Cost of ships could surpass $105 billion

In light of Auditor General Michael Ferguson’s impending report on the Canadian government’s National Shipbuilding Procurement Strategy, the Department of Public Works has announced a new, through-life price tag for the planned ships (Steven Chase, “New warships to cost more than $100-billion, Ottawa estimates,” Globe and Mail, 13 November 2013):

The purchase price of the military ships remains $26.2-billion, but a new estimate of “approximately $64-billion” for 30 years of maintenance, operating and personnel costs brings the total bill to “in the vicinity of $90-billion,” according to a status update released by the Department of Public Works this week. It cautions the “through-life costs” will need to be refined over time. …

In addition to the $90-billion for as many as 15 surface-combat vessels, the federal government is commissioning up to eight Arctic offshore patrol ships that will have a full lifetime cost of $8.6-billion, and two joint support ships – to carry fuel, ammunition, vehicles and cargo – for a cradle-to-grave cost of $7.1-billion. These costs have previously been disclosed.

The new figures bring the total life-cycle cost for as many as 25 military ships to more than $105-billion over three decades.

And even these figures are likely to be low, as they rely on the highly unrealistic assumption that the purchase cost of the vessels will come in within the government’s original estimates.

In an interview with CTV News on November 13th, Steven Staples, President of the Rideau Institute, provided some insight into unforeseen costs. “We don’t know what kind of radar it’s going to have, we don’t know what kind of communications systems [it will have], we don’t know what kind of missile systems are going to be loaded on them. Cruise missiles are expensive and aren’t made in Canada.”

There are many who view the government’s approach to replacing the aging Canadian fleet as inefficient and unnecessarily costly to taxpayers. Even Jack Granatstein, a usually reliable supporter of military spending, criticized the program in a recent article for the Canadian Defence and Foreign Affairs Institute, “Building Ships in Canada?”:

Of course, Canada can create its own naval construction industry, just as we are now trying to do. But the government should be up front about this. The infrastructure and labour costs are going to be high, and every ship built in Halifax or Vancouver will need to be priced accordingly or heavily subsidized. Not just warships or Coast Guard vessels; every ship of any type, now and forever, must be overpriced almost by definition.

Photo credit: DND

Tags: Canadian military spending, Defence policy, Defence Procurement, Jack Granatstein, National Shipbuilding Procurement Strategy, NSPS, Royal Canadian Navy, Steven Staples