PBO says mixed frigate fleet and alternate designs offer cheaper options to navy program

PBO says mixed frigate fleet and alternate designs offer cheaper options to navy program

Canada’s budget watchdog predicts construction of the navy’s new frigate fleet could cost at least $77.3 billion — a number that could rise even higher if the frequently-delayed program faces any more setbacks.

Yves Giroux, the parliamentary budget officer [PBO], said the overall price tag for building 15 Canadian Surface Combatants could hit $82.1 billion in the event the program is delayed by as much as two years.

The Liberal government is basing Canada’s new warships on the design of the British-built Type 26 frigate.

The House of Commons government operations committee asked the budget office to crunch the numbers on other designs, such as the FREMM European multi-mission frigate and the Type 31e, another British warship.

The French FREMM frigate Aquitaine in an undated file photo. (The Naval Group)

Those estimates show the federal government could save money by dropping the existing program and going with the other designs.

It could also save money by building a fleet that includes two classes of vessel, such as the Type 26 and one of the other warships.

Giroux said the idea of a mixed fleet makes sense from a fiscal point of view, but he couldn’t say whether it would agree with the federal government’s vision of what it wants the navy to do.

“It’s a good way of saving costs, if the government is interested in cutting down on its costs,” Giroux said in a virtual media availability following the report’s release today.

Depending on the ship, the savings could be substantial.

Deep cuts to construction costs possible: PBO

For example, the budget office estimated that ditching the existing program and switching entirely to the Type 31 frigate would cost $27.5 billion, a projection that includes a four-year delay.

The cost of acquiring an entire fleet of 15 FREMM warships is estimated at $71.1 billion — somewhat comparable to the existing program.

A mixed fleet using either one of the alternate designs and the existing Type 26 also would result in savings. Giroux acknowledged that such a scenario would mean the navy would have to invest in separate infrastructure, support and supply chains — something it is reluctant to do.

But it might be a good idea from a larger perspective, he added, because a mixed fleet means “you don’t put all of your eggs in one basket.”

As of last fall, the Department of National Defence was insisting it could build all 15 Type 26 frigates, under contract with Lockheed Martin Canada and Irving Shipbuilding, for up to $60 billion.

Giroux said he hopes the department is correct for taxpayers’ sake, but his team stands by its numbers.

The latest report builds on an analysis prepared by the PBO office two years ago which projected a construction cost of $70 billion. The new numbers, Giroux said, reflect new information from the defence department about the size of the warships and the capabilities being built into them, as well as anticipated production delays.

The outgoing president of Irving Shipbuilding, Kevin McCoy, told CBC News in an interview recently that the production timeline to build a Type 26 is seven-and-a-half years, which is two years longer than the five year timeline that had been built into the program.

That means the navy won’t see its first new frigate until 2031, on the current schedule.

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