Recapitalization Strategy Struggling
© 2014 FrontLine Defence (Vol 11, No 4)

From my perch inside the great halls of Parliament Hill, I have been watching as the Government of Canada struggles to maintain a Naval fleet that is ­commensurate with its efforts to be influential in global affairs. Although Canada’s Navy is still able to deploy ships to the far reaches of the world, she now must exchange crews “in place” for extended commitments. But, you ask, don’t we have a robust shipbuilding program underway to replace the entire fleet of federal ships? An unnecessary confluence of activities in and of itself (in my opinion), but the affordability of that program, and the capabilities of the future fleet are in question. Indeed, Canada’s sailors are among the best-trained and best-led in the world – but the Navy can only be as good as the ships it operates. Unfortunately for them (and us), the Royal Canadian Navy now has one somewhat operational replenishment ship, one operational submarine, one operational destroyer, and two deployed frigates. So, the RCN can definitely defend Newfoundland.

Nothing better exemplifies an inability to contribute meaningfully to international security operations more than an active fleet of destroyers and supply ships that were commissioned prior to the Ford Administration. In terms of ships and tonnage, Canada is in the same league as Peru and Chile. We lag behind Greece and Indonesia, but we are more powerful than Portugal – nice. This is particularly telling when one realizes that Canada’s gross domestic product is larger than those five nations combined.

With the world’s longest coastline and a resource-based economy, the ability to patrol Canadian waters and help patrol seas abroad makes intuitive sense. Particularly in a world where Arctic sea routes are increasingly accessible, China is creating tension along maritime routes in the Asian-Pacific (while also rattling entrenched alliances), and the lack of burden-sharing among North Atlantic Allies is rankling U.S. military leaders.

Of course, diplomatically and militarily, Canada is spread too thin to dictate policy in international forums – but if Canada wishes to be heard internationally, we need the Navy to also play a part in global affairs.

The government’s response to the Navy’s challenges is the long-term National Shipbuilding Procurement Strategy (NSPS). It promises to replenish almost the entire fleet of federal ships, including Coast Guard vessels, by building them primarily in two Canadian shipyards over the coming decades. This after years of delivering for the Army and Air Force during the peak of military engagements in Afghanistan, when the impetus and desire to move major military procurement projects forward has lost momentum. Instead, like most Western nations, Canada is experiencing a noticeable reduction in Defence expenditures and significant challenges and delays with major military procurements.

The NSPS, handled by Public Works and Government Services Canada, is already experiencing delays resulting in massive cost overruns which will undoubtedly be compounded over the course of the decades-long strategy. With all of the costs to be absorbed by the Department of National Defence, which has been pushing capital expenditures as far out to the future as possible, it becomes clear that if these cost overruns are even close to predictions by critics then, one way or another, the Navy will not be getting the ships it thinks it is getting.

The Joint Support Ship has already been revised twice, and reduced from three to two ships. The proposed 6 to 8 Arctic Patrol Ships will either be more limited in their capabilities or reduced in quantity.

Simply put, budgets are fixed and aren’t going to be adjusted after years of embarrassing headlines and questionable figures from DND, specifically Assistant Deputy Minister (Materiel), contributed to the Conservative Government’s perspective that DND and the Canadian Forces can’t handle major procurements in a manner that inspires confidence. The government’s perspective was further solidified by the successive reports by David Emerson (Beyond the Horizon: Canada’s Interests and Future in Aerospace) and Tom Jenkins (Canada First: Leveraging Military Procurement Through Key Industrial Capabilities). Both reports argue for a single point of accountability for military procurement. This sounds good in theory. In practice, that experiment was attempted in 2011 with the creation of an Associate Minister of National Defence position, specifically responsible for procurement. The result of that failed experiment was the addition of an inexperienced bureaucratic layer in the overly cumbersome procurement matrix. Now, with the Emerson and Jenkins reports in hand, the government seems to be placing ever more value on procurement processes and the potential for job creation associated with future military procurement than actually buying platforms.

This, of course, is bad for the Navy and military planners – many of whom are asking themselves: at what point does the cost premium associated with building the federal fleet in Canada make it no longer viable? After all, Canada could build more and better ships abroad for a lower price and faster delivery. Consider the Canadian experience with Joint Support Ships. Building the two Berlin-class ships (20,240 tonnes) in Canada will cost U$1.3 billion each IF all goes according to plan – which is a very big ‘IF’ (it’s not even an ‘if’, it’s an ‘IF’). Britain, which is purchasing four 37,000 tonnes Aegir-designed ships, is paying U$230 million per ship. The difference? Britain is building their ships in South Korea and is expecting delivery in 2016. Canada is building ships in Canada and expecting delivery no sooner than 2019.

Re-creating a national shipbuilding industry is expensive. Almost prohibitively.

In Australia, the premium to build their three new destroyers domestically was estimated to be $1 billion (AUS). It is now 32% over budget. The lack of resources needed to build those ships has ultimately placed its proposed upcoming domestic build of frigates in jeopardy.

Options exist for Canada to build some ships abroad and conduct subsequent long-term maintenance domestically, thereby achieving the goal of nurturing a domestic shipbuilding industry (though incrementally), save taxpayer dollars, and get sailors a platform they desperately need sooner rather than later. The chosen shipbuilder might even allow Canada to jump the production queue, as was negotiated with Boeing and the C-17. Is it therefore time to reassess some aspects of the NSPS? Yes. Is a reassessment going to happen? Nope.

The Government has signed Umbrella Agreements with two Canadian shipyards to take on the work for decades to come and if there is one constant about this government, it is that a decision taken is a decision entrenched – even if it means spending billions more than needed to get either less capable ships or fewer ships. Politically, there are far more votes in maintaining the economic argument for a domestic industry, especially in Atlantic Canada, than backtracking on a four-year old commitment.

And here’s the truth of it: Canada is in the attic of a splendidly isolated and relatively safe part of the world, and the Government knows full well the benefit of having the world’s sole superpower living on the main floor. Ours is a culture where we contribute piecemeal to global efforts when needed. We’ll continue to muck along with a good fighting force over the medium-term while contributing, as deemed feasible, to international missions of our choosing. In the short term, Canadian ships will rust, our sailors will be mocked internationally, our institutions will continue to focus primarily on getting processes “right”, taxpayers will pay for delays but help create jobs, and the Department of National Defence will bear the brunt of it all.

It’s all becoming quite ugly, and it’s a shame the coming lapse in capability is such that our blue water Navy is being reduced to a littoral patrol guard in the coming years. But at least we should be able to defend Newfoundland.

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