Navy missed a chance to get its new resupply ships at a much lower price, PBO suggests

Converting two civilian cargo ships to serve as resupply vessels for the navy would have been cheaper than building new ones, Canada's parliamentary budget officer has determined.

PBO Yves Giroux conceded that the advice is coming late — that it would have been more helpful to Parliamentarians and the general public had it come years ago, before the federal government signed a contract over the summer with Seaspan for the $4.1 billion construction of two joint support ships (JSS) at the Vancouver Shipyard.

But what are you going to do?

The Parliamentary Budget Office investigates at the behest of MPs — and it was only asked last June by the House of Commons standing committee on government operations and estimates to review the costs of the naval shipbuilding program. (The previous, long-standing forecast was that the navy could get two purpose-built supply ships for $3.4 billion, but that sum quietly increased late last spring.)

The motion to investigate was put forward by Conservative MP Kelly McCauley, who said at the time that MPs "owe it to taxpayers to finally get some numbers on these ships so we can determine how best to proceed."

What Giroux found was by no means shocking.

To replenish its warships at sea, the navy has been relying for the last couple of years on a leased supply ship, contracted through Federal Fleet Services, which operates out of the Chantier Davie shipyard in Levis, Que.

In addition to that supply ship — the MV Asterix — the company is pitching hard for the federal government to pick up another converted cargo ship — the MV Obelix — for the navy.

The budget officer concluded that purchasing — not leasing — both the Asterix and the Obelix would set taxpayers back about $1.4 billion — substantially less than the $4.1 billion estimate for construction of two joint support ships.

Giroux acknowledged that his office did not analyze the various capabilities of both sets of ships — which could account for the cost difference. He said it's down to the Department of National Defence and the navy to explain the two price tags and demonstrate how the military would be better served by having new ships built.

"The experts at DND would presumably be in a good position, or should be in a good position, to make that point with parliamentarians and the Canadian public," Giroux said.

The budget office report offers no value-for-money judgments and does not favour one option over another — although Giroux conceded it's likely too late for the federal government to back out of the Seaspan contract without incurring substantial penalties.

"Hindsight is often 20-20," he said.

"The government operations committee only asked us to do this report relatively recently … and it would have been very useful to undertake that study a few years ago before the government embarked on the JSS. But it is what it is and we are here now."

In response to the new PBO report, DND said the joint support ships have capabilities the modified civilian ships do not, such a mine avoidance system and defences against chemical, biological, radiological and nuclear agents.

"When sending our sailors into dangerous situations, we insist on providing them with the best and safest equipment possible," said the press statement. "The two types of ships compared in the report are very different."

Five years too late

Still, defence analyst Dave Perry, who has followed the program for a decade, wonders about value for money.

"What is the precise value of that [roughly] $3 billion difference?" he said, adding that DND's argument that the ships must be ready for war zones is a bit of a stretch.

He said history has shown that when the shooting starts, resupply ships are ordered out of the area "because they are floating gas cans."

The ideal time for the PBO's analysis probably would have been a little more than five years ago — either just before, or just after, the former Conservative government entered into the Asterix lease arrangement, which the budget office estimates will cost taxpayers $733 million.

"It would have been really good to have had this comparison five years ago," Perry said.

At the time, several observers wondered aloud whether the lease deal meant the death of the joint support ship program.

Many of those questions were sidelined in the wake of the RCMP criminal investigation into the military's former second-highest commander, the now-retired vice admiral Mark Norman. He was charged with one count of breach of trust and accused of leaking cabinet secrets related to the Davie lease deal. The case ended when the Crown stayed the charge.

The federal government's attempts to replace the navy's worn-out and now-retired supply ships have suffered multiple setbacks.

Originally ordered by the Liberal government of former prime minister Paul Martin in 2004, the first attempt ended four years later when the Conservative government of former prime minister Stephen Harper shelved the program on the eve of a federal election because the cost estimates exceeded the budget envelope.

A previous parliamentary budget officer, Kevin Page, concluded in 2013 that had the Conservatives stuck with the original program, the navy would have had more capable ships for less than the $2.3 billion it was prepared to spend at that time.

Page predicted at the time — ironically, as it turned out — that that final price tag could land at $4.13 billion because of all of the uncertainty surrounding the program.