Dan Middlemiss, 10 December 2020.
Today, journalist David Pugliese wrote another long exposé of the planning, or lack thereof, behind Ottawa’s Canadian Surface Combatant (CSC) [1]. His article, allegedly based on thousands of pages of documents obtained via access to information requests and other sources, depicts the concern of federal bureaucrats that the public would discover the true cost of the CSC and would balk in sticker shock at the enormous price tag.
Much of his revelations focus on the yet unexplained reversal by Ottawa in 2016. Initially the plan was to rely on a mature, existing ship design to save production time and money. Within months, Ottawa reversed its decision, and this paved the way for Lockheed Martin Canada’s Type 26 ship design from the British BAE company to enter the competition in a big way.
This account makes for interesting reading, and suggests that federal bureaucrats have been far less than forthcoming about what they already knew about the huge costs of the chosen ship design. And all this transpired before the Covid-19 pandemic, and the federal spending spree it has engendered, had entered the picture as another possible factor which may undercut support for the CSC project.
Doubtless, many of the bureaucrats identified in Pugliese’s article, will soon be responding to the charges he outlines in his article.
References:
- David Pugliese, “Billions in trouble: How the crown jewel of Canada’s shipbuilding strategy became a possible financial disaster waiting in the wings,” Ottawacitizen.com, 10 December 2020. Accessed at https://ottawacitizen.com/news/national/defence-watch/billions-in-trouble-how-the-crown-jewel-of-canadas-shipbuilding-strategy-became-a-possible-financial-disaster-waiting-in-the-wings
5 thoughts on “CSC Costs – Again!”
Interesting article by David Pugliese of the Ottawa Citizen on how we got to where we are today WRT the CSC Frigate program costs. Did not realize that originally, there were 16 of these 8000 ton monsters envisioned by the government of the day. This article should pair well with Commodore David Clarkes’ article here:
https://www.navalreview.ca/wp-content/uploads/public/Canadian_Military_Journal_Vol_20_4.pdf
Pugliese loves to make accusations. I find his articles very biased towards the military, Irving and CSC. He does love Davie shipbuilding though. A couple online forums with a sizable membership called him out on a number of occasions about some reporting that was full of incorrect facts, he sent his lawyers after them.
The man has an issue with Irving no doubt, so I take what he reports with skepticism. That being said the CSC is expensive and no one is disputing that especially when reporting costs over the expected life of the ship which from an outsider looking in shocks them. I noticed much was made about about the unsolicited bid for the FREMM frigate for 30B. People don’t realize that this was simply a publicly stunt by the company and the actual cost for the ships, lifetime maintenance costs, TDP rights would have been significantly more than the 30B quoted. So I think before I pass judgment on the entire CSC program I will wait for the official report to come out and see what the government says. I predict we will be getting the 15 ships as stated.
It is refreshing to find someone who is biased towards the military, especially the RCN. Those who are not, are more than likely not going to give the CSC Frigate a fair chance no matter what the costs. The PBO will issue another report on the CSC next Feb and no doubt they will conclude the frigate costs will climb. Just a state of our own governments decisions to delay, delay, delay to the point where they hope it will all go away. The only losers are the RCN and Canadian people.
FYI, an interesting article to supplement the subject discussion:
Launching the Canadian Surface Combatant Project — by Ian Mack, CGAI Fellow, December 2020.
https://www.cgai.ca/launching_the_canadian_surface_combatant_project
Looking forward to the PBO’s 2020 update report. The 2019 report’s summary charts allow only very simplistic math, missing a lot of detail.
Based on the 2019 report, and mixing the results of the different estimation methods to fill in gaps, we have an estimated total production cost of $53.2 billion, a ninth ship cost of ~$2 billion, and an 80% learning curve. Plotting back from the ninth ship cost, we get a total of $31.4 billion for 15 ships. Assuming an average yearly inflation rate of 1.2%, this equates to something like $33.8 billion over a simplified 15-year production schedule. This comes out to an average cost of $2.09 billion per ship ($2.25 billion+ with inflation), with the ninth ship costing 87%-89% of the average cost.
This $31.4 ($33.8 inflated) billion cost for 15 ships is in line with the 2017 PBO total production cost of $38.4 billion, but about 64% of the 2019 $53.2 billion estimate. So what’s excluded from the updated ninth ship cost? Considering that civilian construction contractors aim for ~30% profit margin, maybe it’s the shipyard’s margin. Perhaps the foreign ship builders that are majority state-owned enterprises accept lower profit margins.
With this simple math, getting the 15 ship total cost to match the $53.2 billion production cost would require a ninth ship cost of just over $3 billion, which I think is close to the Australian experience.