The slowest ships ever
Auditor slams shipbuilding program mismanagement
We should set up a Royal Commission into the shortcomings of the National Shipbuilding Strategy — except, of course, the ships would be built before it concluded anything.
Such is the nature of galloping — or more accurately, prancing — bureaucracy in this country.
The Auditor General’s report into the shipbuilding program landed Thursday and concluded that the departments of National Defence, Fisheries and Oceans, Public Services and Procurement and Innovation, Science and Economic Development did not manage the process in a manner that supported timely renewal of the federal large vessel fleet — a fact it pointed out is important because it could leave us with a capability gap, where we have insufficient frigates and coast guard ships to perform critical operations.
As usual, all departments agreed with the findings and promised to do better.
It’s probably best not to take any such commitments from the public service to the bank.
These are, after all, the same people who told the Conservative cabinet in 2013 that the strategy would “deliver affordable ships in a timely manner.” It has done neither.
By way of example, only two of four ships scheduled for delivery by January 2020 were delivered, and both of them were late.
The renewal of the federal fleet was launched in 2010, with the aim of creating a domestic shipbuilding industry that did not fall foul of boom-bust cycles of the past.
The plan was to build more than 50 vessels for the navy and coast guard over 30 years, using two shipyards — Vancouver Shipyards and Irving Shipbuilding in Halifax. In 2019, a third yard, Chantier Davie in Lévis, Que., was added to build icebreakers for the coast guard. The government had originally assumed the ships could be built in Vancouver or Halifax but later determined they could not.
The office of auditor general, Karen Hogan, found that the yards were slow to deliver on combat and non-combat ships, resulting in the navy and coast guard spending millions to extend the life of existing ships.
Even then, some vessels have been retired before being replaced, such as the coast guard ship WE Ricker and the navy’s three destroyers, the last of which was retired in 2017.
Under the deals signed with the government, the yards agreed to attain “target state” — to hit international benchmarks for facilities, human resources and processes, so that they build the required ships efficiently and on time. Hogan’s office said the government could not confirm if either of the yards had achieved target state.
The persistent delays are now running into years. The biggest component of the shipbuilding strategy is the purchase of 15 frigates for the Royal Canadian Navy. The first ship was due to be delivered in the mid2020s but that has been pushed back to 2030 at the earliest, with a tentative schedule showing the last ship being delivered in 2047.
Since the navy’s Halifax-class frigates are expected to be retired between 2034 and 2048, Hogan’s office concluded “there is little room for further delay” — a considerable understatement.
Given the absence of wiggle room, you might expect the government to have chosen a proven design of a warship that has already been built. Instead, Ottawa picked the Type 26 frigate, designed by Lockheed Martin and BAE, a ship that hasn’t yet put to sea. It is deemed to be a capable warship, particularly adept at hunting submarines, but its novelty is unlikely to make it quick, easy or cheap to build.
Delivery dates for offshore fisheries science vessels, support ships, offshore patrol ships and icebreakers are similarly deferred. One reason, the auditor’s office noted, was that there were instances where staff shortages at yards caused shipbuilding delays. Another significant problem was financial issues at Vancouver Shipyards, which underestimated the time and effort needed to build three offshore fisheries science vessels and sustained “significant” losses.
The auditor did not look at the cost implications but, coincidentally (or not), the Parliamentary Budget Office released its latest cost estimate for the new frigate fleet on Wednesday. Yves Giroux’s office said that the 15 Canadian Surface Combatant ships will cost $77.3 billion, and could hit as much as $82.1 billion if the program is delayed by two years — making it easily the largest outlay of taxpayer dollars on a single procurement project.
As my colleague, David Pugliese, detailed in his exhaustive account of the frigate fiasco, the navy sold this to politicians as a project that would cost $14 billion, a figure that grew to $26 billion by 2008, as it became clear how complex an initiative building an industry from scratch was going to be.
It was only through diligent work by Giroux’s predecessor at PBO, Kevin Page and Jeandenis Fréchette, that the true cost emerged. The departments of National Defence and Finance put up roadblocks to prevent the information emerging, claiming such an inquiry fell outside the scope of the mandate of the budget officer. However, by 2017 PBO was confident enough in its estimates to peg the program cost at $62 billion, or $4.1 billion per ship — 2.4 times more than originally budgeted. That number has now been upgraded to as much as $82 billion.
The government departments responsible for the delays and cost overruns claim that lessons have been learned and project schedules will be met in future.
Hogan’s office accepted that issues that threatened the renewal of the fleet have been addressed and the strategy is now on a more viable path.
That is the very definition of the triumph of hope over experience. Since the audit period ended just over a year ago, both ship yards have been hit by production delays because of COVID-19. They have indicated their intention to exercise “excusable delay” provisions in their contracts with Ottawa, which may allow them to seek government agreement to postpone delivery dates.
The justification of a pandemic stands in stark contrast to the inexcusable delays that have plagued the program since its launch.