26 novembre 2020 | Local, Naval
In 2019, the PBO projected the cost of 15 CSC frigates to be nearly $70-billion. The defence department says the ships are still projected to cost between $56- and $60-billion.
By Neil Moss; The Hill Times
November 25, 2020
The Department of National Defence says there hasn't been an increase in cost to the largest defence procurement project in Canadian history, which will serve as the backbone of the Canadian Navy for years to come, as questions loom over delays, which could add billions to the price tag.
Parliamentary Budget Officer (PBO) Yves Giroux is expecting to release an updated cost projection for the purchase of 15 Canadian Surface Combatants (CSC) in late February 2021.
The 15 warships are replacing Canada's current fleet of Halifax-class frigates.
The project is still pegged by DND to cost between $56- and $60-billion.
“There have been no budget changes,” a DND spokesperson told The Hill Times.
The ships were originally budgeted to cost $26-billion before their price was doubled by DND following a 2017 PBO report that estimated the costs to be $61.82-billion.
The most recent projection of the cost of the CSC was done by the PBO in February 2019, which forecast the project could cost nearly $70-billion. The DND calculation does not include taxes that will be paid for construction, which the PBO projection does.
The PBO was initially tasked to examine the CSC procurement by the House Committee on Government Operations and Estimates during the last parliamentary session and report back by the end of October, but that timeline was cut short by the prorogation of Parliament on Aug. 18. Now, the committee has passed a motion to have the PBO to report back by Feb. 5, 2021.
Mr. Giroux told The Hill Times the PBO's report won't be finished until late February.
“Given the complexity in the project themselves—the big procurement projects at DND—its not every day or even every year that the government purchases combat ships, so the comparisons are not very easy to do and there are not that many [countries] in the world where information is readily available [for comparison],” he said, noting the PBO hasn't been having difficulties with DND. The office recently criticized the department of finance for a lack of transparency.
“Even if we get perfect information and totally complete and transparent information from DND, that is only one part of the ledger. It doesn't tell us whether the predicted cost compared favourably or not with other procurement projects by other navies in the world,” he said, adding difficulty arises when trying to compare different ships, with different capabilities, being built by different shipyards, and under different timelines.
In response to the PBO's recent cost projection of Canada's Joint Support Ship procurement, DND said the comparisons that were being used didn't have the same capabilities.
“It's not always easy to compare capabilities that vary greatly from one country to the other and that's one criticism we sometimes get when we're trying to cost defence projects, [that] we did not take into account sufficiently the fact that the Canadian capabilities are so much better than the competitors,” he said.
Another issue when performing a cost analysis, Mr. Giroux said, is that navies procure varying numbers of ships and the cost per individual ship decreases with the more ships that are built.
Mr. Giroux said the cost analysis is in the “early stages” and wouldn't comment on its early findings.
He said the extended timeline is a result of the amount of work and the competing work that the PBO has been tasked with, such as costing COVID-19 supports.
The DND spokesperson said costs for “personnel, operations, and maintenance” that will be needed throughout the life of the ships will be “greatly influenced” by the ship design and “only available later in the process.”
In 2019, the Canadian government selected the BAE Type 26 as the frigate design for the CSC. Lockheed Martin is partnering with BAE Systems. The ships will be constructed at Irving Shipbuilding's Halifax shipyard.
Irving and Lockheed Martin are currently “focused on integrating” the necessary elements from the Type 26 with the Canadian Navy's systems requirements for the CSCs, according to DND.
The PBO will be comparing the cost of the Type 26 to the Type 31e, the FREMM, and other “competing” ships.
Canadian Global Affairs Institute vice-president David Perry, an expert on defence procurement, recently wrote in The Hill Times that there are “rumblings” of delays to the CSC procurement and changes to the ship that could drive up the cost of the project.
The CSC procurement has been going through a requirements reconciliation phase of the design process, which the spokesperson says has been “substantially completed,” adding that the preliminary design work has begun.
“Significant progress has been made over the last 18 months to advance the selected design to meet the RCN's unique operational requirements. This progress has provided us with greater clarity about the complexity of the ship design and its associated combat systems, as well as better insight into the required time to complete the necessary design work before the start of construction,” the spokesperson said, but did not address if there are any delays.
The PBO's 2019 reported indicated that a delay of one year would add $2.2-billion to the cost of the ships and a two-year delay would mean an added $4.5-billion.
“There is no evidence suggesting that the pace of the project has improved as the work became more difficult—and that is without trying to account for any COVID-related impacts,” Mr. Perry wrote.
During the first wave of the pandemic, Irving Shipbuilding reduced staff at their shipyard to about half.
After the design phase of the ships is completed, Irving Shipbuilding will be awarded an implementation contract to build the ships.
“The schedule to build and commission the ships will be better understood as design work progresses,” the DND spokesperson said.
Mr. Giroux said he was surprised by how precise the information being provided to the PBO is.
“I would expect some of the information to be secret for defence reasons [and] national security reasons, and very often they are,” he said. “We're provided with a level of information that is surprisingly detailed in my opinion.”
“In terms of transparency from DND, it's a pleasant surprise so far,” he said, adding he also has been surprised with how Defence Minister Harjit Sajjan (Vancouver South, B.C.) and his officials have been transparent with the PBO.
The Hill Times
Other major defence procurement projects
Arctic Offshore Patrol Ship (AOPS)
Purpose: The AOPS will provide armed surveillance of Canadian waters, which includes the North, and help enforce Canada's sovereignty with its defence partners.
First announced: in 2015 by the Harper government.
Cost: $4.3-billion
Timeline: First ship was delivered in July 2020 with the sixth and final ship planned for a 2024 delivery.
