BAE Type-26 GCS to be operational in 2027; Still considered a top contender for CSC Fleet

By: David Pugliese, National Post 

One of the top contenders in Canada’s new frigate program – a ship now being built for the United Kingdom – won’t be operational for the Royal Navy until 2027.

BAE’s Type 26 frigate has been ordered by the United Kingdom and the cutting of steel started last year.

But the United Kingdom’s defence procurement minister Guto Bebb has told parliamentarians that the first of those frigates won’t be delivered until 2025. Because of testing it won’t become operational until 2027, the minister added.

Artists Rendition of the BAE Type-26 Global Combat Frigate. 

The Type 26 design has been submitted to Canada for its Canadian Surface Combatant program and is one of three contenders. Construction on the Canadian frigate program to start in the early 2020s.

That raises the possibility, say industry insiders, that Canada could be the first nation to acquire the Type 26 and put it to sea.

Being the first to deploy a new class of warships, however, comes with associated issues of working through the initial problems of new vessels.

That, however, is what the Canadian government had hoped to avoid with its CSC program. It originally stated that only mature ships or proven designs would be considered.

But the Liberal government inexplicably retreated on that stipulation and allowed the Type 26 design to be entered even though the vessel had not been built yet.

That, in turn, sparked a belief in some quarters of industry that the fix is in for BAE’s Type 26. The federal government has denied that.

Lockheed Martin Canada is leading the consortium that has proposed the Type 26. A company spokesperson said the progress of the British program will not have an impact on CSC.

“Our CSC bid meets or exceeds all requirements and this does not impact our bid in any manner,” the spokesperson noted in an email to Defence Watch. “Our CSC bid does not rely upon the T26 becoming operational before 2027.”

Some industry officials have also suggested that the 2027 date won’t be an issue because they expect the CSC to fall significantly schedule. By the time CSC gets really underway, the Type 26 will be ready.

The Canadian Surface Combatant program will cost between $55 billion and $60 billion. Fifteen ships will be eventually built. Three consortiums have bid on the program.

A contract for the CSC is expected to be awarded by the end of this year, said Pat Finn, assistant deputy minister for materiel at the Department of National Defence.

About half of the cost of the surface combatant price-tag is for systems and equipment that will go on the 15 ships, according to federal documents obtained by Postmedia through the Access the Information law. “Approximately one-half of the CSC build cost is comprised of labour in the (Irving’s) Halifax yard and materials,” the documents added.

Last year, Jean-Denis Fréchette, the Parliamentary Budget Officer, estimated the CSC program

would cost $61.82 billion. He also warned that every year the awarding of the contract is delayed beyond 2018, taxpayers will spend an extra $3 billion because of inflation.

DND Needs $54M in Additional Funds to Evaluate CSC Fleet Proposals

By: David Pugliese, The National Post

The Department of National Defence needs an extra $54 million just so it can examine the bids from companies hoping to build it a new fleet of warships — an indication of the growing expense of a program that has more than tripled in cost over the years.

HMCS Ottawa, one of the Royal Canadian Navy's Halifax-class frigates that will be replaced by the eventual arrival of the Canadian Surfance Combatant Fleet. Roslan Rahman/AFP/Getty Images

The funds are not earmarked for anything to do with the actual construction of the ships, but instead to fund DND’s evaluation of the the bids this year — and they would be in addition to the $39 million the department has already received to review the bids, according to defence sources.

The cost of the new Canadian Surface Combatants, which will replace the existing Halifax-class frigates, has steadily been climbing. The 15 ships were originally estimated to cost $15 billion. That increased to $24 billion before DND came out with a new estimate of around $40 billion. That too has since changed, and the project is now estimated to cost between $55 billion and $60 billion — and even then, the federal government acknowledges it doesn’t know what the program’s final cost will be to taxpayers. Parliamentary budget officer Jean-Denis Fréchette estimated last year the CSC program would cost $61.82 billion, and warned that every year the awarding of the contract is delayed beyond 2018, taxpayers will spend an extra $3 billion because of inflation.

Despite the Liberal government’s repeated statements about openness and transparency, it took Postmedia more than three months to get basic information from DND about its request for new funding, and even then, the details provided are limited.

“These funds will permit the project to maintain the Project Management Office and to continue work under the Definition Support Contract with Irving Shipbuilding Inc. for the remainder of this fiscal year,” the DND said in an email. “This funding will primarily support the Request for Proposal, bid evaluation and preparations for the design services contract.”

The money will cover salaries and benefits for the 135 military and civilian staff at the DND who are assigned to the project office, the department said, and will also be used to train staff and upgrade their offices.

Prospective builders of the new warships submitted their bids on Nov. 30, and a winning bid is expected to be selected sometime this year. Halifax-based Irving Shipbuilding will begin construction of the first ship in the early 2020s and delivery of the first vessel is expected in the mid-2020s, according to the federal government.

Artists rendering of a BAE Type-26 Global Combat Ship with the Royal Canadian Navy Ensign - a proposed design for the Canadian Surface Combatant Fleet. 

Defence analyst Martin Shadwick said that without more detail of how the funds will be spent it’s hard to determine whether taxpayers are getting value for money. “But it seems a very high cost to run a project office for a one-year period and to evaluate bids,” added Shadwick, a strategic studies professor at York University in Toronto.

