Feds sign $8 billion preliminary contract for new navy destroyers while Parliament sidelined

Amid a flurry of last minute senate and judicial appointments, the Liberal government quietly announced Saturday it has signed an $8 billion implementation contract for the construction of the Royal Canadian Navy's new destroyers.

It is only the first step in the long-delayed process to replace the navy's aging frigates and the contract with Nova Scotia's Irving Shipbuilding is essentially a downpayment on only three of the highly sophisticated warships.

The eventual price tag for the trio of destroyers is expected to top $22.2 billion, senior defence officials revealed in a technical briefing late Friday. 

After releasing details to journalists, the federal government imposed an embargo on the release of the information until Saturday morning.

Both the Defence Department and a spokesperson for Defence Minister Bill Blair refused to explain why a moratorium, which is usually imposed for either operational security or market sensitive information, was necessary in this case. The existence of the multi-billion dollar contract was also revealed while Parliament remained prorogued in the aftermath of Prime Minister Justin Trudeau's plan to step down. 

The information became public on a weekend, one day ahead of the Liberals choosing a new leader and the next prime minister — and just weeks ahead of an expected federal election.

Although quoted in a news release, neither Blair, nor Jean-Yves Duclos, the minister of Public Services and Procurement, were part of the technical briefing, nor were they made available to answer questions about the milestone event and the enormous price tag.

One defence expert says it's clear the Liberal government wanted to bury the announcement and avoid public scrutiny of the project, which has been beset with delays and has already seen — according to the Defence Department website — an expenditure of $2.6 billion in public funds for design and preparatory work. 

"They absolutely have to own this decision, instead of hiding it and hoping that it disappears," said Rob Huebert, a professor of political science and the interim director for the Centre for Military Security and Strategic Studies at the University of Calgary. He noted that one of U.S. President Donald Trump's biggest complaints about Canada is a lack of defence spending, yet the current government chose to downplay an enormous expenditure.

"We need to be having this adult discussion about our security in public, not hiding it away in a [media] release on a Saturday."

Concerns about using U.S. system

There are, however, a number of politically explosive elements to the plan. 

The new warships, which are a bigger, modified version of the British Type 26 frigate design currently being constructed by BAE Systems Inc. in the U.K., uses a U.S.-designed and built combat management system. 

In light of Trump's threats to annex Canada by economic force and the on-again-off-again trade war, there have been calls for the federal government to untangle itself from the U.S. defence industrial complex. At least two of the Liberal leadership contenders have pledged to find ways to source more defence expenditures at home rather than from the U.S. 

A senior defence official, speaking at Friday's briefing on background, dismissed the concerns about using the Lockheed Martin-designed and built system and downplayed the notion that the program could be held hostage through political interference in the U.S. foreign military sales system.

"We're talking about a ship that's gonna be more than 8,000 tonnes, probably the most complex warship that Canada has ever built," said the official.

"So, it is going to be comprised of systems from a whole host of different countries. And obviously … the main combat system, the Aegis weapon system, is coming from the United States, along with some other key elements of it."

The official went on to repeat the standard line the military has given lately  with regard to concerns about co-operation between the two countries, saying the military-to-military relations with the U.S. remains strong and "as we speak right now, Canadians and Americans stand watch side by side in NORAD command centres."

Cost for ships has ballooned

The other political flashpoint is cost.

The navy is hoping to acquire 15 of the destroyers, which were recently designated as the River class of warships.

The defence department's own website, as late as Friday night, continued to estimate the overall cost of building all of the warships at $56 billion to $60 billion. The Parliamentary Budget Office (PBO) has long maintained that the cost would be much higher, suggesting in a 2022 report that the construction phase for 15 ships would amount to about $80 billion.

The previous numbers are dwarfed by the figures released on Friday, where $22.2 billion only gets the navy three ships. Officials say once the kinks are worked out in the design and the system, the per-ship cost will lessen over time.

Huebert said he's not surprised politics is being played with the numbers.

"It's a lot of money," he said. "But, I mean, again, with any maritime naval construction, the first ones are always horrifically expensive. I wouldn't be terribly surprised if the budget goes considerably beyond $22 billion because that's everyone's experience.

"It doesn't matter if it's the Americans, Japanese, whoever, the first three [new ships] you make, it's such a learning experience, and you always try to lowball it for political reasons, which is unfortunate."

When the British design was selected a number of years ago, the idea was that it was a so-called off-the-shelf design and therefore cheaper to build. However, Canadian naval planners have modified the design, adding both weight and additional weapons to base model plans.