ARCHIVED - Investment Plan 2010/11 -2014/15

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Section 2: Investment Decisions

2.1 How We Will Invest Our Resources: 2010/11 to 2014/15

Our proposed investments are grouped according to the broad categories of assets in use at CCG: Fleet and Program Infrastructure. Fleet investments are further divided between regular investments and procurement of major vessels because of the magnitude of the investments required to procure new vessels. Teh planned investments are summarized in the following table:

Implementation of the investments proposed in this Integrated Investment Plan is an

Strategic Project - Polar Icebreaker Large multi-taskable icebreaker to be used solely for sustained operations in the Arctic Archipelago for 3 seasons each year. It will deliver icebreaking, safety and navigation services, and support science research, enforcement, security and sovereignty activities. It is able to operate in more difficult ice conditions than the class of heavy icebreakers they replace. Polar Icebreakers will enable operations simultaneously in both Eastern and Western Arctic.

important step in the ongoing effort towards addressing the condition of CCG’s asset base. The reinvestment in our Asset Base set out in this

Strategic Project -
Mid-Shore Patrol Vessels

Medium-size vessel with a fast
response capability to support to marine security, fisheries enforcement and search and rescue in the Great Lakes, St. Lawrence River and Gulf and in all coastal areas up to 120 nautical miles offshore.

plan is expected to maintain or improve the condition of capital assets, which will have a direct impact on the quality or reliability and extent of CCG service delivery and the associated ongoing operating and maintenance costs. The

Government’s investment in renewal of the Canadian Coast Guard fleet and shore based infrastructure will ensure its continued capability to carry out its mandate of saving lives, supporting maritime security, protecting fisheries, enhancing maritime safety, facilitating marine commerce, enforcing Canadian sovereignty, supporting marine scientific research, and protecting the marine environment.

A detailed listing of proposed investments by category appears in Section 3 – Investment Details. Appendix E also provides more detailed descriptions for representative investments and outlines the investments being made on CCG’s behalf by the Real Property COE within DFO. While CCG provides significant input into the decision-making process, the decisions are ultimately made by Real Property and as such are included in Appendix E for information.

2.1.1 Optimizing our Capital Investments

Experience has consistently shown that despite best efforts, external factors often lead to project delays. Experience has also shown that due to the nature of our operations there is a relatively long lead time for implementing capital projects. As a result of these two factors, along with the desire to minimize capital budget (Vote 5) lapses, CCG’s Investment Management Board has decided to over-program its capital vote.

The level of over-programming is determined by CCG’s Investment Management Board (IMB) based on a number of factors including CCG’s experience with the various types of planned projects, communication with industry, communication with Public Works and Government Services Canada (PWGSC), and internal capacity to implement the proposed investments. This approach is used to ensure that the Agency is proactive in the management of its capital budget and has high priority investments ready to absorb in-year slippage that inevitably occurs on large investment projects. The level of over-programming is revisited annually in light of proposed investments so that the level of over programming represents a balance of the risk of lapsing funds and the risk of having to delay expenditures to not exceed budget.

For the 2010/11-2014/15 planning cycle, planned expenditures compare to budgets as shown in the following table:

Table 7 represents an optimized level of over programming that is reflective of CCG’s experience over the previous planning cycle and is designed to ensure maximum investment benefits and results for Canadian taxpayers.

CCG’s efforts to manage slippage in its Major Capital budget have also been aided by CCG’s participation in Treasury Board’s Pilot Project on Non-Lapsing Appropriations for Capital Management. The Non- Lapsing Capital Appropriations pilot project has helped CCG improve the management of its capital budget and projects by increasing the flexibility to better manage the cash profile of CCG projects. It has enabled CCG to be more proactive in the implementation of its project delivery by extending the carry-forward timeline to a point that allows more strategic and planned resource management. This in turn enables more effective cash utilization and a higher return on investment. The participation in the pilot project has sharpened existing capital management processes which are now better suited to prioritize and identify risks within the capital program more effectively. During the two years of the Pilot’s implementation, CCG feels that there were no adverse challenges and /or issues identified as a result of the carry-forward authority. As such, CCG is strongly in favour of the continuation of this program.

