$1 billion and counting: Inside Canada’s troubled efforts to build new warships

The federal government has spent slightly more than $1.01 billion over the last seven years on design and preparatory contracts for the navy’s new frigates and supply ships — and the projects still haven’t bought anything that floats.

The figures, tabled recently in Parliament, represent the first comprehensive snapshot of what has been spent thus far on the frequently-delayed project to build replacement warships.

It’s an enormous amount of money for two programs that have been operating for more than a decade with little to show for their efforts to date.

It will be years before the Canadian Surface Combatant project — which aims to replace the navy’s frontline frigates with 15 state-of-the-art vessels — and the Joint Support Ship program for two replenishment vessels actually deliver warships.

The numbers and details for each advance contract were produced in the House of Commons in response to written questions from the Conservative opposition.

The money was divided almost evenly between the federal government’s two go-to shipyards: Irving Shipbuilding in Halifax, the prime contractor for the new frigates, and Seaspan of Vancouver, the builder of the supply ships.

The breakdown raises critical questions about at least one of the programs, said a defence analyst, but it also shines a light on promises made by both Liberal and Conservative governments to keep spending under control for both of these projects — which could end up costing more than $64 billion.

“I think there should be a level of concern [among the public] about whether or not what’s being delivered in practice is what was advertised at the outset,” said Dave Perry, a procurement expert and vice president of the Canadian Global Affairs Institute.

A design still in flux

Most of his concerns revolve around the new support ships, which the Liberal government says are in the process of being built now.

The written responses, tabled in Parliament, note that the projected cost for the two supply ships — $3.4 billion — remains under review “as the design effort finalizes.”

Perry said he was astonished to learn that, “seven years and half-a-billion dollars into design work on an off-the-shelf design,” the navy doesn’t have the support ships, even though “the middle third of the ship is built” — and officials now say “the design effort isn’t finished.”

Usually, he said, ships are designed before they’re built.

The head of the Department of National Defence’s materiel branch said most of the preparatory contracts were needed to re-establish a Canadian shipbuilding industry that had been allowed to wither.

‘A lot of patience’

“I think we have to look at the totality of everything that’s being accomplished under” the national shipbuilding strategy, said Troy Crosby, assistant deputy minister of materiel at DND.

“Over that period of time, and with these expenditures, we’ve built a shipbuilding capability on two coasts, not just through National Defence but also through the coast guard, offshore fisheries science vessels. I understand it has taken a lot of patience, I suppose, and probably some uncertainty, but we’re really getting to the point now where we can see delivering these capabilities to the navy.”

The largest cash outlays involve what’s known as definition contracts, which went individually to both shipyards and were in excess of $330 million each. They’re meant to cover the supervision of the projects and — more importantly — to help convert pre-existing warship designs purchased by the federal government to Canadian standards.

The choices on each project were made at different times by different governments, but ministers serving both Liberal and Conservative governments decided that going with proven, off-the-shelf designs would be faster and less expensive than building from scratch.

Now, after all the delays, it’s still not clear that choosing off-the-shelf designs has saved any money.

“I would be completely speculating on what it would cost to invest to develop the kind of expertise and capacity inside the government, inside National Defence and everybody involved, to be able to do something like that in-house,” said Crosby.

“The approach we’ve taken at this point, by basing both the Joint Support Ship and the Canadian Surface Combatant on pre-existing designs, allows us to retire a lot of risk in the way forward.”

When Crosby talks about “retiring risk,” he’s talking about the potential for further delays and cost overruns.

Among the contracts, Irving Shipbuilding was given $136 million to support the drawing up of the design tender for the new frigates and to pay for the shipbuilding advice Irving was giving the federal government throughout the bidding process.

Years ago, the federal government had enough in-house expertise to dispense with private sector guidance — but almost all of that expertise was lost over the past two decades as successive federal governments cut the defence and public works branches that would have done that work.

The last time Canada built major warships was in the 1990s, when the current fleet of 12 patrol frigates was inaugurated.

The federal government has chosen to base its new warships on the BAE Systems Type-26 design, which has been selected by the Royal Navy and the Royal Australian Navy.

The hull and propulsion system on the new frigates will be “largely unchanged” from the British design, but the combat system will be different and uniquely Canadian, said Crosby.

The project is still on track to start cutting steel for the new combat ships in 2023. Crosby said he would not speculate on when the navy will take delivery of the first one.

Delivery of the joint support ships is expected to be staggered, with the first one due in 2024.

There will be a two-year gap between ships, said Crosby, as the navy and the yard work through any technical issues arising with the first ship.

If that timeline holds, the first support ship will arrive two decades after it was first proposed and announced by the Liberal government of former prime minister Paul Martin.

CBC