June 13, 2016 5:22 pm
Updated: June 13, 2016 5:30 pm

New plan for warships will likely hit $40 billion price tag: defence analyst

WATCH ABOVE: The Liberal government says it is dropping some capabilities for its next generation warships in order to buy an off-the-shelf ship design rather than a custom design. The move is also expected to shave two years off the shipbuilding program's timeline but the government isn't yet announcing the total budget for the project. Global's legislative reporter Marieke Walsh explains.

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The federal government’s plan to find an off-the-shelf design for its new set of warships won’t keep the budget under the initial price tag, says one senior defence analyst.

David Perry, senior analyst with the Canadian Global Affairs Institute says the initial $26 billion price tag for 15 warships announced in 2015, was “unrealistic” and remains so even with Monday’s changes.

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Perry says the government is “not going to be able to deliver 15 ships for under $26.2 billion.”

“The general type of warship that the Canadian navy needs is going to be somewhere in the $40-50 billion ballpark if its going to be 15 ships,” Perry said.

At the Irving shipyard announcement, Public Services and Procurement Minister Judy Foote refused to give a new budget estimate along with the government’s new plan to drop some of the ships’ requirements.

“For me to stand here and suggest that it’s going to be one cost or another would be really unfair and irresponsible,” Foote said.

Instead, the government says it will finish the competitive process to find a design before announcing a new budget for the surface combatants. Despite the lack of details, Foote said the changes will come with “some cost savings for Canadians.”

READ MORE: Irving mounts public relations push as questions swirl around frigate program

Choosing the off-the-shelf model is expected to shave two years off the shipbuilding project’s timeline, Foote said.

It also means construction for the warships will start as soon as the construction for the Arctic Offshore Patrol Ships is complete. The two types of ships are both being built at the Irving shipyard.

In part, the government will save money through the faster timeline because it means it’s paying  two years less for high inflation rates for equipment needed to build ships, Kevin McCoy, president of Irving Shipbuilding, said.

Shipbuilding inflation ranges from 4-5 per cent a year, McCoy said.

“You’re essentially saving 10 per cent of the cost if you can knock two years off the time period.”

The warships will replace the navy’s ageing Halifax-class and Iroquois-class ships. Construction will start in 2020 and its expected to take 20-25 years to build all of the ships in the program. However, the government isn’t saying yet how many ships it will build — only saying the number could go as high as 15 surface combatants but not setting a floor.

“Maybe we’ll be able to accomplish what we need to accomplish with fewer ships,” Foote said.

Foote’s hedging on how many ships will be built is a change from the Liberals’ election pledge to build all of the ships originally promised when the shipbuilding strategy was announced in 2011.

Speaking to a crowd in Halifax in September, then Liberal candidate Justin Trudeau said if he won government he would ensure “that the national shipbuilding strategy is actually able to complete all the ships promised.”

© 2016 Global News, a division of Corus Entertainment Inc.

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