Victoria-class modernization
Purpose: To extend the life of Canada's four Victoria-class submarines so they have the capability to operate until the mid- to late-2030s.
First announced: in 2017 by the Trudeau government.
Cost: Unknown
Timeline: Currently in the options-analysis phase. More information on the timeline and costs are expected when the current procurement phase is complete.
Joint Support Ships
Purpose: The two Joint Support Ships are replacing auxiliary oiler replenishment vessels that were decommissioned in 2016.
First announced: in 2004 by the Martin government.
Cost: $4.1-billion
Timeline: First ship is expected to be delivered by 2024 and the second one is planned to be completed in 2025.
Fighter Jet Replacement
Purpose: Eighty-eight fighter jets to replace Canada's fleet of CF-18s that serve as the pillar of the Canadian Air Force.
First announced: in 2010 by the Harper government.
Cost: $15- to $19-billion
Timeline: Proposals from three aerospace companies are currently being assessed—Saab's Gripen, Lockheed Martin's F-35, and Boeing's Super Hornet. A contract award is anticipated for 2022 with the first aircraft being delivered “as early as” 2025. The new fleet is planned to operate beyond 2060.
Canadian Multi-Mission Aircraft
Purpose: To replace the CP-140 Aurora fleet to have a “enhanced long-ranged, long-endurance, multi-mission capability.”
First announced: in 2018 by the Trudeau government.
Cost: Unknown
Timeline: Has yet to begin the option analysis phase.
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26 décembre 2019 | Local, Naval
Murray Brewster The Department of National Defence has faced some tough, pointed questions about whether it has chosen the right radar, main gun and close air defence systems for the navy's new frigates, which will soon hit the drawing board. An unsolicited defence industry slide deck presentation, obtained by CBC News, questions each of those key components in the planned $60 billion modernization of the fleet. It was circulated earlier this year and put in front of the senior federal officials in charge of the program. The defence industry briefing presentation points out that the Lockheed Martin-built AN/SPY-7 radar system — an updated, more sophisticated version of an existing U.S. military system — has not been installed and certified on any warship. A land-based version of the system is being produced and fielded for the Japanese government. The briefing calls it "an unproven radar" system that will be "costly to support," and claims it comes at a total price tag of $1 billion for all of the new ships, which the undated presentation describes as "an unnecessary expenditure." Lockheed Martin Canada and British-based BAE Systems Inc. were chosen earlier this year by the Liberal government to design and help build 15 new warships to replace the country's existing patrol frigates — the backbone of the navy. Old guns, inadequate defence systems? The briefing raises concerns about DND's choice of a main gun for the frigates — a 127 millimetre MK 45 described by the briefing as 30-year-old technology that will soon be obsolete and cannot fire precision-guided shells. The briefing also singles out as inadequate the Sea Ceptor close air defence system, which is meant to shoot down incoming, ship-killing missiles. Given the Canadian government's past missteps with military procurement — buying used equipment or opting for developmental systems that take years to get into service — a defence expert said the caution being expressed by the industry now is legitimate, but in some respects it's coming years too late. "There's a risk anytime you try to do something new for the first time," said Dave Perry, an analyst who specializes in procurement at the Canadian Global Affairs Institute. The navy struggled for years to get second-hand British submarines up to Canadian standards. The air force also sat on its hands while the manufacturer of the CH-148 Cyclone helicopters worked out all of the developmental bugs. The presentation, Perry said, essentially tries to re-litigate decisions made by federal officials over three years ago, when the government's request for proposals was mapped out. 'The ship has sailed' "This is calling into question whether the government set down [technical] markers in an appropriate spot or not," he said. "There is always the possibility that these issues can be revisited, but I think at this point the ship has sailed because a competition was run, it did produce a preferred bidder." The pressure to get the new frigate design right is enormous, given the enormous expense involved and the changing nature of warfare, Perry added. The briefing presentation apparently was circulated by a rival radar-maker which was not part of the bidding process. Federal officials declined to name the company. Raytheon Canada Ltd. and its U.S. parent are among the biggest electronics and radar manufacturers in the world. A request for comment sent to their international business division went unanswered last week. 'We did our homework' The concerns in the briefing were presented last summer to: Pat Finn, former head of materiel at DND; Andre Fillion, the assistant deputy minister of defence purchasing at Public Services and Procurement Canada; and Rear Admiral Casper Donovan, the navy's director general for "future ship capability." DND confirmed the existence of the briefing presentation but refused to say who received it or which defence contractor was pushing it. "It is not uncommon for companies to present unsolicited material to our department when they are unsuccessful in a competitive process," spokesman Andrew McKelvey said recently. "We do not comment on these unsolicited documents as they are provided outside the scope of our established procurement process." Both the department and the commander of the navy stand behind the decisions that were made and the systems chosen for the new frigate. "We did our homework. We talked to other navies. We engaged our allies," said Vice-Admiral Art McDonald, who added DND was aware of other options on the market. Delivering the warships on schedule and on budget in the mid-2020s is a constant preoccupation in the department, he said. He would not say whether the choice of radar system might mean a delay in delivery. A senior executive at Lockheed Martin Canada said the company's radar system is identical to one selected by the U.S. government and other countries. Much of the system's hardware, and some of its software, have been used on U.S. Aegis-type guided missile destroyers and cruisers. The difference between the radar system chosen for Canada's frigates and conventional systems is in its array: the Lockheed Martin system sweeps around and above the vessel, rather than only horizontally. "The work that remains is to integrate it into the ship and integrate it into the ship's combat system," said Gary Fudge, general manager and vice president of Lockheed Martin Canada. "We worked for two years with BAE during the proposal stage to optimize the ship design with this particular radar." https://www.cbc.ca/news/politics/frigate-gun-radar-canadian-navy-1.5405054