Little Honking Ships......

[Colin Parkinson]

And, if one thought the F-35 was a big cost, the RCN shipbuilding expense will kill the whole CF budget if anything like planned numbers/capabilities are actually bought.  Which cannot realistically be done.  Fairyland and someone in the government (pols), bureaucracy and forces--if anyone had any honesty--should 'fess up fairly soon.  But I hae me doots.  'Tis Canada and none dare say "acquisition malpractice":
https://www.google.ca/search?q=+%22acquisition+malpractice%22&ie=utf-8&oe=utf-8&rls=org.mozilla:en-USfficial&client=firefox-a&channel=sb&gfe_rd=ctrl&ei=c4IrU-XOJqyC8Qe12IEg&gws_rd=cr

By the way neither Irving nor Seaspan yet have an actual contract to build ships for the RCN.  The yards were merely selected in a bizarre process to determine those least incapable of building the ships.  Or something.  Imagine selecting a factory to build aircraft and then relying on the company to figure out how actually to make them.

Mark
Ottawa

I know Seaspan is willing and able to engage people who have the experience to manage this project, training up the people in the yard and their direct supervisors will be the challenge.

 

[AlexanderM]

It's not Seaspan that I'm worried about.  They are trying to build a good reputation, it matters to them.

 

[Monsoon]

And, if one thought the F-35 was a big cost, the RCN shipbuilding expense will kill the whole CF budget if anything like planned numbers/capabilities are actually bought.  Which cannot realistically be done.

What is your basis for that assessment?

 

[MarkOttawa]

Acquistion cost for F-35 $9B. For RCN $2.6B JSS, $3.1B A/OPS
https://www.tbs-sct.gc.ca/rpp/2011-2012/info/mcp-gpe-eng.asp#dnd

and $26B CSC--scroll down here:
http://vanguardcanada.com/new-fleet-in-sight-canadian-navy-builds-for-tomorrow/

that's $32.7B.  Over many years I know but with inflation and the excessive costs of building in Canada that acquisition cost will have to go up to get the numbers and capabilities currently envisaged.  I don't believe in the tooth fairy and the liklihood of any serious budget increase for quite some to come is perishingly low.

Mark
Ottawa

 

[AlexanderM]

There was a report released stating that the cost of the shipbuilding program for the navy would greatly exceed the current budget, can't remember the source.

 

[MarkOttawa]

Auditor General:

...
Monitoring military capabilities

3.70 Complex developmental projects such as military ships require years to design and build. It is important that any gap between the government’s level of ambition and the Royal Canadian Navy’s capability is regularly measured and minimized. Canada’s last general policy statement on its expected level of ambition was in 2008, through the Canada First Defence Strategy (CFDS). While the CFDS did outline the expected number of Navy ships and the core missions for the Canadian Forces, it did not define the specific naval capabilities required to fulfill the government’s level of ambition.

3.71 Since the CFDS was announced in 2008, the global economic climate has worsened. It is important for National Defence to monitor its ability to meet the expectations set out in the CFDS. The CFDS states that “the Government is committed to reviewing this comprehensive plan on a regular basis to ensure that it continues to fully meet the needs of the military in service of Canadians.” We therefore examined whether National Defence monitored its ability to meet the expectations set out in the CFDS as it relates to the NSPS.
Expectations may not be met

3.72 We found that when seeking decisions on each of the three fleet acquisitions we examined, National Defence has reported to government on the number of military ships it will acquire per fleet within the allocated budget and on their associated capabilities, in comparison to the CFDS. National Defence has provided ministers with an update on the CFDS, and its officials told us that these updates will continue. In our opinion, a gap appears to be developing between the CFDS level of ambition, the evolving naval capabilities, and the budgets. National Defence should continue to monitor the extent to which it will or will not meet the government’s expectations for future military needs, and continue to report to ministers on expected capability gaps, allowing the government to make adjustments to expectations and capabilities...
http://www.oag-bvg.gc.ca/internet/English/parl_oag_201311_03_e_38797.html#hd4c

How, er, polite.

Mark
Ottawa

 

[AlexanderM]

Shouldn't be happening though, there's more than enough money for the ships, if we could do things in a more sensible manner. 

 

[Monsoon]

Ah. So "a gap appears to be developing" = "kill the whole CF budget". Got it.

The AG's recommended solution is that DND should monitor and report back to the minister as things change over time. Good thing all of the projects in the NSPS have full time project staffs to do exactly that.

that's $32.7B.  Over many years I know but with inflation and the excessive costs of building in Canada that acquisition cost will have to go up to get the numbers and capabilities currently envisaged.

So your position is that the effect of inflation will come as a surprise to the Treasury Board? The NSPS dollar value was reported in current dollars, as is the practice. Inflation makes numbers get bigger over time, but that effect is applied to government revenue as well as to expenses. The effect is neutral to the project relative to government revenue (in fact, given that the economy grows faster than inflation, an inflation-adjusted $32.7B over 25 years is cheaper for the government than a current $32.7B).

 

[MarkOttawa]

Defence inflation is rather greater than the economy in general and what the government provides for:

The capital equipment plan: When budget and ambition don’t meet
...
These delays to date and those anticipated are significant. In addition to pushing the acquisition of much needed equipment further down the road, the capital shifts are severely eroding the department’s purchasing power due to the impact of defence specific inflation (DSI). Whereas current Bank of Canada policy aims at keeping Canadian inflation at two percent, defence inflation is significantly higher – in 2011, the Vice Chief of Defence Staff stated that Canadian DSI was seven percent annually.

If DND’s procurement budget was compensated to account for these inflationary pressures, the delays in the capital program would be relatively inconsequential. Unfortunately, this is not the case. The department effectively receives annual compensation to offset the impact of inflation through an “escalator” that provides an automatic annual increase, but this only amounts to two percent annually – matching the Bank of Canada inflation target.

