 planning horizon

Table 3: Total Available Investment Budget, 2011/12 to 2015/16 (Thousands of Dollars)
Funding Sources:
Years A-Base Funding Source External Funding Sources Total Available Budget
2011/12 137,934.3 117,719.2 255,653.5
2012/13 123,626.7 192,941.3 316,568.0
2013/14 129,530.0 229,880.3 359,410.3
2014/15 129,530.0 325,924.5 455,454.5
2015/16 129,530.0 260,091.1 389,621.1
TOTAL 650,151.0 1,126,556.4 1,776,707.4

The funding sources are explained in more detail over the next few sections.

1.4.1 A-Base Funding Source

Every year, Coast Guard automatically receives a recurring investment budget of $129.4 million as part of its A-Base investment budget. Several irregular adjustments such as loans and monetary carry-forwards cause the annual A-Base budgets to fluctuate slightly from year to year.

Of the total A-Base investment budget allocation, seventy-three percent is committed to six fixed spending envelopes including Vessel Refit, Helicopter Refit, Shore-based Infrastructure Refit, Waterway Channel Restoration, Vessel Maintenance Management (VMM), and Small Craft Replacement. Projects funded through the six fixed funding envelopes are identified and prioritized based on regular lifecycle management practices. Asset condition surveys are completed periodically to allow the Agency to understand the overall state of its asset base and establish its investment needs accordingly.

Table 4: A-Base Investment Budget, 2011/12 to 2015/16 (Thousands of Dollars)
  2011/12 2012/13 2013/14 2014/15 2015/16 TOTAL
 
A-Base Budget Envelopes:
Refit - Vessels 62,170.0 59,650.0 64,400.0 64,400.0 59,400.0 310,020.0
Refit - Helicopters 5,600.0 5,600.0 5,600.0 5,600.0 5,600.0 28,000.0
Refit - Shore Based Infrastructure 25,000.0 25,000.0 25,000.0 25,000.0 25,000.0 125,000.0
Waterway Channel Restoration 3,815.0 3,815.0 3,815.0 3,815.0 3,815.0 19,075.0
Vessel Maintenance Management 6,500.0 6,500.0 6,500.0 6,500.0 6,500.0 32,500.0
Small Craft Replacement 5,000.0 5,000.0 5,000.0 5,000.0 5,000.0 25,000.0
Residual for Decision 21,315.0 23,835.0 19,085.0 19,085.0 24,085.0 107,405.0
Sub-total A-Base 129,400.0 129,400.0 129,400.0 129,400.0 129,400.0 647,000.0
 
A-Base Budget Adjustments:
Contribution to Vessel Procurement Budget (6,096.7) (8,403.3) - - - (14,500.0)
Loan Repayment from Real Property 2,500.0 2,500.0 - - - 5,000.0
Expected Carry-Forward ¹ 12,000.0 - - - - -
Capital Salaries Adjustments ² 131.0 130.0 130.0 130.0 130.0 651.0
Total Available A-Base 137,934.3 123,626.7 129,530.0 129,530.0 129,530.0 650,151.0

¹ Carry-forward is an estimate based on a mid-year review exercise in November 2010. Actual amount could vary.

² Capital Salaries Adjustments exist as a result of collective agreement contract settlements.

The remaining balance of non-allocated funds called “Residual for Decision” is available for other investments. Projects seeking funding are selected through a comprehensive project prioritization process. These projects are reprioritized annually through a national peer review exercise in order to select the highest priorities to fund.

Some years, the fixed budget envelopes may not be sufficient to cover all required planned spending; therefore, a portion of the “Residual for Decision” balance may be ear-marked to fulfill this gap. For example, from 2011/12 to 2015/16, a portion of the residual funds were allocated for additional Vessel Refit to address an important refit requirement for Coast Guard’s heavy and medium icebreakers.

In addition to the regular budget envelopes, significant budget adjustments impact the first two years of the investment planning cycle. Coast Guard will contribute $14.5 million of its own A-Base budget towards the externally funded Mid-Shore Patrol Vessel procurement project identified in section 1.4.2. The additional funding will allow Coast Guard to procure a ninth vessel.

In 2010/11, Coast Guard gave a $5 million loan to DFO’s Real Property Major Capital Centre of Expertise to support the construction of office infrastructure in the Maritimes region. The loan is expected to be repaid over the first two years of the planning cycle.

CCG’s regular A-Base budget in 2011/12 is largely committed to maintaining key assets required to deliver program and services, leaving very little funding available for new investment initiatives.

