Canada has no option but pivot away from current Surface Combatants path

I could not agree more with the title of Richard Shimooka’s latest publication, No other option, published by the Macdonald Laurier Institute in December. However, while Shimooka contends Canada has no option but to continue along its current path to acquire 15 Canadian Surface Combatants (CSC) for the Canada’s Navy, I have the exact opposite view. Namely, Canada has no option but to immediately pivot away from its current path and embark on a course that will provide the Navy with the number of frigates with the requisite capabilities to fulfill its mandate and missions. Shimooka grossly understates the costs of the CSC saying that, “it will cost at least $60-billion and become the largest public procurement project in Canada’s history.” (Although he acknowledges further cost increase are “likely unavoidable”). The fact is, what began as an estimated cost to taxpayers of $28-billion to acquire 15 of these ships, I now calculate, has escalated to a figure that exceeds a quarter-trillion dollars to acquire and maintain these ships over the next 30 years. To put this figure in context, the total funding available in the Department of National Defence’s (DND) budget over the next 30 years to acquire and maintain its capital goods for the army, navy, and air force combined is only $240-billion. This program alone could bankrupt the department’s capital and maintenance accounts for the next 30 years. It could inhibit the Canadian Armed Forces from fulfilling its mandate. It could mean the evisceration of the Canadian military. How Shimooka can ignore this reality is bewildering to me. Shimooka contends that there are three options the government could pursue: they include "re-competing the design award, purchasing a less capable class of warship to complement a truncated purchase of the Global Combat Ship, or simply just purchasing fewer vessels.” and that none of these options “are likely to decrease the cost of the ships to Canada in any meaningful way.” Conveniently, he omits a fourth option, that is to limit the current process to the construction of three CSC and conduct an open, fair, and transparent competitive process to build the remaining 12 CSCs to meet the Navy’s needs. We know for certain that such a strategy is both feasible and cost effective. As proof, we need only look at a recent procurement by the U.S. Navy (USN) for its Constellation class (FFG-62) ships. These ships are multi-mission guided-missile frigates, directly comparable to the CSC. The U.S. Congressional Budget Office estimates that the cost of the 10 FFG-62 ships would be about US$1.23-billion per ship. This equates to approximately $1.56-billion CDN per ship, or $23.4-billion for 15 ships—one-third of Canada’s estimated costs of $77.3-billion to build the CSC. To ascertain the reason for the disproportionate costs between the U.S. frigate program and Canada’s CSC program, one need only look at the differing procurement processes followed by each country. The USN demanded a ship design that had been through production and demonstrated in full scale at sea. For this reason, the Type 26 design chosen by Canada, did not even qualify in the U.S. competition. The USN specified the required off-the-shelf systems. Industry had no input into their Navy’s statement of requirements. In contrast, Canada allowed industry to assist in the formulation of the SOR, thereby permitting costly amendments. The USN signed a fixed price contract to build the ships while Canada’s program has no budgetary controls. Lastly, the USN retained accountability for the procurement process. Canada shockingly devolved the accountability for the process to Irving Shipbuilding Inc. It should be noted that the speed with which this procurement took place should ensure that a similar process undertaken by Canada would not delay the current delivery schedule. As another example, in 2017, Fincantieri, a world leader in ship design and construction, submitted an unsolicited proposal to the Canadian government to build 15 surface combatants at a fixed cost of $30-billion, less than half of the current $77.3-billion cost estimate. The vessels were to be built by Irving Shipbuilding in Halifax using a FREMM design The Liberal government rejected the offer. Shimooka contends that a change in design would yield minimal cost savings. He points to a Parliamentary Budget Office estimate that suggested the cost savings only amounted to 10 per cent of the cost of the existing CSC program. That may be true, but that is not what is being recommended. What is being recommended is for a competition not only for a proven warship design but for a shipyard as well. Furthermore, the competition would be based upon a finalized statement of requirements that can be met through off-the-shelf systems, that works within a fixed budget framework, that includes appropriate incentives and penalties and for which the government retains contract authority, In an effort to reduce the costs, other options have also been proposed. These include terminating the existing program and either purchasing 15 of the Constellation-Class frigates from Fincantieri in the United States or running a new competition for 15 CSC rather than 12. These options are also worthy of consideration. Frankly, my preferred option would be to cut our losses now and compete all 15 frigates in an open, fair, and transparent competition. Doing so would maximize the cost savings without further delaying the delivery of these ships. However, I do not feel that the government would have the courage to do so. Allowing for the construction of three ships under the current rubric allows for sufficient “economies of scale” to make it viable. As for purchasing 15 Constellation-Class frigates, I believe our frigates should be built in Canada and be designed to meet our Navy’s specific needs. Alan Williams is a former assistant deputy minister of materiel at DND. He is now president of The Williams Group providing expertise in the areas of policy, programs and procurement. He has authored two books, Reinventing Canadian Defence Procurement: A View From the Inside, and Canada, Democracy, and the F-35. He can be reached at williamsgroup691@gmail.com. The Hill Times