Military still in watchdog’s crosshairs
Shipbuilding plan latest program to undergo scrutiny
OTTAWA — Months after his scathing F-35 report shook the government’s plans to buy the stealth fighter, Auditor General Michael Ferguson has turned his attention to another military procurement project: the $35-billion shipbuilding plan.
Ferguson’s report on the National Shipbuilding Procurement Strategy is due in fall 2013 and — depending on what he finds — could be far more explosive than the F-35.
Ferguson’s office isn’t saying much about the study.
“When determining what to audit, the office focuses on the areas in which federal government organizations face the highest risk,” spokesman Ghislain Desjardins said in an email.
“Examples of high-risk areas are those that cost taxpayers significant amounts of money or that could threaten the health and safety of Canadians if something were to go wrong. Acquiring military ships … is one of those areas.”
Desjardins said the audit of the shipbuilding strategy is also in line with previous audits focused on military procurement projects, including those dealing with military helicopters and the F-35.
The National Shipbuilding Procurement Strategy has been regarded as a godsend for the Royal Canadian Navy and the Coast Guard, which operate fleets of destroyers, icebreakers, frigates and other vessels that are nearing the end of their lifespans.
The strategy is seen also as a huge winner for Irving Shipyards in Halifax, Seaspan Marine in Vancouver and their respective communities after a panel of federal bureaucrats announced in October that these companies had been selected as the main production centres for $33 billion in work. (The other $2 billion will go to a number of other shipyards across the country on smaller projects.)
And amid problems with the F-35 stealth fighter program and other military purchases, the Conservative government has held up the shipbuilding strategy as an important success for military procurement and a means to leverage tax dollars into massive economic spin-offs.
But there have been repeated indications that the strategy is in danger of running aground — which would have military, economic and political ramifications far greater than those associated with the F-35.
Delivery of the first ships to be produced under the strategy — seven armed Arctic vessels valued at $3.1 billion — was supposed to begin in 2015, but has already been delayed three years to 2018.
Those Arctic ships and replacements for Canada’s existing destroyer and frigate fleets are to be produced by Irving Shipbuilding in Halifax for a total of $25 billion.
Work on the frigate and destroyer replacements is also reportedly proceeding at a snail’s pace because of uncertainty over what the navy wants to build into the new ships.
This is critical because not only are the destroyers already due to retire before replacements come online, but any delay reduces the government’s purchasing power because of ever-increasing material costs and inflation, possibly resulting in fewer ships or capabilities.
Similarly, efforts to replace the Royal Canadian Navy’s 50-year-old resupply ships have repeatedly been bogged down as National Defence has been unable to decide on what it wants the ships to actually do.
The replacements are being produced by Seaspan Marine in Vancouver and were supposed to be in the water by 2012.
But design and money concerns have delayed delivery of the first new, $2.6-billion joint support ship until at least spring 2018.
A large part of the problem, according to insiders, is that there are some in the military who want the ship to be able to make amphibious landings for military troops.
Such capabilities, however, would push the cost far past the government’s budget.
Public Works, which is the lead department overseeing the shipbuilding plan, said it was aware the auditor general had launched his study and has already been approached for information.
Irving Shipbuilding also said it was aware of Ferguson’s study.
“(Irving Shipbuilding) is committed to delivering the
There have been repeated indications the strategy is in danger of running aground.
best value to Canada,” spokeswoman Mary Keith said in an email.
“We will be co-operating fully with the AG’s report.”
Keith said Irving Shipbuilding will begin a $300-million infrastructure upgrade in January. Engineering and design work on the Arctic vessels will begin in early 2013, with the aim to start building in 2015.
Postmedia News could not reach Seaspan Marine for comment.
Ferguson isn’t the only one looking at the shipbuilding program.
Parliament Budget Officer Kevin Page is examining what financial implications the joint support ship project will have on the federal government, with a report expected early next year.
Page is also planning to do a similar examination of the Arctic vessels project.
It was Ferguson’s report on the F-35 this past spring that pushed National Defence to reveal this week that the full cost of owning and operating 65 F-35s through 2052 would be around $45 billion.
Facing the possibility of a popular uproar, the Harper government has since backtracked on its plan to solesource the contract, saying it has gone back to the drawing board and is considering all options for replacing Canada’s aging CF-18 jets.
Public Works Minister Rona Ambrose in June acknowledged the difficult hurdles the massive national shipbuilding plan will need to clear in order to become a reality, and encouraged all sides to work together.
“I have every confidence that both shipyards, Irving and Seaspan, will work very closely over the many years we have a relationship with them to make sure our ships for the coast guard and navy are built on time,” Ambrose said.
“Of course, this does entail a lot of co-operation, collaboration and trust between the shipyards and the navy and coast guard. I fully expect that will happen.”
Then-chief of defence staff Walter Natynczyk was also quoted in June as saying that “cutting steel” for naval vessels was his highest priority.
“The National Shipbuilding Strategy is a huge leap in progress,” Natynczyk said at the time. “But we need to start cutting steel.”