The latest Parliamentary Budget Officer (PBO) report, The Cost of Canada’s Surface Combatants: 2019 Update, issued on June 21, 2019, estimated the cost of the Canadian Surface Combatant (CSC) project at $69.8 billion over 26 years. This consists of $5.3 billion in pre-production costs, $53.2 billion in production costs, and $11.4 billion in project-wide costs.
This cost has been revised and updated from the 2017 PBO report: The Cost of Canada’s Surface Combatants, which was at $61.8 billion, $8 billion less than the updated 2019 estimation.
The variation according to the PBO is due to new information on project specifications provided by the Department of National Defence (DND): since ship construction will begin later than first expected this will increase inflation costs; construction costs will also increase as the ships will be larger than previously reported; and the cost of spares beyond the initial two years is no longer included, reducing real program costs.
This updated cost estimate of CSC by the PBO is $9.8-$13.8 billion more than the 2017 revised Government of Canada cost estimate of $56-60 billion. A statement issued by National Defence states that the difference is due mainly to the PBO’s “decision to include taxes in their costing.”
“DND’s practice is to not include taxes in our budget or cost estimates because DND is not required to request funding for taxes from Parliament. Essentially taxes flow immediately back into federal coffers at no cost to Canadian taxpayers,” the statement reads.
It states further that by removing taxes from the PBO’s costing, the estimates are within 10 per cent of each other. This variation, according to DND, is normal and expected when comparing independent cost estimates on a complex multi-decade project, like CSC.
To view the report, go here.