The following chart demonstrates how Coast Guard plans to spend its A-Base funds in 2011/12:

Chart 1 - A-Base Investment Budget Usage, 2011/12
A-Base Budget ($000,000's) %
Refit - Vessels 62.2 49
Refit - Helicopters 5.6 4
Refit - Shore-Based Infrastructure 25 19
Waterways Channel Restoration 3.8 3
Vessel Maintenance Management 6.5 5
Small Craft Replacement 5.0 4
Investment (Residual for Decision) 21.3 16
Total 129.4 100

Note: This chart represents the distribution of CCG's A-Base Investment budget of $129.4M for 2011/12 and not the total planned spending outlined in the Planned Investments Table in section 2.1. The difference between them is a result of annual over-programming, as described in section 2.1.1.

Of the remaining “Residual for Decision” envelope in 2011/12 ($21.3 million or 16 percent of the A-base investment budget), a large portion is dedicated to replacing, upgrading or creating important new program infrastructure systems ($13.1 million or 61 percent of the residual budget). Another significant portion of the residual budget is dedicated to critical unplanned and miscellaneous investment requirements ($3.4 million or 16 percent of the residual budget). This leaves Coast Guard with a mere $4.8 million to replace the capacity of its aging small vessel assets and vessel systems. The cost of replacing a Near-Shore Fishery Science Vessel alone is $16 million, which clearly demonstrates the financial challenges currently being faced by Coast Guard.

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).

The 2010 Federal Budget provided Coast Guard with $2.8 million in additional funding to provide an issuing service for navigational warnings to mariners for two newly created navigational areas (NAVAREAs) in the Arctic, and $27.3 million to acquire a new Air Cushion Vehicle for Pacific region.

Over the planning horizon of this Investment Plan, CCG will receive additional funding of $1.1 billion to renew a portion of its large vessel fleet. Without this external funding, these projects would otherwise have been unaffordable. Table 5 outlines the additional funding that will be managed by the Vessel Procurement sector.

Table 5: External Funding Sources Budget, 2011/12 to 2015/16 (Thousands of Dollars)
  2011/12 2012/13 2013/14 2014/15 2015/16 TOTAL
 
External Funding Project Budgets:
Polar Icebreaker 9,450.0 13,171.5 76,514.0 223,000.0 226,000.0 548,135.5
Mid-Shore Patrol Vessels 78,996.0 62,881.9 11,459.0 - - 153,336.9
Offshore Fisheries Science Vessels 5,177.2 50,829.0 76,659.0 80,389.8 23,509.3 236,564.3
Offshore Oceanographic Science Vessels 4,069.5 43,604.6 59,600.0 21,500.0 10,567.1 139,341.2
Air Cushion Vehicle 9,950.0 9,360.0 4,820.0 1,020.0 - 25,150.0
Arctic NAVAREAs Infrastructure - 2,013.6 813.6 - - 2,827.2
Total External Funding Sources Budget 107,642.7 181,860.6 229,865.6 325,909.8 260,076.4 1,105,355.1
 
External Funding Budget Adjustments:
A-Base Contribution for Mid-Shore Patrol Vessels 6,096.7 8,403.3 - - - 14,500.0
Expected Carry-Forward ¹ 3,965.0 2,662.7 - -
Capital Salaries Adjustments ² 14.8 14.7 14.7 14.7 14.7 73.6
Total Available Externally Funded Budget 117,719.2 192,941.3 229,880.3 325,924.5 260,091.1 1,126,556.4

¹ Carry-forward is an estimate based on a mid-year review exercise in November 2010. Actual amount could vary.

² Capital Salaries Adjustments exist as a result of collective agreement contract settlements.

The funding outlined in Table 5 will be allocated to five Vessel Procurement projects. These strategic investments are described as follows:

  • Mid-Shore Patrol Vessels (MSPV) – Total estimated cost: $227.0 million
    • Nine new MSPVs are being constructed to replace the existing capacity provided by vessels nearing the end of their operational life. As part of the Fleet Renewal Plan, these are not one-for-one replacements, but rather a number of vessels determined by program requirements and Government of Canada decisions and priorities. Five of the MSPVs 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 and St. Lawrence Seaway system. Construction of the first vessel has begun and it is targeted to be ready for delivery in late 2011 with all remaining vessels to be delivered by 2013.
       
