Federal auditor general Karen Hogan delivered a stark warning Thursday that government mismanagement is threatening to leave the navy and coast guard without the ships they need to defend Canada and protect its waterways.
The warning is in a new report that offers a scathing assessment of the state of Ottawa’s multibillion-dollar national shipbuilding strategy nearly 10 years after it was launched.
Hogan and her team found delays across the board in the construction and delivery of new ships for the Royal Canadian Navy and Canadian Coast Guard even before the COVID-19 pandemic began.
Those delays are threatening to create gaps as the navy and coast guard vessels those ships are supposed to replace are near retirement, or in some cases have already reached that stage.
Those include the navy’s three destroyers and two support ships, while the coast guard has had to do without some research vessels and icebreakers because its existing ships are docked for repairs.
Hogan’s report says the government has mitigated some of the short-term effects but Canada is already feeling the pinch as ships retire or are forced into extended maintenance.
“The delivery of many ships was significantly delayed, and further delays could result in several vessels being retired before new vessels are operational,” the report says.
“National Defence and the Canadian Coast Guard have implemented measures to maintain their operational capabilities until new ships are delivered, but interim capabilities are limited and cannot be extended indefinitely.”
The report added that it had not assessed the impact of the COVID-19 pandemic, but noted that shipyards have either closed or reduced their workforces due restrictions, which will further threaten schedules.
The auditor general’s report came one day after the parliamentary budget office estimated that building 15 new warships — just one part of the strategy — will cost $77.3 billion, about $17 billion than the government’s stated price.
Both reports are likely to raise fresh questions about the shipbuilding plan, which was launched in earnest in October 2011 when Irving Shipbuilding in Halifax and Seaspan Marine in Vancouver were selected to build dozens of navy and coast guard vessels.
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The government is now working to add a third shipyard to the program, Chantier Davie in Quebec City, to build a series of icebreakers.
“The delays that we saw in this audit should really be seen as a shared responsibility,” Hogan said. “There were delays in designing and determining capabilities that were needed. Then there were delays in production.”
Procurement Minister Anita Anand defended the strategy, saying shipyards have so far delivered four ships and created thousands of jobs.
She also insisted that the government was on track after facing some early challenges that “were not yet informed by actual build experience at the shipyards, and expertise in Canada was still developing.”
“I am of the view that the shipbuilding strategy has been, by and large, successful,” Anand said. “I don’t think it is a mistake when you see the contribution to the Canadian economy … and the actual vessels that have been produced.”
But Conservative defence critic James Bezan held up the report as evidence of the Liberal government’s mismanagement.
Hogan acknowledged the complexity of building new ships but said that was “compounded” by the shipbuilding plan’s other objectives: creating a Canadian shipbuilding industry and boosting the economy.
To that end, nearly a decade after the strategy was launched, the auditor said the government did not know if the two shipyards in Halifax and Vancouver had even reached a state where they “met international ship-construction standards to enable efficient ship production.”
Officials also had not assessed whether the shipyards — or even the government departments involved — had enough staff to implement the shipbuilding plan and deliver the new ships on schedule.
“We noted instances where such staff shortages caused shipbuilding delays,” the auditor’s report says, adding the government only drew up a draft human-resources plan for the shipbuilding strategy in December 2019.
Hogan’s report also catalogues some of the changes to the schedule and cost of the various individual projects in the plan, which is supposed to deliver dozens of new vessels over 30 years.
That included several amendments to the contract with Seaspan Marine for three fisheries-science vessels for the coast guard, which saw the delivery schedule pushed back by two to three years.
The report revealed the Vancouver shipyard “sustained significant financial losses” during the construction of those vessels, the last of which was delivered in October, due to a significant underestimation in the time and effort needed to build them.
“This not only threatened the strategy’s overall objective of creating a sustainable marine industry,” the auditor general’s report says, “but also put the renewal of the federal fleet in peril.”
Seaspan spokeswoman Amy McLeod suggested Thursday that the Vancouver shipyard had overcome those problems.
“In very close collaboration with our government partners, Seaspan Shipyards and its (national shipbuilding strategy) ecosystem are firing on all cylinders and delivering ships, jobs and economic benefits across Canada.”
Irving Shipbuilding did not immediately respond to requests for comment.
Hogan also raised concerns about building a polar icebreaker to replace the CCGS Louis S. St-Laurent. The new ship was pulled from Seaspan’s order book in 2019 and the government has not decided where it will be built.
The auditor general did suggest departments have started to learn from some of their earlier mistakes and expressed a cautious hope those lessons would ease some of the problems.
“But there was little room for further delay,” Hogan’s report says. “Delaying could result in a loss of capability to deliver essential government programs.”
As an example, she noted that the last of the navy’s existing Halifax-class frigates is due to retire in 2047 — only one year before the last of 15 new warships is scheduled to arrive.
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