By David Dunlop, 9 November 2022
The Parliamentary Budget Officer (PBO) Yves Giroux has stated that costs for the Canadian Surface Combatant (CSC) program have increased (again). The PBO recently reported on cost increases for the program of around 9% up from $77B to $84B as of 28 October 2022 thanks to delays and inflation. These figures have so far not been disputed by the government. See “Estimated cost of warship fleet rises to $84B thanks to delays, inflation: PBO”. See also a commentary by Roger Cyr in National Post, “$84B plan to replace Canada's warships is 'ludicrous': Buy less costly warships that won’t take 26 years to acquire."
6 thoughts on “CSC Costs Increase (More)”
David. You follow this more closely than I do; how is it that UK MoD and BAE have a “firm contract” for 3x Type 26 at 1.4B GBP each. If you convert this to CAD (1.4 x 1.22 = 1.7B CAD) x 15 ships you get 25.5B CAD which is strangely close to the original budget CSC price of 26B CAD. Asking for a friend, cheers Pete.
Hello Pete. Yes, at first glance, a 3 ship batch contract of BAE Type 26 Frigates at 4.2B GBP would seem to be a good deal. Let’s not forget however, that the BAE contract by the MoD was not finally signed until July 2017. Some 5+ years later and the first BAE Type 26 Frigate is still under construction after the initial contract signing. The CSC Frigate Design Phase has still not been completed as of Nov 2022 with no contracts yet awarded by the Canadian government to Lockheed Martin and Irving Shipyard as yet. In my opinion, the CSC contracts should have been signed years ago in order to let Irving Shipyard get on with the hull construction and then add in any design phase requirements as they come about. Another factor is that the BAE Type 26 Frigate is geared towards ASW Warfare with some AAW/ASuW capabilities only, where the CSC Type 26 Frigate is being designed to do all three warfare functions within each CSC Frigate. The British have other ships designed that specialize in AAW and ASuW duties. The Canadian version of the Type 26 is also longer and heavier than the BAE Type 26 Frigate. If the BAE Type 26 Frigate contracts were not signed until say, 2022, the GBP costs would be much higher at 2.2B GBP for each of their BAE Type 26 Frigates (6.6B GBP) per batch or 17.6B GBP for all 8 Type 26 Frigates. With the Canadian government opting to build 15 Frigates at 2022 BAE Type 26 prices, that would add up to 33B GBP for all 15 CSC Frigates. I suspect though that the other BAE batch contracts will be higher than the first batch in today’s prices. Perhaps as much as 3 x the original costs. The CSC Frigate also has a much more expensive Radar (SPY 7 V3/Illuminator)/Combat Management System as well. So, it’s like comparing apples to oranges. My thoughts anyway. Cheers!
Comment on DD (10-11-22)
The PBO’s most recent report would appear to vindicate the numerous warnings from Alan Williams that the CSC costs for both acquiring and supporting the CSC were unsustainable.
Williams responded to the latest PBO Report in the following article:
Alan Williams, “Poilievre’s Conservatives should dig deep into $300-billion price tag for new Navy warships, not ‘gotcha’ issues of the past,” The Hill Times (7 November 2022):
[I had previously] “proposed three options moving forward. The first was
for the government to bury its head in the sand; pretend that money is readily
available and continue on the current path. The second option was to buy
American frigates. The third option was to conduct a proper competitive
procurement process. I argued that such a process could deliver the required
number of frigates with the necessary capabilities to the Royal Canadian Navy in
a timely manner for one-third to one-half of the current expected costs.
In response to the PBO report, the Department of National Defence said that it
could not provide an accurate estimate as to what these ships would cost and
gave no indication that it was willing to change course.
the acquisition costs of the CSC alone will consume approximately
two-thirds of the capital funds available over a 30-year period. In other words,
without an influx of additional capital funds, less than $1.4-billion a year would be
available over this period to meet all the other capital requirements for the Army,
Navy, and Air Force combined, including the F-35 jets and the other ships under
the National Shipbuilding Strategy.
There is, of course, a simple way to resolve this difference of opinion. Have the
government produce a 30-year plan that lays out all current and planned capital
programs. In each year, the costs to acquire, maintain (e.g. upgrade the software,
allow for refits) and support (e.g. personnel costs, fuel, oil) each program would
be shown. Similarly, in each year the available funding to acquire the asset
(capital funds), to maintain the asset (national procurement funds) and to
support the asset (operations funds) would be displayed. Such a report would
provide clear evidence as to the financial viability of the CSC program as
currently structured.
