Canada’s New Warship Program Has Run Into a ‘Little Bit’ of a Cost Overrun — From $11bn to $60bn
$60 billion USD for 15 frigates
The cost of Canada’s proposed fleet of warships has jumped to an estimated $77 billion, according to a new report from the parliamentary budget officer.
The report, released Wednesday by Yves Giroux, outlined how the price tag of the Canadian Surface Combatant fleet increased by $7.3 billion in less than two years.
The controversial project, which would see Canada purchase 15 Type 26 warships from Lockheed Martin and BAE, has already faced delays and significant cost increases — and a contract has not yet been signed. The vessels are meant to replace the current Halifax-class frigate fleet and are to be built for the Royal Canadian Navy at Irving Shipbuilding on the east coast.
Initially estimated to cost $14 billion, the price tag quickly climbed to $26 billion, then to $70 billion in 2019.
“We estimate the fleet of new ships, based on the Type 26 design, will cost $77.3 billion to build”, Giroux said in his report. That number could go even higher if the project is further delayed.
“A one-year delay would increase that cost to $79.7 billion, and a two-year delay would see the cost rise to $82.1 billion,” the PBO said.
A significant increase in the weight of the CSC warship was also cited as a factor driving up the cost.
The CSC program will be the largest single purchase in Canadian history.
Giroux’s report also presented a cost analysis of two other ship designs: the FREMM European multi-mission frigate and the Type 31e, a class of general-purpose frigates planned for the United Kingdom’s Royal Navy. The cost of acquiring 15 FREMM ships is estimated at $71.1 billion, while the cost of a fleet of 15 ships based on the Type 31e design is estimated at $27.5 billion, the PBO said.
The report also considered the cost of a mixed fleet: three of the Type 26 ships and 12 ships of either of the alternate designs. Under this scenario, the costs increase to $71.9 billion for the mixed FREMM fleet, and $37.5 billion for the mixed Type 31e fleet.
The defence department, however, rejected the PBO’s figures, saying Wednesday that it stands by its claim that the price tag of the CSC project will be between $56 billion and $60 billion. “After reviewing the report, we find that the key differences in our cost estimates can be primarily attributed to the PBO including provincial sales tax and the additional emphasis PBO puts on weight-related costing,” the DND noted in its statement.Critics of the CSC project say it is out of control financially and there is a lack of proper oversight. There have been calls on the Liberal government to scuttle the project and start over with a less costly warship.
The Department of National Defence revealed Feb. 1 that the delivery of the first surface combatant ship would be delayed until 2030 or 2031. The first ship was to have been delivered in 2025, according to DND documents. But defence officials recently acknowledged they couldn’t say when they found out the CSC project had fallen five years behind schedule. DND acknowledges that while there were indications in early 2020 the project schedule was slipping it doesn’t actually know when it determined that the Canadian Surface Combatant program was facing significant delays. Alan Williams, the former assistant deputy minister in charge of procurement at DND, says that lack of insight by staff is dangerous. On major equipment procurements, every step should be documented as bureaucrats could be called on to justify future spending decisions and overall management of a project, he added.
He said the lack of critical information shows the federal government has little accountability or control over the CSC program.
So far, Canadian taxpayers have spent $739 million on CSC preparing for the eventual construction, according to figures tabled with parliament.
Australia and the United Kingdom also plan to purchase the Type 26. But the first ship, destined for the UK, has yet to be completed.
Source: Ottawa Citizen