UPDATE 1-Canada picks Irving to build Arctic patrol ships for C$2.3 bln

Fri Jan 16, 2015 2:04pm EST
 
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(Adds increase of C$400 million in patrol ship budget, details)

By Mike De Souza

OTTAWA Jan 16 (Reuters) - Canada has picked Nova Scotia's Irving Shipbuilding Inc to build at least five Arctic patrol ships for the country's navy for C$2.3 billion ($1.9 billion) and has increased the overall program's budget, government officials said on Friday.

The total budget for building the ships, part of the government's efforts to exert Canadian sovereignty in the Arctic, has increased by C$400 million to C$3.5 billion, with C$1.2 billion of that to be used for such things as infrastructure, ammunition, administrative costs and final operating capability.

Irving Shipbuilding President Kevin McCoy said the contract requires the company deliver at least five ships, but is designed for it to deliver six if costs are contained.

"This is a new design and class of military ship that will be constructed in a brand new shipyard," he said. "These things bring with them risk. This is a fact of life. What we have done here is try to understand and manage these risks."

He said construction is set to begin later this year and run to 2022, and estimated the program would create about 1,000 construction jobs.

The 104-meter ships will give the navy new capabilities to navigate the icy waters of the Arctic and accommodate landings of helicopters under some conditions.

Canada's parliamentary watchdog warned last October the government would need to increase the program's budget or receive fewer ships than planned.

The government had originally estimated it could build six to eight ships for about C$3.1 billion.

($1=$1.20 Canadian) (Additional reporting by Randall Palmer; Editing by Jeffrey Hodgson; and Peter Galloway)