At the OGGO hearings on Oct. 30, Parliamentary Budget Officer Yves Giroux
noted that departmental officials were required, under Treasury Board policy, to
prepare life-cycle costs. It would be worthwhile to question the witnesses as to
whether they have complied with the policy and, if so, what is their estimate of
these costs. Why have they not made it public? Do they dispute the PBO’s
acquisition or life-cycle cost estimates?
The committee should probe the current status of the program. Questions should
be asked as to whether the design has been completed. What are the next steps
and what is their timetable? Has any contract been signed to begin construction?
If not, when is it expected to be signed? How many ships would be contracted to
be built? How much money has been paid to date to Irving Shipbuilding Inc.?
As of today, the expected cost to acquire each of our frigates is about $5.6-
billion, which is equivalent to the newest U.K. aircraft carrier, The Prince of Wales.
Our program costs are shameful, wasteful, and out of control.
The CSC program cannot proceed as currently structured. The only question is who will have the courage to say so?
And when?”
To these recommendations by Mr. Williams, I would also add that the PBO should undertake a comprehensive study of the costs of acquiring essentially ‘as is’ alternate, available frigates from foreign suppliers (e.g. the US or the UK). That is, the costs of acquiring these warships without the stricture of having them built in Canada by Canadian shipbuilders.
I should have mentioned in my Comment that each paragraph is an excerpt from Mr. Williams’ article. My apologies to Mr. Williams and to this Forum.
Hi everyone,
I believe that the cost of the CSC program will remain a hot topic for years to come! One thing that is being done time and time again, is comparing the cost of the CSC program with other frigate programs around the world. In most cases, it is like comparing apples and oranges. Most other programs are only stating the price of putting the ships together themselves, left alone the designing phase and the construction of support facilities. One comparison often used is the US Constellation class frigate. The report to the Congress clearly states that the government furnished equipment are procured under different program and they are the mission systems and associated software. These are the most expensive items of a modern warships. In the case of a Constellation class frigate, it would include the AEGIS combat management system, SPY-6 radar, and fire control radar, the gun and associated ammo, all the missiles and associated launchers, sonar system and torpedo. It probably also means the EW warfare systems. All of that is a significant chunk of the total money spent on those ships and are not part of the stipulated cost. In the case of the CSC, the only things that probably will not be included to the purchase price are the new multi-role boats (MRB) that are already being procured under a different program and, also the MK-54 torpedoes that will probably be fitted to the Halifax class frigates and CH-148 helicopters before the CSC comes along. If an appropriate fact-finding exercise would be done in order to properly compare the cost, the picture might look quite different!
That being said, the NSS clearly expose the result of the decades of neglect that did let our shipbuilding industry wither away. The AOPS, JSS, OFSV and OOSV are relatively simple ships compare to the CSC but the cost of building them are easily the double of the cost of building such ships in country that are constantly building major naval vessels. As time passes, that aspect should improve and especially on multi-ship program such as the CSC where the learning curve allows for much improvement after 5 to 6 ships. That aspect would remain even if a switch to a lesser advanced design would be made. Switching to a foreign built strategy would also offer some unpleasant surprises as the Aussies are finding out with the AUKUS agreement. With the submarine building capacity of both the USA and the UK being maxed out at the moment being, it will be decade before they see the first of their new SSN. A similar dilemma would confront us if we would want to procure some Constellation class frigate from the USA or a Type 26/Type 31 frigates from the UK. Both countries are struggling to revitalize their surface fleet against the rising fleet of their potential foes. On the other hand, Naval group seems the have the capability to quickly deliver ships such as the FREMM and FDI frigates.
As we went for a foreign design for the CSC, one thing that mystify me is the fact that the design supplier is not the prime contractor on the program. The design supplier shall be the prime contractor and the naval yard be a sub-contractor. Over time, there should have been a mechanism for technology and responsibility transfer over to ISI so they become the prime at such point (after so many ships) when things are running smoothly.
