Jonathan Kay on the death of Gaddafi: Three lessons from the Libyan campaign Mark Collins - Autumn 2011 Edition of Conference of Defence Associations Institute’s On Track Magazine
Oct 20

Excuse the long post; it’s a complicated subject.

The selection of the two shipyards for the government’s National Shipbuilding Procurement Strategy certainly seems to have been a clean and honest process sans political interference. The heart of the announcement:


The combat package includes the Royal Canadian Navy’s Arctic Offshore Patrol ships and the Canadian Surface Combatants ships. The non-combat package includes the Navy’s joint support ships, the Canadian Coast Guard’s off-shore science vessels and the new polar icebreaker. Small ship construction (116 vessels), an estimated value of $2 billion, will be set aside for competitive procurement amongst Canadian shipyards other than the yards selected to build large vessels. Regular maintenance and repair, valued at $500 million annually, will be open to all shipyards through normal procurement processes.

Irving Shipbuilding Inc.[Halifax] has been selected to build the combat vessel work package (21 vessels), and Vancouver Shipyards Co. Ltd. has been selected to build the non-combat vessel work package (7 vessels). The total value of both packages is $33 billion [$25B combat, $8B non-combat] and will span 20 to 30 years…

Main details:

For the Department of National Defence

Arctic/Offshore Patrol Ships (6 to 8 vessels)

The Arctic/offshore patrol ships will conduct armed sea-borne surveillance in Canada’s waters, including in the Arctic [by the way these are not truly combat ships, see: “Guess What? RCN’s Arctic/Offshore Patrol Ship Not a Real Warship, or, the Constabulary Navy“]. They will enhance the government’s ability to assert Canadian sovereignty and provide surveillance and support to other government departments. Further information is available on the arctic offshore patrol ships website.

Joint Support Ships (2 vessels with the option of 1 additional)

The joint support ships are a critical component for achieving success in both international and domestic Canadian Forces missions, as laid out in the Canada First Defence Strategy. The ships will increase the range and endurance of naval task groups, permitting them to remain at sea for significant periods of time without returning to port for replenishment. The joint support ships will replace the two existing protecteur class auxiliary oiler replenishment vessels. Further information is available on the joint support ships website.

Canadian Surface Combatants (15 vessels)

These warships will replace Canada’s destroyers and frigates. While the ships will be based on a common hull design, the frigate and destroyer variants will be fitted with different weapons, communications, surveillance and other systems. These new ships will ensure that the military can continue to monitor and defend Canadian waters and make significant contributions to international naval operations [But, as I wrote earlier, “…can the CF really afford to support: a submarine fleet; a substantial blue water Navy (we are planning on 15 Canadian Surface Combatants whilst the Royal Navy will be reduced to 19 destroyers and frigates - does Canada really need a strength that close to Britain’s?)..]. This project is in the options analysis phase and will proceed to government for approval to enter the definition phase in due course [in other words they have no real idea of the costs–but one DND estimate is $26 billion, scroll down here, more than the $25 billion the government now says it will pay for the CSC and A/OPS together, good luck–the A/OPS are supposed to cost $3 billion].

For Fisheries and Oceans Canada - Canadian Coast Guard

Offshore Oceanographic Science Vessel (1 vessel)

The offshore oceanographic science vessel project will build a replacement ship for the Canadian Coast Guard’s largest science vessel—the CCGS Hudson. This vessel was built in 1963, and its replacement is critical to the fulfillment of the department’s science mandate, as well as the mandates of other government departments and agencies. The vessel currently operates on the east coast of Canada. The new ship should be in service by 2014.

Offshore Fisheries Science Vessels (3 vessels)

The offshore fisheries science vessels project will build three ships for the Canadian Coast Guard fleet. The project will replace four aging Coast Guard ships on the east and west coasts of Canada that provides a platform from which critical scientific research and ecosystem-based management can be performed. The new ships should be in service by 2015.

[The two types of science vessels are described here.]

Polar Icebreaker (1 vessel)

The polar icebreaker is one of the centerpieces of Canada’s Northern Strategy, which focuses on strengthening Canada’s Arctic sovereignty, northern economic and social development, and protecting the North’s environmental heritage. The new icebreaker will provide the Canadian Coast Guard with increased coverage in the Canadian Arctic and adjacent waters and will be able to operate during three seasons in the Arctic, over a larger area and in more difficult ice conditions than is currently possible. The polar icebreaker will be 120 to 140 metres in length and will carry a complement of 100 personnel and accommodation for 25 additional people. The polar icebreaker will also be able to accommodate two helicopters when required and will have cargo-carrying capacity. Further details are available from the polar icebreaker website.

A graphic from the National Post:

And a CBC slideshow is here.

