I’m not big on big numbers.
When SaltWire asked me to be part of an Atlantic business series on Canada’s multibillion-dollar shipbuilding strategy I was moderately impressed but not exactly enthused.
So I did what I usually do with big numbers and I started to break them down.
Irving is the prime contractor to build six new Arctic Offshore Patrol Ships (AOPS) for the Canadian Navy. It’s a multi-year contract that is north of $2 billion in value.
Big number, but not that interesting for me.
Irving has a handy map on its website that shows us taxpayers where the money from the contract is being spent across the country.
In Newfoundland and Labrador, there’s about $10 million worth of work connected to the AOPS project. That means that as these vessels patrol our waters for decades to come, they carry a little bit of Newfoundland and Labrador with them.
I’m getting more interested but, frankly, I’m more interested in the smaller focus, the actual companies and people involved on the ground here.
Irving provided a list of the companies in this province who’re doing work as part of the AOPS.
Which brought me to a boardroom in Donovan’s Industrial Park on a blustery bright but overcast day just before Christmas talking to the people at Madsen Diesel and Turbine.
Madsen is one of the N.L. companies that were successful bidders for work on the AOPS.
In a nutshell, they’re providing the compressors for the air starters on the six AOPS’ engines, as well as compressors for the onboard service air system (for air tools and the like) and a specialized mobile centrifuge system that will allow the crew to clean and reuse hydraulic fluid during onboard operations as needed.
That means that each of the patrol ships will have a little bit of Madsen in them – and that’s something they take great pride in.
Now, I have the small, detailed focus I was looking for. Now, I’m interested.
Like most private companies, Madsen wasn’t about to tell me exactly what their contract for the AOPS work is worth for competitive reasons, so let’s just say their successful bid earned them between five and 10 per cent of the $10 million in AOPS money that’s coming to this province.
It’s a significant chunk of change for a relatively small company.
Madsen began life as Diesel Injection Sales and Service in 1963 in a small shop on the St. John’s waterfront.
It was founded by Bill Madsen, a Danish immigrant and machinist who specialized in fuel injection systems.
He quickly teamed up with Art Pearcey. He was born and raised in The Battery: when Madsen first offered him a job, Pearcey replied that it was spring so he had to go fishing with his father. If the job was still open when the season was over, he’d think about it.
It was and he did, and the two ended up working together for decades, building the company up, expanding and diversifying its services as the marine diesel industry evolved. It ventured into electronic control systems, power systems, engineering, and construction equipment.
When Madsen retired, Pearcey bought him out and the company continued to grow.
Ten years ago, the company rebranded itself. Diesel Injection Sales and Service no longer reflected the full breadth of its operations.
It renamed itself as the Madsen Group, comprising Madsen Diesel and Turbine (basically the original company), Madsen Power Systems, Madsen Construction Equipment, and Madsen Controls and Engineering.
Since that small shop on the waterfront, the company has grown to about 50 employees in Mount Pearl, Halifax, Montreal and Toronto. Most recently it completing an acquisition out west which positions it as the Canada-wide distributor for Woodward Governors, an international industry leader in the field.
While Madsen does do regular work for the Canadian Coast Guard and Newfoundland Hydro, the bulk of the company’s work is more commercially driven. Government-related contracts like the AOPS program are not its meat and potatoes
AOPS is, however, something of a feather in their cap, given how complex and drawn out the federal procurement contracts process can be.
“We do a lot of work with Coast Guard but I’d say capital work like this (AOPS contract) is more in the minority,” sales manager Mark Hilliard said. “Most of our work is in the refit world. … we’re not living off these type of capital projects because they’re painful to get, they take a lot of work.”
Winning a federally derived contract like this is not a simple process.
“There’s a prequalification so you go in and tell them what you can supply. You check all the boxes of everything you can supply,” Alan Franklin, Madsen’s technical sales rep said. “Then they come back to you and say ‘OK we’ve got these opportunities for this equipment we need to buy from somewhere and we want to buy from a Canadian supplier.’”
“If you went to a multinational manufacturer and said ‘I’d like you to read these 600 pages of text and if you’re successful I’d like you to hold onto these units for three years and then you can invoice me,’ the room would be pretty quiet by the time you’d done that. But, as a local firm, we can do that,” Hilliard added. “While it doesn’t make sense for most we were willing to do that.”
They went through the process and were successful. The bid means that Madsen will continue to work on its specific parts of the AOPS vessels for several years to come.
“We were over the moon with the orders,” Franklin said. “When we got them it was like ‘Wow! Awesome!’ It was really a High-5 moment, because I think, deep down, we thought we didn’t really have a chance of getting it.”
Being a smaller Newfoundland and Labrador company securing a piece of a massive national shipbuilding contract is significant for more than just Madsen, too
“I think more companies should be recognized for shipbuilding,” Hilliard said. “I think it’s critical to Canada as a whole and I don’t know if there is enough being done to connect little firms like ours to these big projects.”
“Especially given that it’s Canadian money, it’s Canadian shipbuilding with the Canadian government,” Franklin added. “It’s not like they’re building a ship for a private entity it’s our money (at work).”
Their piece of this shipbuilding program is a definite addition to the company’s reputation and resume, and they may go after similar bids in the future, but it’s just one facet of the company’s presence, according to Trevor Porter, vice-president and general manager at Madsen Controls and Engineering.
“I don’t think anybody perceives Madsen as a sort of a government-focused company, let’s say,” he said. “We probably haven’t used these types of things (federal programs/contracts) in our promotion quite as much as we should have or could have but I think that’s relevant. We do some work with Coast Guard but we also do a lot of work with the offshore vessels, we do work with fishing vessels, we do work with Newfoundland Hydro and the refinery … but wherever there’s sort of an opportunity for our products that’s where we survive.”
In a way the AOPS success is just one more example of how, over the years, Madsen has diversified itself to deal with the ebbs and flow of the industry, expanding its technical repertoire and its provincial and national footprint.
“This is a great example of a Newfoundland-grown family business. It’s a great story. We’re in growth mode,” Hilliard said. “We’re on Chapter 10 of a 20-chapter novel and there’s a lot more to come here from Madsen and it’s very exciting what’s going on here.”
Mark Vaughan-Jackson is The Telegram’s business editor. He can be reached via email at [email protected].