So, there is now easy way to lower procurement cost. On the sustainment and operating cost part, I don’t agree at all with the PBO report even though they rely on well proven cost projection tools. These tools are mostly based on the ships size and procurement cost and that where it does not fit. While the CSC displacement is almost twice as much as a Halifax class frigate, it operates with a slightly smaller crew; 210 vs 225/235. The usage of an integrated mast with solid state radars means for an easier and safer maintenance of the different radars. The sailors go up into the mast for maintenance and off goes the many moving parts of previous radar such as bearing, motor and gear train. Also, the propulsion plan is to be much more efficient than the previous generation. To explain it as briefly as possible, the CSC use a single 36 MW gas turbine VS two 17,7MW GT for a Halifax class frigate. That means that a CSC going along at full power at 27 kts will use about the same quantity of fuel of a CPF at 30kts (We lose on speed but we don’t use more fuel). The CSC will only use its GT at high speed while the CPF goes on both GTs when sailing near shore or other ships to avoid a single point of failure. The highly flexible Diesel electric drive of the CSC will always be use at slower speeds and the number of running Diesel Generator can be modulate for maximum efficiency. These DGs are upper tier category and are meant to operate for over 24000 hours before any major overhaul.
The cost projection also seems to foresee expansive mid-life upgrades. Well, the life extension of the CPF was done at a relatively good price. The open architecture of the CMS330 shall make future upgrades more affordable and it is proven to be easier to modify a bigger ship than a small one. Also, oppose to previous ships generation we are to utilise probably the most advanced radar from the start. This radar as the potential to be the best one to detect and track hypersonic missiles at the time we begin to operate it. This mean it should be relevant for years to come.
One can only hope that the government become more transparent on that procurement process so the public is well informed. We don’t need to know the real secret capability of the ship’s system but we deserve to know the financial impact on our country’s budget. We should also have the different shipyards owner invest in their facilities instead of the tax payers in order to truly deserve the huge profits down the road.
Constellation-Class Frigate (FFG-62) Costs
Dan Middlemiss
While it is true that it is often difficult to determine the exact, real cost-to-taxpayer amounts for acquisition costs and for Government Furnished Equipment (GFE) costs for US small surface combatants like the Constellation-class frigate, we can obtain a close approximation. To do so, we must take the total approved budget for each warship (i.e. the total amount Congress authorizes on a yearly basis), and then subtract the announced amount of the construction contract to the shipbuilder, in this case Fincantieri/Marinette Marine (F/MM). This latter calculation provides an approximation of the GFE amount.
Let us start with the initial budget estimates for the Constellation-class frigates. From the outset, both total production costs and GFE costs were included in the early USN projections. See, for example, the following:
“As one of the parameters for the competition, the Navy set generic unit-procurement goals for the 2nd through 10th ships. Specifically, it wanted the FFG(X) to cost an average of $800 million to $950 million per ship in 2018 dollars (including government-furnished equipment such as combat and weapon systems). In 2020 dollars, that target cost range is $836 million to $1 billion.”
The most recent report from the US Congressional Research Service has adjusted this original estimate slightly upwards. The total approved budget, including GFE, for the first ship was $1.281.2B (USD). This included $795M for the concept design and construction of the lead ship and $486.9M (USD) in GFE. (A list of the systems included in the latter can be found in the CRO report listed below.)
The total approved budget for FY2022 for the third ship of this class is $1.090.9B (USD), which includes a construction contract of $537M to Fincantieri/Marinette Marine, and $553.9 M (USD) for GFE.
Therefore, using a conversion rate of $1.00 US to $1.30 CDN, the total procurement cost of Constellation-class frigates should be about $1.418.17B (CDN).
Sources
1. Note that we are not including annual operating costs, or total life cycle costs in these calculations. Navy and Congressional Budget Office documents do provide estimates for these costs, however.
2. As many Congressional Budget Office and Congressional Research Office reports note, the GFE costs for the Constellation-class are being held down by the fact that many of the combat and weapon system components have been fully developed and are currently in service aboard other U.S. Navy surface warships.
3. U.S. Congressional Budget Office, “The Cost of the Navy’s New Frigate”, Report 56675, (October 2020), p. 5.
4. Congressional Research Service, “Navy Constellation (FFG-62) Class Frigate Program: Background and Issues for Congress”, Report R44972 (Updated 26 August 2022), p.5.
5. Naval Technology, “Constellation-Class Guided-Missile Frigates”, (21 October 2020).
6. Dr. Regan Campbell, “FFG(X) Update National Symposium – Surface Navy Association (18 June 2019), slide 4.
7. Congressional Research Service, “Navy Constellation (FFG-62) Class Frigate Program: Background and Issues for Congress”, Report R44972 (Updated 26 August 2022), p.5. See also, Sam Lagrone, “Updated: Navy Awards $537M Option for Third Constellation Frigate Chesapeake”, USNI News, (16 June 2022).