New warships to cost more than $100-billion, Ottawa estimates

OTTAWA — The Globe and Mail (includes correction)

Technicians work on a hull at Halifax Shipyard in Halifax on March 7, 2013. (ANDREW VAUGHAN/THE CANADIAN PRESS)

The cradle-to-grave cost to Canadian taxpayers to acquire new warships will exceed $100-billion, the federal government says – tens of billions of dollars more than Ottawa has previously disclosed.

It is the first time the federal government has gone public with its best guess on the full life-cycle cost of up to 15 surface combat vessels.

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The political demand for transparency has changed in Ottawa since a controversy over the true cost of a plan to buy F-35 fighter jets, and the Harper government feels pressure to open the books.

The purchase price of the military ships remains $26.2-billion, but a new estimate of “approximately $64-billion” for 30 years of maintenance, operating and personnel costs brings the total bill to “in the vicinity of $90-billion,” according to a status update released by the Department of Public Works this week. It cautions the “through-life costs” will need to be refined over time.

The government appears to be releasing the new figure in anticipation of Auditor General Michael Ferguson’s report later this month on the national shipbuilding procurement strategy. It is possible the federal watchdog will use full life-cycle cost estimates to discuss the project, as he did with the F-35s.

Ottawa does not want to be accused of hiding cost information on another major purchase.

The Harper Conservatives drew heavy criticism in 2012 when Mr. Ferguson disclosed that the full life-cycle cost of the planned F-35 Lightning jet purchase would be closer to $25-billion than the $15-billion or $9-billion Ottawa had previously used.

An independent audit by KPMG later estimated the cost of buying and operating the F-35 warplanes at $600-million per jet – or $45-billion in total – a number that came out just before Ottawa officially reversed its decision to buy the Lockheed Martin planes.

The government appears determined to avoid a repeat scenario. Ottawa’s national shipbuilding procurement secretariat has published about 75 web pages of information on the project in both official languages over the past two years.

In addition to the $90-billion for as many as 15 surface-combat vessels, the federal government is commissioning up to eight Arctic offshore patrol ships that will have a full lifetime cost of $8.6-billion, and two joint support ships – to carry fuel, ammunition, vehicles and cargo – for a cradle-to-grave cost of $7.1-billion. These costs have previously been disclosed.

The new figures bring the total life-cycle cost for as many as 25 military ships to more than $105-billion over three decades.

Alyson Queen, director of communications for Public Works Minister Diane Finley, said the full life cycle of spending will mean decades of work for Canadians.

“By building these ships in Canada, industry analysts have estimated that 15,000 jobs will be created across the country and that there will be over $2-billion in annual economic benefit for 30 years,” Ms. Queen said.

Last month, Defence Minister Rob Nicholson announced the new joint support ships would be named the HMCS Queenston and HMCS Chateauguay after two battles from the War of 1812 against the United States.

Irving Shipbuilding on the East Coast will build the combat vessels, including the Arctic offshore patrol ships and the surface combat vessels. Non-combat vessels – including the joint support ships – will be built by Vancouver shipyards on the West Coast.

Editor's note: A previous version of this story said the total life-cycle cost for as many as 25 military ships was more than $105-million over three decades. It is actually $105-billion.