In recent weeks, the verbal barbs between contending parties for a $587 million contract to retrofit a civilian tanker to serve as a replenishment ship for the navy have hugged the headlines. However, the government’s $39-billion National Shipbuilding Procurement Strategy (NSPS) appears to be headed into more troubled waters than those stirred by recent controversies.
The warship component of the program is on course to overshoot its budget, according to an independent analysis of the program.
The NSPS was launched by the Conservative government in 2010. The strategy was broken into three sections; the combat package, the non-combat package and the smaller vessel package. Companies that won one of the larger ship packages were not able to bid on the smaller vessel package.
Irving Shipbuilding Inc. won the largest chunk of the NSPS when it was awarded the $26 billion contract as part of the combat vessel package. Seaspan of Vancouver got the smaller $8 billion non-combat vessel contract and Quebec’s Chartier Davie won the much smaller $587 million civilian tanker retrofit contract.
The price of the 15 warships that were to be procured for the Royal Canadian Navy’s (RCN) Single Class Surface Combatant Project has more than doubled from the initial $14 billion price tag to more than $30 billion, according to a report by the Canadian Broadcasting Corp. (CBC) News. This means the total cost $26.2 million approved by the government for the purchase of those 15 ships and an additional 6 Arctic Patrol Ships, will cost about $16 billion more and balloon to $42 billion.
The cost analysis was carried out by A.T. Kearney, a Chicago-based global management and consulting firm focusing on issues faced by governments and businesses.
A.T. Kearney is a global management consulting firm that focuses on strategic and operational CEO-agenda issues facing businesses, governments and institutions around the globe.
The report has not yet been released, according to CBC reporter James Cudmore, but indicates that delivering the ships at a priced originally set by the Defence Department would be impossible.
He said the A.T. Kearney report itself is controversial because it was paid for the by Irving. Irving was selected to build combat ships for the navy. The Conservative government put out a tender for the audit when it realized there were budget problems with its NSPS.
Meanwhile, the operational requirements of the navy, as well as the potential for cost-capability trade-offs are still being reviewed, by a third party.
A spokesperson for the military said the government is still working out its costing and that there is still no final estimated cost for the project.