February 24, 2021 – The Department of National Defence (DND) thanks the Office of the Parliamentary Budget Officer (PBO) for its work, and welcomes its report on the Canadian Surface Combatant. Reports such as this one serve a critical role in validating our project costs, while supporting our shared objective of ensuring that the best value is provided to Canadians.
After reviewing the report, we find that the key differences in our cost estimates can be primarily attributed to the PBO including provincial sales tax and the additional emphasis PBO puts on weight-related costing.
We conducted extensive research to ensure that the selected Type 26 design will provide the Royal Canadian Navy (RCN) with the modern and capable warships it needs to support operations. The design was selected following an open, fair, and transparent competitive procurement process, in which performance against the RCN’s requirements was a key selection criteria. As the PBO noted the other design options that they examined would have “more limited” and “modest” capabilities than our selected design. These reductions would impede the RCN’s ability to execute its assigned roles and missions to keep Canadians safe both at home and abroad.
While we recognize the differences in our calculations, we are confident in our current estimate of $56 billion to $60 billion (before taxes). This accurately reflects the value of this project, and is based on our detailed costing model and ongoing work with industry. As we adapt the design to meet the needs of the RCN and confirm more details related to the ship’s combat and support systems, we gain greater confidence in our costing.
Delivery timelines continue to be reviewed and are not final. We are actively working with industry to accelerate the project in order to deliver these important ships to the RCN as soon as possible. One way this will be done is by starting construction of the simpler zones of the ship while the design work on the more complex sections continues, similar to what we have done for the Joint Support Ship.
The report also calculated the costs of selecting a new design for the CSC project. This is not an option we will be pursuing. As the PBO accurately states throughout the report, there are important differences in capabilities when comparing the cost of these three designs.
Selecting a new design at this stage in the project would lead to significant economic loss for Canada’s marine industry and those employed in it. It would have major operational impacts for the RCN, due to associated project delays and life-extension requirements, as well as increasing the costs to operate and maintain more than one class of ships in the future.
Additionally, launching a new competitive process would not guarantee that a new design would result in a lower cost, and would certainly incur additional project management costs related to launching a new procurement process and restarting the required design work.
In addition to providing an invaluable investment into the future operational capability of the RCN, the CSC is also at the core of our Government’s commitment to revitalize Canada’s marine industry through the National Shipbuilding Strategy, which supports over 15,000 jobs per year. This project will provide significant and long-standing investments into the Canadian economy from coast to coast during construction and over decades throughout the CSC’s operational life.
The CSC is the right ship for the RCN, and will provide the best value for the military, Canada, and the Canadian economy. We remain confident that the capability and versatility of the selected CSC design will equip the RCN with the modern, capable, and effective fleet of 15 surface combatants that it will need to support operations for decades to come. We will continue ongoing work to support the start of construction in 2023/2024.