  • Offshore Oceanographic Science Vessel (OOSV) – Total estimated cost: $144.4 million
    • The OOSV project was developed to acquire a replacement vessel for the 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 design phase and delivery of the vessel is anticipated for 2014.
       
  • Offshore Fishery Science Vessels (OFSV) - Total estimated cost: $244.0 million
    • The OFSV project was developed to acquire three vessels to replace four aging Coast Guard vessels on the East and West Coasts of Canada that provide a platform for critical scientific research and ecosystem-based management. The OFSV project is currently in the design phase and all three vessels are expected to be delivered by 2015.
       
  • Polar Icebreaker – Total estimated cost: $800.0 million
    • Canada’s largest and most capable heavy icebreaker, CCGS Louis S. St-Laurent, is nearing the end of its operational life and is scheduled to be decommissioned in 2017. The Federal Budget of 2008 provided the funds necessary for the procurement of a new Polar Icebreaker. This new vessel class is being designed with greater icebreaking capabilities, allowing it to operate in more difficult conditions and for longer periods in the Arctic. It will allow Coast Guard to more effectively continue its work to strengthen and protect Canada’s sovereign interests in the Arctic. The new Polar Icebreaker is scheduled to be delivered in 2017.
       
  • Air Cushion Vehicle (ACV) – Total estimated cost: $27.3 million
    • The new ACV will replace the capacity of CCGS Penac at the Sea Island Hovercraft Base in Richmond, British Columbia. It will allow Coast Guard to fulfill its mandate and maintain current levels of service for its Search and Rescue program. A contract for the construction of the ACV was awarded in 2010/11 with delivery expected in summer 2013.

Some of the aforementioned investments have implementation timelines greater than the five-year planning horizon presented in this investment plan. For example, the Polar Icebreaker project was initiated in 2009/10 and will carry on until 2019/20. Therefore, the total vessel procurement budget presented in Table 5 of $1.1 billion reflects only the funds that have been allocated within the next five years.

1.5 HOW WE MAKE INVESTMENT DECISIONS

The Capability Gap Analysis is a key piece of the Agency’s investment planning framework. The analysis identifies the gaps between our current capability and our target capability for service delivery. The analysis was a collaborative effort completed by program analysts in every region of the country. The result is a comprehensive 20-year outlook of capability challenges that will confront the Coast Guard.

The new Canadian Coast Guard investment planning format is now in its second year and was necessitated by a new Treasury Board policy which provided the Agency with an additional impetus to review the way it plans its investments. This approach (described in Appendix C) allows for a consolidated view of the Agency’s activities and ensures that scarce investment resources are applied to the highest priorities.

In response to the Treasury Board Secretariat (TBS) Policy on Investment Planning – Assets & Acquired Services, the Agency’s investment planning is anchored in program requirements. This is accomplished by performing a Capability Gap Analysis that identifies program needs in terms of the assets or acquired services available to meet those needs. By focusing on program requirements and assessing the current and future capability to deliver those programs, CCG now looks at alternatives to “one-for-one asset replacement” in a more formal way. This ensures continued innovation in program delivery where it is cost effective.

Greater emphasis has been placed on understanding the condition of CCG’s assets. A systematic survey program is in place for both fleet and shore-based assets. These surveys allow the Coast Guard to better understand its maintenance and reinvestment issues, a fundamental component in effective decision making. To date, condition surveys have been completed for fleet assets and are integral in updating the Fleet Renewal Plan. Condition surveys for shore-based assets continue to be refined and will be essential to the remediation of the Agency’s critical Program Infrastructure.

In 2009/10, Coast Guard updated its planning approach to include greater integration between its Centres of Expertise (COE); Fleet COE and Equipment and Other Moveable Assets COE. Prior to 2009/10, each COE submitted individual long-term capital plans for inclusion in the Fisheries and Oceans Canada departmental plan. Through this process, the COEs have developed deep, unique and specialized expertise in their respective fields; it is therefore logical to continue using this planning structure. However, in order to encourage closer collaboration between the COEs, Coast Guard now submits a single Integrated Investment Plan. The historic approach of developing two separate plans did not paint an accurate picture of the Coast Guard’s true investment profile and made it difficult for COEs to share resources when needed.

Coast Guard’s own IIP continues to be developed with the intent of being fully integrated within Fisheries and Oceans Investment Plan, and in order to be submitted for consideration to the Treasury Board Secretariat. The additional value of creating a standalone Coast Guard Integrated Investment Plan has already been proven 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.