Price tag for navy, coast guard patrol ships soars to $6.5 billion

It will cost Canadian taxpayers upwards of $6.5 billion to acquire six Arctic Offshore Patrol Ships for the navy and two additional similar vessels for the coast guard, according to newly tabled documents and a statement from the federal government.

Public Services and Procurement Canada (PSPC) says a contract amendment has been signed with Irving Shipbuilding Inc. of Halifax, N.S. that allows for a top-up to the budget for the military ships and sets the contract price for the coast guard vessels.

The cost of the navy ships has now risen to $4.98 billion from an earlier projection of $4.3 billion. The contract for the coast guard vessels has been set at $1.6 billion — an increase of $100 million from the figures tabled before Parliament last spring.

The news of the contract amendment was released quietly by PSPC this week in a media statement. It came days after the department tabled an biannual report on the progress of major projects with the House of Commons government operations and estimates committee (OGGO), which has been studying shipbuilding programs, among other things.

The report was delivered on Dec. 30, 2022, between Christmas and New Year's — leaving MPs with absolutely no opportunity to question federal officials about the reasons for the higher price tags.

Mary Keith, vice-president of communications for J.D. Irving, told CBC News in Nova Scotia that the contract for the coast guard ships is good news for shipbuilders because they now have the green light to start cutting steel.

Both procurement services and the Department of National Defence blame the increases on the labour shortages and supply chain issues brought on by the pandemic — factors that PSPC said have, among other things, resulted in "higher shipping costs and higher costs for spare parts."

In a media statement, PSPC said it has undertaken a thorough review of the program's projected costs and has built a contingency fund into the planning process to cover "possible cost impacts due to higher than forecasted cost of materials."

But critics say the Liberal government has not provided much oversight of the shipbuilding program writ large and that costs continue to swell each year.

Early last year, MPs heard from Simon Page, assistant deputy minister of defence and marine procurement at PSPC. Page gave them the most substantive testimony they'd heard from a government official about the status of the program. He blamed spiraling costs in part on the fallout from the pandemic.

"Unfortunately, just when the performance indicators were looking good, the pandemic hit and it hit hard. I'm not saying that the pandemic is responsible for all the issues, but it did not help the shipbuilding industry whatsoever," Page told the government operations committee under opposition questioning.

"We now have to deal with the additional costs shipyards are charging and the new schedules. We are working closely with third parties to review everything and make sure that, as you said, the costs are justified."

What the government hasn't explained in great detail — and to the satisfaction of Parliamentarians — is why the coast guard variant of the arctic patrol ship, which does not contain weapons and defensive systems, will cost more to build than the navy ships.

Andy Smith, the deputy commissioner of the Canadian Coast Guard in charge of shipbuilding, defended the cost difference while testifying before Parliament on March 25, 2022.