Canada set to scale back big plan for navy ships, go over budget

Fri May 1, 2015 4:37pm EDT
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By David Ljunggren

OTTAWA (Reuters) - Canadian officials said on Friday a C$26.2 billion ($21.5 billion) program to build 15 naval ships could end up below target and over budget, the latest challenge to Canada's troubled military procurement process.

In 2010, the Conservative government announced the program to replace three destroyers and 12 frigates with 15 modern warships.

But officials told a briefing that the plan was now to build "up to 15 vessels" and the exact number would not be known for another few years. Construction is set to start early in the next decade and end in 2040.

"Do we think that the C$26.2 billion is going to become the sort of ceiling cost in the time frame we're talking about? Perhaps not," one official said, on condition of anonymity.

Canada's official spending watchdog said in November 2013 that C$26.2 billion was not enough to buy and properly equip the 15 ships. Nova Scotia's Irving Shipbuilding Inc will build the vessels and oversee the project.

Military projects are notorious for running over budget and defense experts say inflation on shipbuilding projects can easily run from 5 to 7 percent a year.

"We do have to constrain this," the official said. "Do we land with fewer ships, as is happening with our allies?"

In a clear sign of Ottawa's intentions, he cited a separate plan to build Arctic patrol ships. Ottawa said in January it would increase the budget by more than 10 percent and cut the number of ships to five from an initial six to eight.   Continued...