In the event that the Non-Lapsing Capital Appropriations pilot project does not continue into 2010-11 and beyond, CCG will face increased project management constraints and the risk that portion of the overall Vote 5 project slippage could not be carried forward to the subsequent fiscal period. Given the nature of CCG assets and the associated complexity of the maintenance of replacement of the specialized asset base, CCG is exposed to greater risks of external project delays and set-backs that could result in year-end project slippage. Also, given the high dollar value of the ongoing Major Crown projects, there is increased risk that the materiality of project slippage may exceed the 5% carry forward limit that would be reintroduced as a result of the elimination of the non-lapsing capital authority.

2.1.2 Acquired Services

CCG’s Investment Planning Framework does not result solely in investments in assets. As part of its planning process, CCG considers different delivery options for the delivery of its programs. In some cases, it is determined that acquired services are the best delivery alternative and provide the best value to Canadians as opposed to the acquisition of additional assets.

In this planning cycle there are five significant examples where investments in acquired services were chosen over investments in assets:

  1. Buoy Tendering;
  2. Ice Reconnaissance;
  3. Helicopter Operations;
  4. Channel Surveying; and
  5. Canadian Coast Guard Auxiliary.

Buoy Tendering Contracts

Buoy tendering is a program where CCG contracts with private companies to place Aids to Navigation in waterways based on our levels of service. CCG owns the Aids and determines where they are to be placed. The Agency has buoy contracts in all regions, and continues to assess the relative cost and effectiveness of external service providers relative to provision of the service by CCG’s Fleet.

Ice Reconnaissance

Ice Reconnaissance is a key activity of the Icebreaking Program where CCG contracts with Environment Canada to collect information about ice on Canadian Waterways using Transport Canada’s multi-tasked aircraft in the National Aerial Surveillance Program. Information gathered under this service is combined with other CCG-gathered information in order to provide ice routing and information services for mariners and for CCG’s Icebreaking services.

Helicopter Operations

The Canadian Coast Guard owns a fleet of 23 helicopters, but the Agency contracts with Transport Canada to operate these aircraft. All activities are related to the actual operation of the aircraft, with the exception of tasking, are managed by Transport Canada. This includes the provision of pilots and maintenance of aircraft.

Channel Surveying

Channel Surveying is an activity undertaken as part of the Waterways program in all regions. CCG contracts private companies through Public Works and Government Services to survey the main commercial shipping channels on a regular basis and provides information to the users on available depths and obstructions in the channels. The mariners use this information in combination with information about the current water levels in the channel to determine the maximum safe draft for their vessel.

Canadian Coast Guard Auxiliary

In addition to the above acquired services, the Agency also maintains a contribution agreement for the Canadian Coast Guard Auxiliary (CCGA). This is a program under the Search and Rescue program where CCG provides funding to Auxiliary organizations across the country. These organizations consist of private mariners who assist the Canadian Coast Guard in marine search and rescue operations and prevention. Through the support of this program, CCG is able to meet Search and Rescue Service Standards while minimizing the size of its Fleet. CCG will continue to seek out the most innovative and effective means to deliver its programs through rigorous alternative analysis as a part of the Investment Planning Framework described in Appendix C.

2.2 Addressing Risks Related to the Investment Plan
2.2.1 Risks to the Successful Implementation of the IIP

Integrated risk management is being used at CCG in order to systematically manage all levels of risk that may
impede the Agency from achieving its intended results. Implementation of the Risk Management Framework
for the Investment Plan was intended to help ensure that risks associated with the plan are well-understood and
can be addressed in a methodical manner that is consistent with the approach used in addressing risk across all
departmental activities.

In the CCG Risk Management Framework, each risk is rated by considering the product of the probability of
a risk occurring (scored out of 5) and the impact if the risk occurs (also scored out of 5). In this way, the most
significant risks are highlighted for management attention including ongoing monitoring of the effectiveness
of mitigation strategies. The risks identified in association with the Integrated Investment Plan are:

The Risks to the successful implementation of the Investment Plan have been plotted on a “Heat Map” to indicate the potential of the identified risks to prevent the successful implementation of the IIP:

On balance, the risks associated with the Investment Plan are considered to be manageable as a result of the mitigation measures in place and as a result of the regular oversight of risks by CCG’s Investment Management Board. Failure in key mitigation areas, for example the updated Fleet Renewal Plan, may result in significantly higher risk for the CCG.

The most significant risks on this list are risks: A (Insufficient Investment in Asset Base); C (Changing Priorities – Assets); and E (Resource Availability – External).

