New Data Confirms Sixth Estate Estimate: Navy Shipbuilding Plan to Cost $100+ Billion
As other political bloggers know, there’s no feeling quite like vindication without attribution. Which I felt this week after parsing the latest data from Public Works and from the Parliamentary Budget Officer on the cost of the Joint Support Ship. A couple months ago, I predicted that the true cost of the ships project — unless it was drastically scaled back, which I think is a strong possibility — would exceed $100 billion.
An update to that estimate is in order, but in broad brush strokes, the upshot is that I was basically right. It’s worth recalling that the Canada First Defence Strategy officially pegged the cost of all “major replacements” — tanks for the army, ships for the navy, and F-35s for the air force — at just $20 billion. Whoops. That was followed up by a National Shipbuilding Procurement Strategy promising replacement warships, supply ships, Coast Guard ships, offshore patrol ships, and a brand new icebreaker, all for $35 billion. I ran over the figures, compared them with the costs of new destroyers in other countries, and said that it seemed suspicious. But I didn’t question them.
The Parliamentary Budget Officer has released what will probably be his final major report, which relates to the Joint Support Ship part of the purchase. This started out as a Liberal plan to buy three new supply ships (since that’s what we used to have right now), then became a Conservative plan to buy two supply ships. It’s still two, but the ship capabilities have been drastically scaled back and the price tag has ballooned to an astonishing $1.3 billion each. Given that one of the ship designs in the running is apparently a German ship that cost their navy less than half a billion euros, I can’t see how this figure is even plausible. But it’s worse than that: Kevin Page says that due to inflation and cost overruns the true cost of the supply ship contract may grow from $2.6 billion to $4.1 billion.
How likely that is I really don’t know, but if the same ratio holds true for the rest of the shipbuilding strategy, then initial construction costs would grow from $35 billion to $55 billion.
The next set of costs are for operations, sustainment, and maintenance. The government previously stated that it would cost about 1.5 times as much to operate the offshore patrol ships for 25 years as it did to build them in the first place. The new data say that the 30-year operating cost of the supply ships will be 1.7 times that of the initial purchase price. So my guess that this was a relatively useful ratio appears to hold true.
Which means that over 30 years, “$35 billion” in new ships would cost about $60 billion to operate. And that original purchase price may balloon to $55 billion, if the PBO estimates are to be believed.
All of which, taken together, mean that my initial estimate appears to be confirmed: the total cost of the new naval project proposed by the Harper government, at least as described so far, exceeds $100 billion.
I think we could colonize Mars for that price.
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Purple Library Guy
Colonize Mars? Well, maybe . . . but not under a Conservative government. Imagine the cost overruns on that project!
Mark Collins
Lots more here, first post only slightly relevant:
http://cdfai3ds.wordpress.com/tag/canadian-navy/
Plus the Canadian Coast Guard:
http://cdfai3ds.wordpress.com/2013/02/25/mark-collins-the-poor-canadian-coast-guard-or-read-our-lips/
Mark
Ottawa
jrkrideau
Maybe we could just buy the old Royal Fleet Auxiliary ships and save money. Oh wait, that didn’t work out so well last time did it?
I am waiting to hear that the cost of replacing the PM’s limousine has now reached $10 million but is expected to rise to $18 million by Easter.
Mark Collins
Then there’s the Arctic/Offshore Patrol Ship, note comments:
http://cdfai3ds.wordpress.com/2013/03/07/mark-collins-rcn-arcticoffshore-patrol-ship-design-contract-signed-with-irving/
Mark
Ottawa
Mark Collins
See also:
“Canadian National Shipbuilding Procurement Strategy: How Not to Keep Costs Down”
http://cdfai3ds.wordpress.com/2013/03/11/mark-collins-canadian-national-shipbuilding-procurement-strategy-how-not-to-keep-costs-down/
Mark
Ottawa
Briguyhfx
In fairness to the navy, the original operational requirement list for the new supply ships was ridiculous and probably unachievable. They were to serve as resupply vessels, hospital ships, troop transports, helicopter carriers, and probably a few other things. The navy just wanted supply vessels that doubled as hospital ships, but the other military branches wanted everything plus the kitchen sink added on.
That said, the procurement of new supply vessels is still a boondoggle, even with the operational requirements scaled back to reasonable proportions.
Mark Collins
But the Dutch are building a ship similar to the original one we planned–with the metal bashing done in Romania:
http://www.damennaval.com/nl/company_product-range_joint-logistic-support-ship.htm
http://www.ynfpublishers.com/2011/06/keel-laid-for-royal-netherlands-navy-joint-support-ship/
Why don’t we just go Dutch? Instead:
“Canada’s National Shipbuilding Strategy: Nowhere Without Government Help”
http://cdfai3ds.wordpress.com/2013/03/15/mark-collins-canadas-national-shipbuilding-strategy-nowhere-without-government-help/
“Shipbuilding Bootcamps”!
Mark
Ottawa
Sixth Estate
The fact that it’s being built in Canada actually bothers me a great deal less than most commentators on the subject (including yourself, evidently). I’m really not bothered by the fact that we’ll pay a significant premium in procurement costs if it also translates into considerable employment for Canadians. I’m not really a fan of selling defence procurement as a jobs plan — if what we’re after is investing in skilled employment, there are far more useful and cost-effective ways of doing that — but I’m at a loss in seeing why that particular premium should bother people. Either Canadian taxpayer dollars are being inefficiently redistributed back to Canadians, or they’re being distributed efficiently to workers in other countries. All else being equal, I will choose the first of those two options every time.
That said, if the best argument for a new ships plan is that it is also a new jobs plan, then I’d say that is pretty poor defence policy. Couple that with the fact that I think we’re being repeatedly and brazenly lied to about the actual cost of the new ships and you have the reason why I oppose this latest procurement debacle.
Sixth Estate
Briguyhfx — If Canada actually needs a ship to do all of those things, then the pricetag is what the pricetag is, and there’s no real way around it.
As with the F-35, though, I have a feeling that Canadians have been sold a bill of goods by some slick DND and ministerial salesmen who claim that we can very high quality ships built at lightning speed, dirt cheap.
Unless there’s a military exemption to the project triangle, which I very much rather doubt, it’s obvious that we can’t have all three and will have to make some hard choices. The sooner we settle down to a serious discussion instead of nonstop hyper-partisan spin, the sooner we can make those choices in a responsible manner.