Canada Scales Back Important Navy Shipbuilding Strategy

Canada’s Irving Shipyard, file photo.

By David Ljunggren

OTTAWA, May 1 (Reuters) – Canadian officials said on Friday a C$26.2 billion ($21.5 billion) program to build 15 naval ships could end up below target and over budget, the latest challenge to Canada’s troubled military procurement process.

In 2010, the Conservative government announced the program to replace three destroyers and 12 frigates with 15 modern warships.

But officials told a briefing that the plan was now to build “up to 15 vessels” and the exact number would not be known for another few years. Construction is set to start early in the next decade and end in 2040.

“Do we think that the C$26.2 billion is going to become the sort of ceiling cost in the time frame we’re talking about? Perhaps not,” one official said, on condition of anonymity.

Canada’s official spending watchdog said in November 2013 that C$26.2 billion was not enough to buy and properly equip the 15 ships. Nova Scotia’s Irving Shipbuilding Inc will build the vessels and oversee the project.

Military projects are notorious for running over budget and defense experts say inflation on shipbuilding projects can easily run from 5 to 7 percent a year.

“We do have to constrain this,” the official said. “Do we land with fewer ships, as is happening with our allies?”

In a clear sign of Ottawa’s intentions, he cited a separate plan to build Arctic patrol ships. Ottawa said in January it would increase the budget by more than 10 percent and cut the number of ships to five from an initial six to eight.

Canada has experienced a string of military procurement problems since the early 1990s, variously featuring search and rescue helicopters, fighter planes, trucks, close combat vehicles and submarines.

The Conservatives announced a C$9 billion deal in 2010 with Lockheed-Martin Corp for 65 advanced F-35 jets but abandoned the plan in 2012 after a probe found officials had deliberately downplayed the costs and risks of the deal.

The F-35s were supposed to replace Canada’s ageing CF-18 fighters. Ottawa has restarted the process of seeking new planes and extended the operating life of the CF-18s to 2025 from 2020.

($1=$1.22 billion) (Reporting by David Ljunggren; Editing by Richard Chang)