  • Insufficient Investment in Asset Base - There is concern that given the existing budget CCG will be unable to procure and maintain its asset base, in a timely fashion, to deliver mandated services. While the inevitable trend towards lower fleet reliability has been moderated by more aggressive and carefully managed maintenance and refurbishing programs, and through new acquisition decisions, “rust-out” remains a serious risk to CCG and DFO objectives. There is concern that current recapitalization plans will not replace assets in a timely manner, and that the condition of land based assets, such as fixed aids, may be worsening at an even faster rate than fleet assets, thereby also significantly contributing to the level of risk. This risk is mitigated by the Agency’s long-term planning efforts, namely the Fleet Renewal Plan and the Shore based Infrastructure Renewal Plan. By articulating a concrete, long-term plan for the lifecycle management of the Agency’s assets, CCG is able to put forth an integrated storyline and rationale for additional capital funding requirements (over and above the annual A-base Vote 5 allocation).
  • Changing Priorities – Assets refers to the potential for unexpected breakdowns of CCG Assets which necessitate a review of investment priorities. This risk is mitigated by the management and oversight of CCG’s investment portfolio by the Investment Management Board (whose role is described in Appendix B – CCG Organization Structure and Governance). If a breakdown of an asset necessitates the initiation of a previously-unplanned investment, IMB engages project managers across the country to identify projects with expenditures that can be pushed into the next fiscal year to allow timely implementation of the emergency investment.
  • Resource Availability – External refers to supply limitations that occur due to the specialized nature of the assets required by CCG. This risk is mitigated by strong ties within the organization to the Marine and Shipbuilding industries in Canada, and through CCG’s participation in the National Shipbuilding Procurement Strategy with the Department of National Defence. All of the risks and their associated mitigation strategies are described in greater detail in Appendix G.
2.2.2 Individual Project Risks

In the context of the Investment Plan, each proposed investment is subject to a risk assessment as part of the investment identification and prioritization steps in the Integrated Investment Planning Framework (see Appendix C). The following risk dimensions are evaluated for each proposed investment:

  • Risk to Mandate Outcomes
  • Reputation/Image Risk
  • Environmental Risk
  • Risk to Asset Integrity
  • Financial Risk
  • Health and Safety Risk
  • Regulatory Risk

The risk assessment and mitigation measures for each CCG investment are available in the Investment Summary Note documentation for each proposed investment. Like the risks for the overall Investment Plan, these risks will be monitored on an ongoing basis by Project Managers with reports to CCG’s Investment Management Board on an exception basis.

2.3 Measuring Our Performance Relative to the Investment Plan

Performance management will form a key element of the approach to help ensure that the investment plan achieves its intended results. IIP performance management is conducted under the direction of CCG’s Investment Management Board (IMB). Investment Planning performance at CCG will be managed on two levels:

  • Project Management Effectiveness
  • Investment Planning Results
2.3.1 Project Management Effectiveness

CCG has a strong track record of very rigorous monthly project progress reporting. On a monthly basis, IMB reviews the budget, scope, timeline and risks associated with every planned and ongoing investment within the Agency. Projects showing issues on any of these dimensions are required to report to IMB regarding the causes, mitigations and proposed solutions on a project-by-project basis. In this way project issues are identified as early as possible and highlighted to Senior Management for attention, decision and remedial action.

2.3.2 Investment Planning Process

Results On an annual basis, the CCG Resource Management and Financial Allocations team (which is responsible for the preparation of the IIP) conducts debriefing sessions with Integrated Investment Planning process participants and stakeholders, and revise the process as necessary to ensure that it is meeting the planning needs of the Agency.

Process effectiveness will also be assessed through targeted performance indicators that will be reported to IMB. The measures are designed to inform senior management as to whether the Investment Plan is achieving intended effects by demonstrating both internally and externally: good governance, stewardship, accountability, sound decision-making, and effectiveness of planning activities.

The following table contains the performance measures for assessing the investment plan’s effectiveness and efficiency:

This two-tier Performance Management Framework is expected to be a significant contributor to the Agency’s
ongoing successful track record for project delivery and planning. By using this approach, CCG ensures rigorous
oversight of the Agency’s continued performance and effectiveness in Investment Planning and investment decisions.

2.4 How We Will Invest Our Resources: Looking Beyond 2014/15

The Canadian Coast Guard must ensure that it is in a position to provide the services required by its stakeholders now and in the future. Given the changing environment within which the CCG and its stakeholders operate, this means adopting a forward looking approach to planning for the CCG services to be provided over the coming 20 to 30 year period.

