Billions of dollars going out to sea

The government of Canada is potentially wasting tens of billions of dollars and nobody is talking about it.

Reports have been written about it, but politicians of all stripes ignore it, and it fails to capture any attention.

“It” is the purchase of 15 new frigates for the Canadian navy, to replace our aging and obsolete destroyers.

Why do we need them?

You’re asking the wrong question. We do need to replace our ships, but the point is that, Liberal government or Conservative government, we ARE going to buy them, and we are probably going to pay too much. This question — why do we need to buy them at all — is only a distraction that will undermine a proper discussion about how the CSC (Canadian Surface Combatant) program is being managed.

How much money are we talking about here?

  • The 2008 budget for the program was $26.2 billion
  • The newest estimate by the Parliamentary Budget Officer (PBO) is $77.3 billion (link)

Another 2 year delay … remember this has been in progress since 2008 … would increase the cost to $82.1 billion. That is $56 billion more than the original budget … and we haven’t even welded one piece of metal yet.

I know you know that’s a lot of money, but it’s also just a number. We absorb lots of numbers, especially during an election cycle, so it’s understandable that one particular number might not have an impact. So to put this in perspective, this is a comparison of how much the program cost has increased in comparison to some other things that you may hear about or recognize:

  1. Value of the alleged bribes to Libyan officials that were behind the SNC Lavalin scandal that lead to the departure of Jody Wilson-Raybould.
  2. Value of the improperly awarded WE Charity contract for the Student Summer Grant program
  3. LPC (Aug 24) “Make $4 billion available to cities through a Housing Accelerator Fund.”
  4. 5-year allocation for $10/year childcare cost shared with provinces and territories per budget 2021
  5. PBO expected cost of the program less 2008 original budget

You could buy $10/day childcare including the province’s share for 5 years and still have money left over for a couple of major scandals, just with the increase in the cost of the CSC program.

Why is it so expensive?

Much can be traced to the glacial pace of federal military procurement. It’s rare that these sorts of things get cheaper by dragging your feet for 13 years. Some of it is also due to special requirements and customizations that I have no expertise to speak about.

And some of it is due to the structure of the program, including the requirement that all of the ships be built in Canada, with intellectual property conceded to Canadian businesses. This not only limits the competitive process, but it increases costs. By how much? By $10.2 billion according to another PBO report (pdf).

Oh but there will be high-paying jobs created! Unfortunately there is no information forthcoming about the number of jobs and there will likely be no consequences for failing to deliver the jobs, according to this Ottawa Citizen report of the “significant secrecy surrounding the industrial benefits for the program”.

Even if there were, say, 2,000 long-term jobs created, you could instead buy each person a house, given them $1 million in spending money, and still save billions by having the ships built by the actual shipbuilder vs. the Irving family in Canada.

Make no mistake — this is about politics and vote buying. And both parties do it.

$10 billion. To buy votes.

What are the alternatives?

The PBO report looks at that too. No they did not look at not buying ships. As mentioned, that is not an option. But they did look at other ship design alternatives that could reduce the cost to as little as $27.5 billion — not that much more than the original budget.

The larger Type 26 has advantages that the other designs do not, but do we need a whole fleet of them? The PBO suggests a mixed fleet with a few of the big boats combined with a larger core of the other designs.

Those alternative costs include cancellation costs and sunk costs of the existing contract, and this can be done on the same timeline as the current CSC procurement plan.

By buying a slightly smaller ship of a different design, we could save enough money to dwarf the cost of most promises you’ll hear during this election campaign. How are they going to pay for those promises? This is certainly one idea.

So now what?

This is probably pointless. Nothing is going to change at this point. We’ve been on this path for so long without anyone blinking an eye, I don’t see it changing now.

The point of this blog post is more to reinforce the notion that military procurement needs to get more attention. A LOT more attention. Reporters should be asking about it. YOU should be asking about it when your candidate comes to the door. It not just ships either — we can also make a royal mess of buying simple handguns. No purchase is too small for the Canadian government to completely and utterly bungle.

While our path may be set on the purchase of extremely expensive ships (though it doesn’t have to be), our decision has not been made regarding the purchase of extremely expensive airplanes. Maybe there’s a chance we can not screw up the CF-18 replacement program any worse than it already has been, by actually buying the best jet for the best price!

Which jet is that? Come back soon to find out!


The sorry state of the Canadian navy: a comparison with Denmark

One thought on “Billions of dollars going out to sea

  1. Pingback: What is the right jet for Canada? | Around This Town

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