OTTAWA Nov 26 In the latest blow to Canada's
crisis-hit military procurement process, the country's official
spending watchdog said on Tuesday the government has
underestimated how much a multibillion-dollar naval shipbuilding
plan will cost.
As a result, said Auditor-General Michael Ferguson, Canada
would either have to make do with fewer ships or settle for
vessels with fewer capabilities than initially planned.
In 2010, faced with the need to replace ships that in some
cases had been in service for 40 years, the Conservative
government announced plans to build 165 vessels over a 30-year
period at a cost of more than C$50 billion ($47.2 billion).
The new ships are designed to play an important role as
Canada asserts its sovereignty claims in the Arctic, a disputed
region rich in energy and mineral resources.
Ferguson said the budget for the ships was set early on and
had not been changed despite signs that costs would rise.
"According to National Defence, there have been significant
increases in cost elements, which are impairing the
affordability of the military ships," he said.
One major element of the shipbuilding plan is the Canada
Surface Combatant (CSC) project - C$26.2 billion to replace
three destroyers and 12 frigates with 15 modern warships.
"The CSC project budget of C$26.2 billion is insufficient,"
Ferguson said bluntly.
"Cost/capability trade-offs need to be monitored and
revisions made to project budgets, if necessary, to make sure
Canada gets the military ships it that it needs to protect
Canadian interests and sovereignty."
Another element of the plan is C$2.3 billion for two big
supply ships, with an option for a third one. Ferguson said
there is not enough money for a third ship.
"By acquiring fewer than three ships, Canada's ability to
respond autonomously to crises and contingency operations will
be significantly diminished when one ship is in maintenance," he
Various Canadian governments have had trouble buying new
equipment since the early 1990s, when the then Liberal
government scrapped a contract with Finmeccanica SpA's
AgustaWestland unit for search and rescue helicopters.
A decade later the Liberals decided to buy helicopters from
United Technologies Corp's Sikorsky unit instead. That
C$5 billion contract has been so beset with problems that the
Conservatives announced in September they might scrap the deal
and look elsewhere.
In 2012, then Defence Minister Peter MacKay said the fiasco
was "the worst procurement in the history of Canada" and blamed
MacKay, though, was at the center of a proposed C$9 billion
deal in 2010 with Lockheed-Martin Corp for 65 advanced
F-35 jets. Ottawa abandoned the plan and started again in 2012
after the Auditor-General said officials had deliberately
downplayed the costs and risks of the deal.
At the same time, the government also stripped the defense
ministry of responsibility for big defense procurement projects
and put the public works ministry in charge.
Other procurement woes include a 2006 plan to buy military
trucks that was scrapped in July 2012 just minutes before the
final deadline for applications.
Canada has also had big problems with a fleet of four used
submarines it bought from Britain for C$750 million in 1998.
Government ministers are due to react to the report at a
news conference set for 12:30 p.m. EST (1730 GMT) on Tuesday.