2.4.1 Program Assets

In keeping with advancements in technology and the needs of our user groups and stakeholders, CCG has rolled out a number of technically advanced systems over the past 10-15 years. Unfortunately, as the new services are being introduced, older more traditional technology is left in place for a variety of reasons. The result is that CCG carries an ever larger inventory of assets that compete for the limited maintenance and reinvestment budget. This in turn does not allow CCG to liberate enough funding to make additional investments in newer technology.

In order to begin addressing this issue, CCG has adopted the Fixed Aids Management Framework. The aim of this framework is to gradually reduce the number of Complex Aids to Navigation that use old technology while increasing the number of Simple Aids to Navigation that use new technology. CCG currently has approximately 500 Complex Aids which tend to be more costly to build and maintain without any added benefit in terms of service delivery. By reducing this number, CCG will be able to realize efficiencies in our service delivery model, which will lead to added benefits for Canadians in other areas.

Over the next two years, the Agency will also develop a Long-term Plan for Shore-based Infrastructure modeled on the Fleet Renewal Plan. This Plan will bring a similar level of rigour to planning for shore-based infrastructure over a long-term planning horizon (20-30 years) as we have for our fleet assets.

At one end of the spectrum, the assets currently in service may only require refurbishment or replacement with technologically updated equipment in order to enable the CCG to continue to offer the same service over time (e.g. Communication Control System replacement). At the other end of the spectrum, the assets currently in service may have to be totally replaced by new assets that will enable the CCG to provide the new services that are required by its stakeholders (e.g. Differential Global Positioning System navigation tools).

CCG will also face the requirement to retire assets that have been used to provide a service that it has been decided will no longer be provided or to retire assets that no longer enable the CCG to respond to the new requirements of its stakeholders (e.g. LORAN-C).

The establishment of the Shore-Based Infrastructure Renewal Plan should ensure that the condition of the Agency’s shore-based assets will stabilize over time and ensure the continued successful delivery of CCG’s programs that are supported by this infrastructure.

2.4.2 Fleet Assets

Long-term planning for CCG’s vessel and helicopter fleet is accomplished by regularly updating the Fleet Renewal Plan (FRP). CCG is currently preparing the next phase of the FRP, named the 2010 FRP. The 2010 FRP is based on seven key principles:

  • Canadian Coast Guard vessels and helicopters are Government of Canada assets and comprise the Government of Canada’s only national civilian fleet.
  • The size and mix of the fleet is determined by program requirements and Government of Canada decisions and priorities – the FRP is not a vehicle for program enhancement and expansion.
  • The fleet will be multi-taskable to the greatest extent possible.
  • The fleet will be built in classes and will comprise the smallest number of classes possible.
  • The Plan is based on appropriate life-cycle management to obtain the full expected operational life of the vessels and to improve life-cycle cost.
  • Cost estimates for vessels are based on a robust and indicative methodology that will have independent validation.
  • Implementation of the plan has to be sustainable, affordable and provide value for money.

The 2010 FRP addresses the long term fleet requirements, the vessel capabilities and the fleet mix needed for the next 30 years. In developing and updating the plan, Canadian Coast Guard assessed the likely factors that would impact on the type of vessels and helicopters required to deliver programs in the future. This is of critical importance because the new large vessels will be in service for up to 45 years and there is little doubt that over that timeframe, there will be changes to program priorities and requirements. The aim of the Fleet Renewal Plan is not to replace vessels one-for-one, but to replace vessel capacities in a logical and sensible way that takes into consideration a wide range of factors and the selection of vessels specifically designed to meet the tasks they are required to perform.

The 2010 FRP is also built around the premise that vessels will be multi-taskable rather than single-purpose. This means that future vessels will be designed and equipped to adapt to more than one function over their operational life in order to maximize their use. It will also make it easier to re-assign the vessels geographically if needed.

Currently, Canadian Coast Guard operates and maintains over 30 configurations of vessels and four types of helicopters. Through the FRP, Canadian Coast Guard will continue to reduce the number of vessel and helicopter classes. Ultimately, this will be more cost effective for crew training and maintenance and will consequently increase efficiency by making it easier to reassign vessels and redeploy crews.

The overall objective of the 2010 FRP is to have more capable, multi-taskable vessels built in a standard class structure, for more efficient management, operation and maintenance, with the ability to adapt to changing program requirements over the long operational life of the vessels. The Fleet Renewal Plan provides a solid foundation for building the Government of Canada’s national civilian fleet for the future. The investments selected in this year’s Integrated Investment Plan are aligned with the long-term vision for the Fleet in the Fleet Renewal Plan.