By Christian Paas-Lang
Canada's 15 new warships will cost almost $70 billion over the next quarter-century, according to Parliament's budget watchdog, and the cost could change further depending on the final design of the ships and when they actually get built.
The estimate, released in a report by the parliamentary budget office Friday, is up substantially from a Canadian government estimate in 2017 that pegged the price of the project at between $56 billion and $60 billion. The 2017 estimate was itself a revision of the project's original $26-billion price tag.
Also in 2017, the PBO estimated the total cost of the ships to be $61.8 billion, but its report released Friday updates that to reflect the design of the ships — frigates known as “Type 26” — which wasn't known at the time. It also accounts for delays in the project.
The Canadian government will now pay out $69.8 billion over 26 years, the PBO estimates.
In a statement released shortly after the PBO report, the Department of National Defence said it remained “confident” in its 2017 estimate, and that the “vast majority” of the difference between the estimates came from the PBO's choice to include taxes in its projections.
Taking away taxes brings the two estimates to within 10 per cent of each other, the DND said.
But the department conceded that any small difference means hundreds of millions of dollars in costs for taxpayers.
The PBO report says the difference in the estimates is due to a later start date for construction and a heavier ship design.
The report assumes ships will start being built by the 2023-2024 fiscal year, three years later than its 2017 projection. As the timeline extends into the future, costs increase due to inflation.
The PBO originally projected a displacement, or weight, of 5,400 tonnes for each ship but the Type 26 design is a heftier 6,790 tonnes per ship, an increase of more than 25 per cent.
The report also includes an analysis of what effect further significant delays would have on the project. For a one-year delay, the PBO estimates, an extra $2.2 billion will be added to the project cost, and a two-year delay would cost the government $4.5 billion.
In an interview Friday, the top bureaucrat in charge of procurement at the DND expressed skepticism that the heavier ships will result in as much increased cost as the PBO suggests, but he did say the potential for delays was something he is “watching more carefully.”
“The labour piece is always where uncertainty can remain,” said Pat Finn, the department's associate deputy minister for material, noting labour can make up around 40 per cent of the cost of a ship.
Finn said the DND is in the “same place” as the PBO on the cost of “slippage” — delays in the project — but that he is confident the structure of the National Shipbuilding Strategy will mean the project could benefit from a skilled workforce and ongoing expertise.
The purchase of additional Arctic patrol ships, announced last month, means there will not be a lapse in efficiency at Irving's Halifax shipyard, which is building the warships, Finn said.
He set a goal for start of construction earlier than the PBO assumes in its report.
“We would say between mid-2022 and mid-2023, we're in-contract and cutting steel,” Finn said.
Potential delays would certainly increase costs, and it would be “absolutely no shock if there was additional delays,” said Dave Perry, a procurement expert with the Canadian Global Affairs Institute.
“To this point in time, the government has not been able to meet any of the timelines that have been put forward publicly,” he added.
Still, the closer you get to construction, Perry said, the less uncertainty there should be about costs and the potential for further delay.
The last thing that might change the final cost of the ships is the specifics of what components are chosen to fill out the design — which radar equipment, for example, Perry said.
The DND is deciding on those components as it reconciles the requirements of the ships with costs.
“You could potentially get a few-percentage-point swing” in price in either direction based on those choices, said Perry.
“But if you're talking about several tens of billions of dollars, a few-percentage-points swing is real money.”
June 3, 2024 | Local, Land
This is my first opportunity to come to CANSEC. It’s a very, very well-done and impressive gathering of industry, public servants, partners and friends. As Canada’s Minister of National Defence, I draw great strength and encouragement by the crowd I see before me today and the conversations that we have shared.
August 21, 2018 | Local, Aerospace
Chris Thatcher PAL Aerospace is on the hunt for maintenance, materiel, information technology and other support talent to staff the Royal Canadian Air Force's (RCAF's) four search and rescue main operating bases. Twenty months after the federal government selected 16 Airbus CC-295W fixed-wing search and rescue aircraft to replace six CC-115 Buffalos and 12 CC-130 H-model Hercules, St. John's, N.L.-based PAL is ready to hire the team that will deliver in-service support (ISS) for the new fleet. “PAL Aerospace will be providing a wide assortment of program management services as we prepare to undertake the maintenance and logistics support, heavy maintenance, including a mobile repair team, and centralize supply chain management activities for this aircraft,” Eva Martinez, vice-president of ISS, told the Abbotsford Aerospace, Defence and Security Expo (ADSE) in August. As a supplier to Airbus, PAL is responsible for maintenance and material support of the new fleet, providing an integrated team of aircraft maintenance engineers (AMEs), warehouse and tool crib personnel, a technical library and a contractor field office at four main operating bases in Comox, B.C., Winnipeg, Man., Trenton, Ont., and Greenwood, N.S. Each base will require around 11 people. PAL will also establish and maintain a maintenance, repair and overhaul (MRO) facility in Winnipeg for heavy maintenance work. The shop will be co-located with its central warehouse, and will be home base for the mobile repair team. In total, PAL expects to hire around 28 people to staff the facility. As for material, PAL will provide ground support equipment, a 30-day supply of aircraft consumables at each base, personal protective equipment, and shipping and handling of all aircraft spare parts, said Martinez, an aerospace engineer who served 13 years in the Air Force. Through a joint venture with Airbus called AirPro, PAL will collaborate on the integration of all ISS services. “Our hiring target as it stands right now is 73,” she said. “As we work with Canada and Airbus to fully define the maintenance tasks, we could see an increase in the level of effort required...for AMEs.” That workload is based in part on RCAF plans to locate three CC-295W at each base. Two more will reside with the operational training unit in Comox while a final two will serve as floaters. “They will be moved around depending on the induction into heavy maintenance as well as the operational tempo,” said Martinez. Comox, which will include the RCAF's new search and rescue training centre, will stand up in 2019 to coincide with the arrival of the first aircraft, expected by the end of next year. The front, mid and rear fuselage sections have been delivered to Airbus's pre-final assembly line in Tablada, Spain, and the final aircraft is expected to roll out in the first quarter of 2019. Full article: https://www.skiesmag.com/news/pal-aerospace-seeks-iss-talent-for-rcaf-sar-operating-bases/
June 8, 2021 | Local, Aerospace
Will Also Provide The Opportunity To Carry On The Legacy Of Captain Jenn Casey Airshow London seems pretty stoked to announce the addition of t| Published: Sat, Jun 05, 2021 | Aero-News Network