Cost of Canada’s Shipbuilding Plan More Than Doubles to C$62Bn

Multibillion-Dollar Warship Replacement Plan 2.4 Times Over Budget: PBO (excerpt)

The federal government's multibillion-dollar effort to replace the navy's warship fleet could cost taxpayers 2.4 times more than first expected, Ottawa's budget watchdog warned Thursday in a new report.

And the longer a process tripped up by delays drags out, the more it's going to hurt the public piggy bank, the analysis found.

The Parliamentary Budget Officer estimates Ottawa will have to spend nearly $61.8 billion to replace 15 ships — more than twice the original 2008 budget of about $26.2 billion.

Looking at a per-ship price tag, the cost is likely closer to $4.1 billion, rather than the $1.7-billion estimate released in 2008 by the then-Conservative government.

At that higher rate, the office believes the government would only have enough cash to buy six ships, if it still expects to keep the program on budget.

"There's a gap there and if the government wants to build 15 ships, then they have to, obviously, set aside more money for that," assistant parliamentary budget officer Mostafa Askari said in an interview.

"We don't really know what the original budget estimate was based on because there was no detailed costing provided... So, we don't really know on what basis they had $26 billion."

Askari said there is no detailed documentation available that breaks down the federal government's original estimate.

The PBO did acknowledge its calculations were based on assumptions it made about the specs of the future warships, which could differ from the blueprints that are ultimately selected by the government. The number-crunching models it employed also have a range that could mean the eventual price paid by taxpayers will be 20 per cent above or below the PBO estimate.

Ships to start arriving in mid-2020s

The Trudeau government launched a competition last fall asking some of the world's largest defence and shipbuilding companies to design a potential replacement for the navy's 12 frigates and three destroyers.

The chosen designs will be constructed by Irving Shipbuilding in Halifax, and delivery of the new vessels is expected to start in the mid-2020s.

The massive program has faced delays, including a recent announcement that gave competing firms another deadline extension to submit their designs.

The PBO pointed to several factors that can really drive up the price of naval vessels. They include the weight of the ships, their increasingly complex combat systems, ammunition in the form of missiles — and time. (end of excerpt)

Click here for the full story, on the CBC News website.

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The objective of this report is to provide a cost estimate of the CSC program. This estimate includes costs resulting from development, production, spare parts, ammunition, training, government program management and upgrades to existing facilities. It does not include costs associated with the operation, maintenance and mid-life refurbishment of the ships, other than the spare parts that will be purchased when the ships are built.

There are two primary cost drivers for surface combatants: the ship’s weight and the combat system. The weight of surface combatants has been increasing, while their combat systems have become more and more complex, both factors driving up their cost.

Assumptions which the PBO used for it estimation were:
-- Contract awarded in 2018
-- Construction starts in 2021
-- 15th ship delivered in 2041
-- CSC based on an existing design with 5,400 tons used as the reference lightship weight.

Total program cost in FY2017 dollars is estimated to be $39.94 billion or $61.82 billion in then-year dollars. The original budget for the CSC was $26.2 billion (from 2008 and under review) and it is estimated to buy six ships.

Click here for the full report (60 PDF pages) on the Govt. of Canada website.

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Cost of Canada’s Shipbuilding Plan More Than Doubles to C$62Bn Cost of Canada’s Shipbuilding Plan More Than Doubles to C$62Bn Reviewed by Defense Alert on 04:37:00 Rating: 5

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