Ottawa quietly announces cost of building new supply ships has jumped by almost $1 billion

The cost to build the navy's often-delayed, long-anticipated supply ships has shot up once again — this time by almost $1 billion — the federal procurement department announced Friday.

Successive federal governments have tried for almost two decades to deliver joint support ships (JSS) to the navy — vessels used to replenish warships at sea.

After years of delay, the Liberal government awarded Seaspan's Vancouver Shipyards Co. Ltd. a build contract in June 2020 for two ships — HMCS Protecteur and HMCS Preserver — at an anticipated cost of $2.44 billion.

Public Services and Procurement Canada (PSPC) chose to announce in a media statement on Friday — the eve of the August long weekend — a major amendment to the contract which drives up the price tag to $3.3 billion.

And that figure does not include the design cost, in-service support and other expenses related to the program. When those numbers are added, the total bill for taxpayers for owning and operating the ships is now expected to exceed $5.2 billion.

"This increased contract value was calculated by considering a number of factors, such as lessons learned from developing a new type of warship for the [Royal Canadian Navy], COVID-19 impacts that resulted in labour and supply chain disruptions, economic price adjustments, foreign exchange rate fluctuations, and changes in labour rates," said the statement.

PSPC did not rule out further cost increases, saying the federal "continues to actively monitor progress on the JSS project and is working with [Vancouver Shipyards] to ensure timely delivery of both vessels to the RCN."

The new ships are meant to replace the navy's long-retired original replenishment vessels, which were taken out of service a decade ago or more after 30 years at sea.

Ottawa began the process of acquiring new ships two decades ago. The first program was scrapped by Prime Minister Stephen Harper's government in 2008 — by press release on a Friday night in the middle of August, on the eve of the federal election that year.

The program was restarted, but not before the old supply ships had to be retired.

The navy couldn't do without a replenishment capability, so the Harper government turned to a private company — based out of the Dave Shipyard in Levis, Que. — to convert a civilian ship, the MV Asterix, which remains in service under a long-term lease.

Canada's parliamentary budget office did an analysis in late 2020 that said converting two civilian cargo ships to serve as resupply vessels for the navy would have been cheaper than continuing with the joint support program.

When the build contract with Seaspan was signed, the first ship was slated for delivery in 2023 and the second in 2025.

But federal officials warned in the spring of 2023 that those delivery dates had to be pushed two years into the future. They also said that costs likely would rise, but they couldn't say by how much.

That announcement came on a Thursday before a long weekend. The officials denied at the time that it was an attempt to bury bad news.

A defence analyst said members of Parliament and the Canadian public in general deserve more accountability and a precise breakdown of the costs that are driving up the program by more than 26 per cent.

"It's pretty unusual to see that level increase for a project that is this mature," said Dave Perry, president of the Canadian Global Affairs Affairs Institute, a specialist in defence procurement who has tracked the program for years.

"The government ... ran on reintroducing transparency across government, and particularly in national defence. To give them credit, they did reintroduce a meaningful measure of transparency in the first couple of years in office, but since then we've seen an almost entire rollback." 

On projects like this, Perry said, "you basically never hear from the government with any kind of fulsome detail or explanation. Now, it's mostly slipping news out as a Friday afternoon special, preferably before a long weekend ..."

The cost increase has significance beyond the navy supply ship program, he added.

"There should be a much more fulsome explanation than just that short news release, because this isn't a new project," said Perry, whose organization hosts conferences that are sometimes sponsored by defence contractors. 

"We need to better understand whether or not this is a one-off. If the factors that they expressed on joint support ship are accounting for the majority of that 26 percentage point increase, then we shouldn't just assume that every other budget for defence acquisition projects isn't similarly affected."