Budget officer says navy supply ship program is underfunded by $1.5 billion

by Murray Brewster

OTTAWA – The parliamentary budget officer says replacing the navy’s two existing supply ships is expected to cost $4.13 billion, far more than the $2.6 billion budgeted by the Harper government.

Kevin Page’s latest report could spell more political trouble for the Conservatives, who’ve been hammered over delays and cost overruns in a series of military equipment projects.

The budget officer’s staff say they used a couple of different models in their calculations and cut government officials some slack in terms of delivery dates, but essentially came up with the same numbers.

The analysis says $3.2 billion would be needed to replace the navy’s 45-year-old replenishment ships, HMCS Preserver and HMCS Protecteur.

But it adds that a contingency cushion of almost $900 million should be added in, given the engineering complexity of the project and the fact that shipyards haven’t built such vessels in decades.

That’s an idea backed by American naval construction experts at the Government Accountability Office in Washington.

Building in such a buffer for decision-makers “conveys the level of confidence in achieving the most likely cost and also informs them on cost, schedule, and technical risks,” U.S. officials were quoted as saying in the budget officer’s report.

The support ship program has travelled a long, convoluted path.

It was first proposed in the defence white paper of 1994, but the Liberal government didn’t get around to ordering replacements until 2004.

The shipyard proposals were deemed too expensive by the Harper government in 2008 and the project went back to square one, with a drastic scaling back of the capabilities the navy wanted.

The program is now not expected to deliver replacement ships until 2018.

Page’s analysis shows that had the government stuck with the original plan, it would have delivered more capable ships to the navy at less cost than what is now projected.

In an attempt to get out ahead of Page’s report, Public Works and Defence officials held a background briefing Wednesday and insisted the program is on track and the ships will be built for $2.6 billion.

They conceded the design is not complete and must be reviewed for cost before the program goes ahead.

The budget officer’s report says one of the factors driving the higher cost is the insistence that the ships be built entirely in Canada, something that runs contrary to the defence practices of many other nations.

Only the United States and Britain, among the major allies, design, build and launch their own warships. Britain, however, is expected to use foreign sources for some future construction.

European countries, notably France and the Netherlands, out source some of their naval construction to lower-cost builders such as Romania and South Korea.

Building in Canada will come with a cost, one that the government doesn’t seem willing to acknowledge, the report suggests.

Liberal defence critic John McKay said the report draws into question the Harper’s often-celebrated national shipbuilding strategy, which promised to deliver at total of 28 warships and coast guard vessels.

Government officials acknowledged in the background briefing that the number of hulls is not fixed.

“Today’s report from the parliamentary budget officer reconfirms this government’s fiscal incompetence when it comes to military procurement; incompetence that directly jeopardizes Canadian jobs as well as the capabilities of our navy,” McKay said in a statement.

“Huge delays and inaccurate costing estimates have produced this latest failure. While the Conservatives continue to cut ribbons and fund self-promoting publicity stunts, it is increasingly clear that the government has hidden the real cost of this project from Canadians.

“The Conservatives must immediately come clean and disclose whether they now plan to purchase fewer naval ships or how many billions more will be required from hard-working taxpayers to compensate for this latest ineptitude.”




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