PBO to examine $60 billion price tag of new warships and compare to other less expensive foreign programs

David Pugliese, Ottawa Citizen, Postmedia News (dpugliese@ottawacitizen.com)

Published: Aug 07 at 6:31 p.m.

Updated: a day ago

The $60 billion price tag of Canada's proposed new fleet of warships will come under the scrutiny of the Parliamentary Budget Officer, who will also examine other less costly similar projects underway in other countries.

The House of Commons government operations committee requested that Parliamentary Budget Officer Yves Giroux examine the cost of the Canadian Surface Combatant project and take a look at the cost of two other types of warships: the FREMM and the Type 31.

PBO spokeswoman Sloane Mask said the analysis would be presented to the committee by Oct. 22. “The analytical work is currently underway,” she added.

Last year the Liberal government signed an initial deal that is expected to lead to the eventual construction of 15 warships in the largest single government purchase in Canadian history. Lockheed Martin offered Canada the Type 26 warship designed by BAE in the United Kingdom. Irving is the prime contractor and the vessels will be built at its east coast shipyard.

Construction of the first ship isn't expected to begin until the early 2020s.

But the Canadian Surface Combatant (CSC) program has already faced rising costs. In 2008, the then-Conservative government estimated the project would cost roughly $26 billion. But in 2015, Vice-Admiral Mark Norman, then commander of the navy, voiced concern that taxpayers may not have been given all the information about the program, publicly predicting the cost for the warships alone would approach $30 billion.

The overall project is currently estimated to cost around $60 billion. “Approximately one-half of the CSC build cost is comprised of labour in the (Irving) Halifax yard and materials,” according to federal government documents obtained by this newspaper through the Access to Information law.

But some members of parliament and industry representatives have privately questioned whether the CSC cost is too high. There have been suggestions that Canada could dump the Type 26 design and go for a cheaper alternative since the CSC project is still in early stages and costs to withdraw could be covered by savings from a less expensive ship.

Canada had already been pitched on alternatives. In December 2017, the French and Italian governments proposed a plan in which Canada could build the FREMM frigate at Irving. Those governments offered to guarantee the cost of the 15 ships at a fixed $30 billion, but that was rejected by the Canadian government.

Earlier this year, the U.S. Navy selected the FREMM design for its newest fleet of warships. The estimated cost is around $1.3 billion per ship.

The other type of warship the PBO will look at is the Type 31, which is to be built for the Royal Navy in the United Kingdom. Those ships are to cost less than $500 million each.

In 2017, then Parliamentary Budget Officer Jean-Denis Fréchette estimated the CSC program would cost $61.82 billion.

The entry of the BAE Type 26 warship in the Canadian competition was controversial from the start and sparked complaints that the procurement process was skewed to favour that vessel. Previously the Liberal government had said only mature existing designs or designs of ships already in service with other navies would be accepted on the grounds they could be built faster and would be less risky. Unproven designs can face challenges if problems are found once the vessel is in the water and operating.

But the criteria was changed and the government and Irving accepted the BAE design, though at the time it existed only on the drawing board. Construction began on the first Type 26 frigate in the summer of 2017 for Britain's Royal Navy.

Copyright Postmedia Network Inc., 2020

https://www.thechronicleherald.ca/news/canada/pbo-to-examine-60-billion-price-tag-of-new-warships-and-compare-to-other-less-expensive-foreign-programs-482874/