New fleet of warships will cost about $77B

OTTAWA • Parliament's budget watchdog is predicting another multibillion-dollar increase in the cost of a new fleet of warships for the Royal Canadian Navy, pegging the price for what was already the largest military procurement in Canada's history at more than $77 billion.

Parliamentary budget officer Yves Giroux's latest estimate is $17 billion more than the government's stated price for the 15 warships, which are to be built in Halifax over the next two decades and form the Navy's backbone for most of the century.

Giroux's estimate is in a highly anticipated report released Wednesday that is likely to set the stage for some tough discussions — and heavy industry lobbying — on whether Canada should push ahead on the project or change tack.

To that end, the budget officer's report includes a number of potential scenarios designed to provide a clearer picture of what options are available to the government should it decide to go in a different direction — and how much each would cost.

That includes scrapping the existing plan to base the 15 warships on the British-designed model called the Type-26, which Canadian defence officials repeatedly have described as the right ship for Canada, and choosing a different design for the fleet.

Giroux and his team also looked at the idea of a hybrid fleet, in which Canada builds three Type-26 ships and supplements them with 12 other vessels. That would mimic how the Navy was previously built, with three Iroquois-class destroyers and 12 Halifax-class frigates.

The Type-26 frigate also is being built by the United Kingdom and Australia, but Canadian officials have been making several changes to the design to meet Canada's unique military and industrial requirements.

Those changes have been made more complicated by the government's attempts to pack all the capabilities from the Navy's now-retired destroyers and existing frigates into one type of ship.

The destroyers provided air defence while the frigates specialize in hunting submarines.

The PBO found that the government could save $40 billion if it built only three Type-26 frigates and supplemented them with 12 smaller, less capable Type-31s, which is similar to what Britain has decided to do.

Canada could also save $50 billion if it scrapped plans to build any Type-26s and went with an entire fleet of Type-31s, according to the report, though the PBO notes that the Type-31 was “designed to operate alongside the `higher-end' Type-26.”

Restarting the entire project could result in a fouryear delay to the start of construction.

Defence Minister Harjit Sajjan's office and the Department of National Defence did not respond to questions on Wednesday.