CSC: Ottawa Opting for a Batch Procurement Approach?

Dan Middlemiss, 12 May 2021

The US Defense Security Cooperation Agency (DSCA) on 11 May 2021 announced that it had delivered the required certification notifying Congress of a possible Foreign Military Sale to the Government of Canada of the AEGIS Combat System valued at an estimated $1.7 billion (US).

According to the Letter of Transmittal No. 21-17 the potential sale would cover:

.... four (4) Shipsets of the AEGIS Combat System (ACS); one (1) AEGIS Combat System Computer Program; four (4) Shipsets of AN/SPY-7 Solid State Radar Components; four (4) Shipsets of Cooperative Engagement Capability (CEC); and three (3) Shipsets of the MK 41 Vertical Launch System. Also included is Mode 5/S capable Identification Friend or Foe (IFF) equipment; early ACS development activities for the Canadian Surface Combatant (CSC) Project to include U.S. Government and contractor representative engineering activities supporting design, integration, testing, technical documentation, modeling, and training; hardware to support development and testing in U.S. facilities; software; documentation (including combat system capabilities and limitations); training devices and services; technical support; and other related elements of logistical and program support.” [1]

Earlier in this Forum, David Dunlop posted that Canada was acquiring a similarly limited number of OTO Melara/Leonardo 127mm/64 LW guns for the CSC. [2]

These two slated acquisitions suggest strongly that Ottawa has decided to procure its CSCs in an unstated number of ships initially, most likely a first batch of three warships. This possibility was advanced by both retired Admiral Mark Norman and retired Admiral Ian Mack in separate reports earlier. The UK has adopted a similar approach for its own Type-26 frigate program. In both the Canadian and UK cases, this batch series procurement approach would be designed to limit the initial procurement costs of the frigates, and to spread out the overall program costs over an extended, but as yet undefined, period of time.

Several thoughts come to find. First, in a typical fashion, in its pursuit of an open and transparent procurement process for the CSC, Ottawa has not made any specific comments about these recent developments. Second, this stretching out of the procurement program into one or more series of batches, leaves the possibility that the program could be reviewed by some future government. Third, much like the UK case, there is no guarantee that the CSC program will go forward for the full 15 ships. For instance, the UK has made no firm commitment as to dates for its follow-on five Type 26 frigates. Much the same as the Canadian case, future batches will depend on the government authorizing future funding. Fourth, any extended delays between batches will add considerable costs to the CSC project, a point the Office of the Auditor General has made abundantly clear in several costing reports. Fifth, the announcement of four shipsets of the AN/SPY-7 radar components, raises the question of what exactly will be left for Canadians of the high-tech jobs associated with the development and production of this yet untested radar system. Will LMC be left with some metal-bashing harnesses and other minor sub-systems and components of this radar system? Presumably, LMC will at least be responsible for the final assembly, installation and testing of the radar, but will this really constitute high-value technological additions for Canadian industry?

A more unsettling prospect is that these twin developments may be signaling Ottawa’s return to an old dodge – dividing the procurement project into two separate components, one for the platform itself, and another for the weapons and associated combat systems. Ottawa used this approach for the CF-18 procurement and for the Maritime Helicopter replacement program. In both cases, the government was roundly criticized for attempting to confuse the Canadian public about the real costs of the acquisitions. Each component made little sense to the CAF without the other. But it did help distract from the sticker shock.

We await with interest further developments in the case of the CSC procurement strategy.

Notes:

[1] For the News Release from the US DSCA see, https://www.dsca.mil/press-media/major-arms-sales/canada-aegis-combat-system

[2] David Dunlop, “CSC: Canada buys OTO Melara/Leonardo 127mm/64 LW gun,” Broadsides, 23 April 2021.

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