The federal General Services Administration said Friday that costs to build a much-delayed but long-awaited Navy supply ship have soared again, this time by about $1 billion.
Successive federal governments have tried for nearly two decades to equip the Navy with joint support ships (JSSs), which would be used to resupply warships at sea.
After years of delays, the Liberal government awarded a contract in June 2020 to Seaspan’s Vancouver shipyard to build two ships, HMCS Protecteur and HMCS Preserver, at an expected cost of $2.44 billion.
Public Services and Procurement Canada (PSPC) chose to announce a significant amendment to the contract, increasing the contract price to $3.3 billion, in a media statement on the Friday before the August long weekend.
That figure does not include design costs, in-service support and other costs associated with the program, which together bring the total cost to taxpayers to owning and operating the vessels to more than $5.2 billion.
“The increase in the contract amount was calculated taking into account several factors, including lessons learned from the development of the new vessels. [Royal Canadian Navy]”The impacts of COVID-19 have resulted in labour and supply chain disruptions, economic price adjustments, foreign exchange rate fluctuations and changes in labour wages,” the statement said.
PSPC said the federal government “continues to actively monitor the progress of the JSS project. [Vancouver Shipyards] “To ensure that both ships are delivered to the Royal Canadian Navy in a timely manner.”
The new ship will replace a former Navy supply ship that was decommissioned more than a decade ago after 30 years at sea.
The Canadian government began procuring new ships 20 years ago. The initial plan was canceled in 2008 by Prime Minister Stephen Harper’s government in a press release issued on a Friday night in mid-August, on the eve of that year’s federal election.
The program was restarted, but the old supply ships had to be retired.
Because the Navy cannot survive without replenishment capabilities, the Harper government turned to a private company based at Dave Shipyards in Lévis, Quebec, to convert the MV Asterix, a civilian ship currently in service on a long-term lease.
An analysis by the Parliamentary Budget Office of Canada in late 2020 found that converting two civilian cargo ships into naval supply ships would have been cheaper than continuing the joint support program.
When the construction contract with Seaspan was signed, the first ship was scheduled to be delivered in 2023 and the second in 2025.
But federal officials warned in the spring of 2023 that deliveries would have to be pushed back by two years, and said costs would likely rise but could not say by how much.
The announcement was made on the Thursday before the long weekend, and officials denied at the time that it was an attempt to cover up bad news.
Defence analysts said MPs and Canadians overall are entitled to more accountability and an accurate breakdown of the costs that are driving up the programme by more than 26 per cent.
“It’s pretty unusual for a project of this maturity to go up to that level,” said Dave Perry, director of the Canadian Institute of Global Affairs, a defence acquisition expert who has followed the program for years.
“The government campaigned on a platform of reintroducing transparency throughout government, and particularly in defence. In the first few years of their term they effectively reintroduced transparency, but since then they have almost completely rolled it back.”
Perry said such projects “are generally never given any detailed information or explanation from the government. They are now often snuck out as a Friday afternoon special, preferably before a long weekend.”
He added that the increased costs have implications beyond the Navy supply ship program.
“This is not a new project, so it requires more explanation than a short news release,” said Perry, whose organization hosts conferences sponsored by defense contractors.
“We need to better understand whether this is a one-off event. If the factors they expressed about the joint support vessels account for a large part of this 26 percentage point increase, we should not simply assume that all other budgets for defense procurement projects are not similarly affected.”