The place where the politics really comes in is the diminished purchasing power resulting from the government’s insistence–like all Canadian governments–that the vessels be constructed in Canada (though this government seems sometimes open to using foreign designs, see JSS below–maybe). That insistence makes it very difficult for me to believe that in the end we will get the number of ships promised at anything like the planned costs and within the claimed time frames.

And how will having two monopoly shipyards for large vessels keep costs under control when no actual contracts are yet in place? Which means I think we will end up with perhaps quite a lot fewer hulls since I do not see defence budgets going up in any significant way.

Here are some of the, er challenges. From a comment at Milnet.ca:


I participated in the original NSPS industry consultations. It will be a strategy for 25 years. The near term aim is to get the ships that are desperately needed built and to get the industry back on its feet. The medium term aim is to sustain the industry with government work supplemented by repair/private newbuilds. The longterm aim is to build a competitive industry that will be capable of providing government ships as needed and when needed without having to reinvest and retrain each time…

We have few offshore sales at present. We are currently somewhere around half as productive as a good European yard [emphasis added] and don’t have too much to offer in way of references.

We have capable design firms that compete internationally (and have done so as a primary activity for several decades due to lack of national activity). We have one of the world’s top design firms of offshore patrol vessels, also quite capable in other large and midsize vessels, and one of the world’s top design firms (probably the top firm) in tugboat design, who are reasonably capable in midsize ships. We have a couple of good production engineering firms as well. We do not have the existing capacity to properly design CSCs, which I realize is what most interests people here, but the rest is well covered. I believe we should purchase and modify a foreign frigate design…

Plus excerpts from two pieces by the National Post’s John Ivison:

1) Tories’ $35-billion ship project hits a snag

…the news of the troubled joint supply ship (JSS) project is sure to raise questions about whether the government is able to bring any of its procurement projects in on time or on budget.

Defence sources said it is in trouble because two companies competing to design the new ships — ThyssenKrupp Marine Systems of Germany and Navantia S.A. of Spain — are backing away from the bidding process. It is understood that the government is not prepared to pay their asking price and is likely to turn to a domestic Canadian design being prepared by engineering support contractor BMT Fleet Technology of Kanata, Ont. None of the competing companies responded to requests for comment Tuesday.

A spokeswoman for National Defence said the government is continuing contract negotiations with the two European companies but if neither design delivers the best equipment at the best price, the Canadian design will be used.

One Defence insider said the JSS problems reflect a lack of experienced procurement staff. “This is so depressingly Canadian — you go out to bidders, you indicate an interest in designs, you load on extras and then say ‘no, thank you.’ It could set us back another five years,” he said. The new supply ships were due to be in service by 2017 but sources say that deadline is unlikely to be met now [emphasis added].

The JSS project has been plagued by years of delays and set-backs [see: “How Slow Can One Procure Navy Ships, Part 2?“]…

…Last year, Defence Minister Peter MacKay said JSS were back on the agenda but with a reduced $2.6-billion budget and the intention to build just two ships, with the option for a third.

National Defence proceeded to short-list two designs already in service with NATO allies – the Berlin class made by ThyssenKrupp, which carries light weapons, helicopters and an on-board hospital; and, the Cantabria class, produced by Navantia, which also has a medical centre and operating facility.

However, the Defence industry insider said those plans are set to founder on demands by the Canadian side for multiple adaptations to the existing ships and inflexibility on pricing from the Europeans.

Aside from tinkering with the specifications, one of the reasons the project has not run smoothly is the political imperative that the ships must be built in Canada, a decision likely to add around 20% to the cost [emphasis added, that’s all?], according to some procurement experts…

2) Everyone wins in shipbuilding contract but Quebec and the taxpayers

The denouement of the great multi-billion-dollar shipbuilding bonanza has left almost everyone popping Champagne corks —except perhaps Quebec, and the poor, bloody taxpayer who will end up footing the bill for the inevitable cost overruns and delays that will result from the government’s made-in-Canada national strategy.

…while the government may be able to deflect criticisms of bias, it is going to have a tougher job explaining that taxpayers’ money is being well spent.

If we accept we need all the ships the navy and coast guard says we do — and there are plenty of leaky old tubs out there that should have been decommissioned years ago — then a free trade warrior with an aversion to national strategies like Stephen Harper should have bought some off-the-shelf solutions at the cheapest price from international yards. Instead, we will pay an estimated 20% more to build them here.

The goal, according to the government, is to use a “once-in-generation opportunity” to build a “stronger, more sustainable” Canadian marine industry. But is it really sustainable? Are we likely to be building ships for export [see Milnet.ca comment above]? Not according to anyone who knows anything about the economics of shipbuilding.