The surface combatant project, intended to provide the backbone of the future Royal Canadian Navy, has long been controversial.

In a surprise twist in November, a French-Italian consortium declined to formally submit a bid, instead offering Canada a fleet of vessels at half the price. Fincantieri of Italy and Naval Group of France don’t believe the established procurement process for the surface combatant program, already beset with delays and increasing costs, will be successful.

They instead proposed that Irving Shipbuilding construct 15 ships based on the consortium’s proven FREMM frigate design, currently in operation in both the French and Italian navies, among others, and guaranteed a fixed price of $30 billion. Thier proposal also focused on using Canadian technology on board the ships, and would have transferred technology to Canadian firms so they could be involved in future sales of the FREMM vessels on the international market. Under the plan, Irving would have been able to start building the warships almost immediately.

The Canadian government, however, rejected the offer.

Italian Navy Alpino FREMM Frigate. Italy ordered 10 FREMM Frigates. The FREMM is currently operated by the Italian Navy, the French Navy, the Egyptian Navy, and the Royal Moroccan Navy. 

Canadians won't see price tag for Navy Frigate replacement until 2019

By: Murray Brewster, CBC News 

Liberals learn lesson of F-35 and move to keep shipbuilding cost estimates under wraps till contract signed. 

Canadians will not know the price tag for the navy's frigate replacements — the largest, most complex military purchase in the country's history — until the ink is dry on the contract, Procurement Minister Judy Foote said Thursday.

The decision to keep the numbers secret is just one in a series of measures being taken by the Liberal government to get a handle on the National Shipbuilding Strategy, which was launched almost six years ago with much fanfare.

The program commits the federal government to dealing exclusively with Irving Shipbuilding in Halifax for the construction of combat ships and Vancouver's Seaspan Shipyards for civilian vessels.

The strategy has faced increased skepticism, however, because it has yet to produce a ship and there has been a series of published and broadcast reports with eye-popping cost projections.

Related:
Warship designers, federal government huddle in Halifax on frigate replacement
Defence Minister Harjit Sajjan grilled by MPs in special Commons session
Harper government gave Seaspan shipyard $40M contract on election day

Foote's speech to a defence industry trade show Thursday is an attempt to shut down the speculation.

"We will not be announcing a new cost estimate for the Canadian Surface Combatant until we have signed a build contract," she told delegates, most of them defence contractors. "Given the number of variables that can change and the very long planning periods involved, we have seen how these estimates cause confusion."

Ottawa is not expected to award a design contract until next year. The agreement to build the warships won't be signed until 2019.

The Liberals, who promised openness and transparency during the last election, appear to be learning the lesson of the searing political debate over the F-35 fighter, where arguments over price tags among the Conservative government, the parliamentary budget officer and the auditor general derailed the purchase.
A history of rising costs

When the Harper government first began talking about replacing the navy's 12 patrol frigates with 15 modern warships, the construction cost was estimated at $26 billion.

But that was nearly a decade ago before delays and the corrosive effect of inflation began playing havoc with those assessments.

Last year, the commander of the navy told CBC News the cost of building the ships could well hit $30 billion, even without maintenance and long-term support costs.

The Canadian Press, quoting internal briefings prepared for the new Liberal government, reported in March that the total lifetime price tag could hit $104 billion, a figure stretched out over three decades that would include long-term maintenance, as well as the cost of the crew, fuel and other expenses.

Halifax-based frigate HMCS Montreal is one of the navy vessels slated to eventually be replaced in the federal government's shipbuilding program. (Adrian Wyld/Canadian Press)

The solution for the Liberals is to stop talking about the numbers until they have signed agreements.

"It makes no sense to establish a budget today for a project that will not start for years, even a decade," said Foote, who noted that the previous government never updated its initial shipbuilding cost estimates to reflect changes in material cost, the exchange rate and inflation.

All of this has led to a skewed picture, in her estimation.

"This is the main reason why projects appeared to be vastly over budget when actual contracts were signed," said Foote.

Overcharging by contractors

The Liberals are developing a new costing method and promised Thursday to keep Parliament updated with regular reports and estimates.

The first retrospective of the shipbuilding plan was released Thursday along with the Defence Department's annual list of anticipated capital purchases.

When the shipbuilding strategy was launched, federal officials promised that in exchange for ditching the competitive process they would conduct rigorous oversight to make sure taxpayers were not getting taken for a ride.

But a recent internal report prepared for Public Services and Procurement Canada said the federal government was routinely overcharged by contractors, to the tune of tens of millions of dollars in practices that have been going on for decades.

The Liberals have been warned that years of cutbacks have left the purchasing department without the staff to oversee such complex programs, and Foote announced Thursday that the number of employees working on the shipbuilding strategy will double, possibly triple.

Kevin McCoy, the president of Irving Shipbuilding, said that sticker shock among the public is always a concern, but promised the federal government will pay a fair price for its warships.

"What we have said consistently to the government of Canada is: Canada should pay no more for their warships than other nations with like-minded aspirations," McCoy told CBC News.

"And that is really what is the focus of this strategy, which we endorse."