Quite apart from propping up an industry that would be uneconomic without government largesse, there must be serious doubts that the bill will actually come in at $35-billion…

Of course more money will be needed, if only for this one reason:

…the non-combat order is expected to grow over time to include more replacement Coast Guard vessels.

No kidding. The CCG now has 28 ships over 1,000 tonnes. Of those 15 will soon be over 30 years old (see preceding link), the youngest will soon be 25 years old, and only 5 replacements are in train. That leaves 23 other ships to be replaced, one would surely hope and expect, as part of the government’s shipbuilding strategy.

The government has allocated $8 billion for the non-combat ships. The JSS acount for some $2.6 billion of that, and the CCG vessels the government lists above account for some $1.2 billion. That’s a total of $3.8 billion, leaving $4.2 billion for all the other large Coast Guard vessels. Amongst them all six of our icebreakers are getting very old and should be replaced, yet the government has only committed to one new such ship. Enough money for the CCG? Who knows?

Disclosure: The last years of my federal public service career were as a bureaucrat at CCG HQ.

Mark Collins is a prolific Ottawa blogger

3 Responses to “Mark Collins - RCN/CCG Shipbuilding: Politics vs. Purchasing Power”

  1. MarkOttawa Says:

    A telling paragraph from the very progressive Susan Riley in the Ottawa Citizen:
    http://www.ottawacitizen.com/opinion/Harper+government+does+right+ship+contracts/5584161/story.html

    “…
    It helps, too, that buying ships - even military vessels - seems benign as military spending goes. In an era of high-tech war, unmanned drones, smart bombs and operations run from video-game-like consoles, there is something folkloric about a Canadian warship, flags flapping smartly, inching out of Halifax harbour bound for some distant war.”

    Quite. In other words ships for the RCN are seen more as a warm and fuzzy economic/jobs matter (with potential party political fun and games) than a serious military one. Which helps explain why there has been almost no questioning of the enormous costs involved (the supposed F-35 acquisition costs are about 1/4 those for all the vessels). And why there has been no serious discussion of the roles and capabilities of the ships, indeed why/if Canada needs these numbers of these particular types.

    Mark Collins

  2. MarkOttawa Says:

    If you want to see really massive cost over-runs imagine this happening:

    “Ottawa can take over defaulting shipyards, $33-billion deal states”
    http://www.theglobeandmail.com/news/politics/ottawa-can-take-over-defaulting-shipyards-33-billion-deal-states/article2208631/

    Mark Collins

  3. MarkOttawa Says:

    Some interesting serious detail via Vanguard magazine’s “Newsletter”:
    http://www.vanguardcanada.com/

    “Ken Bowering is a retired naval officer and served as the Navy League of Canada’s vice-president for Maritime Affairs from 2006 to 2010. He provided Vanguard with this commentary on the government’s selection of shipyards under the National Shipbuilding Procurement Strategy…

    My understanding of the process is that what has actually happened is both shipyards have been selected by the government to build ships, and the next step is that the government and the shipyards will sign “umbrella agreements”. Once the umbrella agreements are in place, the government will, over time, ask the shipyards to prepare detailed proposals to actually build the respective ships - Irving for the Combat ships (for the Navy, of course) and Seaspan for the Non-Combat ships (some for the Navy and some for the Coast Guard) - and once the proposals have been received, contracts will be negotiated. So, why does one shipyard seem to get $25-30 billion and the other only $8-10 billion?

    I would expect the ships to be built by Seaspan will be built almost entirely by them (and their partners and suppliers). On the other hand, I would expect most of the ships to be built by Irving will probably be built by Irving working with a “to be determined” “combat system” contractor or integrator (Irving would build the physical ships - the hulls, outfitted with electrical and propulsion plants, etc - but the “other contractor” would supply the combat portion of the ships - the sonar and radar systems, the weapon systems, radio communications, and command and control systems), or could maybe even be the prime contractor. And this “combat portion” of the ships will account for a substantial portion of the overall ship cost. Thus, from simply a “cutting steel” point of view - the construction work actually to be done by both Irving and Seaspan - will be somewhat closer in dollar value than what’s been indicated by the media. In addition, based on the government’s current schedule to build the ships, the ships to be built by Seaspan should be completed in about 8 years (after work begins). The first 6 ships to be built by Irving could also expected to be built in this timeframe, but the remaining ships might not be started for perhaps 8-10 years from now and they could be built over a 12-15 year period. In the meantime, as the Coast Guard recapitalizes its fleet, it is expected they could have more ships built under the program - and these (if over 1,000 tonnes - like a second ice-breaker) would be expected to be built by Seaspan [see end of my post]…”

    Mark Collins

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