At present, therefore, defence specific inflation erodes procurement budgets by at least five percent a year – the gap between defence inflation and the department’s annual escalator...
http://vanguardcanada.com/the-capital-equipment-plan-when-budget-and-ambition-dont-meet/

Whole article worth a read.

Mark
Ottawa

 

[Monsoon]

Defence inflation is rather greater than the economy in general and what the government provides for:

My understanding is that defence inflation (over and above consumer inflation) is part of the model TB applied to derive the NSPS headline number.

 

[suffolkowner]

My understanding is that defence inflation (over and above consumer inflation) is part of the model TB applied to derive the NSPS headline number.

I have been under the impression that the budgets for ships and the fighter jets were effectively fixed and the Vanguard article seems to confirm that. That is ultimately a political decision however just like the decision to build the ships in Canada at a cost premium. We will see what political will there is to continue.

It seems unlikely that CSC can be delivered for less than 4 billion per which will deliver only 6 ships to replace our current fleet

 

[Monsoon]

I have been under the impression that the budgets for ships and the fighter jets were effectively fixed and the Vanguard article seems to confirm that. That is ultimately a political decision however just like the decision to build the ships in Canada at a cost premium. We will see what political will there is to continue.

The budget is "fixed", but that doesn't mean that the number won't change over time to accommodate inflation. As I said, the NSPS budget was quoted in 2012 dollars; the TB financial model is pretty comprehensive. I certainly don't blame you and a lot of other people for thinking otherwise - the commentariat on this subject has been engaged in some quite uninformed and unhelpful speculation gussied up as "analysis". You can argue usefully all day about whether the NSPS procurement list will meet Canada's defence needs, but from a strictly financial perspective NSPS != F35. The chattering heads just need to accept that and move on.

 

[Edward Campbell]

In my opinion the National Shipbuilding Strategy isn't so much about building ships as it is about distributing political pork.

It was a little, actually rather a lot better managed than most political pork because, at least, a team of senior civil servants studied the industry and decided which yards should get the work.

But it's not about military requirements; there is no national military strategy so the RCN cannot have a coherent plan ~ it does have a plan, it's probably a pretty good plan, but it rests on a foundation of sand .... not even sand, a foundation of smoke.

We can have as many ships as we need. Canada is a rich country that spends quite sparingly, to be charitable, on defence. We spend so little because political parties ~ Conservatives, Liberals and NDP, alike ~ poll assiduously and their polling tells them, consistently, that Canadians, in an overwhelming majority, do not want to spend money on defence. That's a firm political fact: your friends and neighbours, your aunts and uncles do not want to spend any money on new ships, tanks, guns or aircraft for you folks to use in order to meet our national and international commitments.

The CF wil get as many ships as it is politically expedient to build.

 

[AlexanderM]

In my opinion the National Shipbuilding Strategy isn't so much about building ships as it is about distributing political pork.

We can have as many ships as we need. Canada is a rich country that spends quite sparingly, to be charitable, on defence. We spend so little because political parties ~ Conservatives, Liberals and NDP, alike ~ poll assiduously and their polling tells them, consistently, that Canadians, in an overwhelming majority, do not want to spend money on defence. That's a firm political fact: your friends and neighbours, your aunts and uncles do not want to spend any money on new ships, tanks, guns or aircraft for you folks to use in order to meet our national and international commitments.

This is exactly why the case can be made to do it all another way.  We can say to Canadians hey, we don't have to spend 33 billion on shipbuilding, we can do it all for 20 billion if we do a combination of building our own and buying from other countries with very good value added agreements.

We could have the AOR's built in Korea, like the Brits, then build 2 big icebreakers, intead of 1 and still save money.  We could purchase 10 Iver Class, then build corvettes and AOP's a Davie yard and stay within budget.  Probably have enough money left for 2 Amphibious Assault Ships, if purchased elsewhere.  I'm under the opinion that most Canadian would not favour pouring all this money down the drain, if we sell them the options in the right way.

 

[Edward Campbell]

This is exactly why the case can be made to do it all another way.  We can say to Canadians hey, we don't have to spend 33 billion on shipbuilding, we can do it all for 20 billion if we do a combination of building our own and buying from other countries with very good value added agreements.

We could have the AOR's built in Korea, like the Brits, then build 2 big icebreakers, intead of 1 and still save money.  We could purchase 10 Iver Class, then build corvettes and AOP's a Davie yard and stay within budget.  Probably have enough money left for 2 Amphibious Assault Ships, if purchased elsewhere.  I'm under the opinion that most Canadian would not favour pouring all this money down the drain, if we sell them the options in the right way.

I agree with you ... but what I cannot do is make that argument in a compelling (and at Grade IX reading level) 15 second TV ad. And in this day and age policy has to be explained that way.  :dunno:

Edited to add:

Don't get me wrong. This is not a uniquely or peculiarly Conservative issue. It also drives the Liberals and the NDP. The recent Liberal policy convention was a sham, just like the Conservative one last year. Policies will be developed by advertising agencies in response to political imperatives, often on a riding by riding or region by region basis.

I have no doubt that there are senior civil servants in Ottawa proposing what you said just above ... the problem is that the politicians, of all stripes, are not listening. Official Ottawa, even with a majority government in power, is is full time, 24/7 election/campaign mode - on both sides of the House. That's not a good thing.

 

[AlexanderM]

I agree with you ... but what I cannot do is make that argument in a compelling (and at Grade IX reading level) 15 second TV ad. And in this day and age policy has to be explained that way.  :dunno:

It would have to be done as a bit of a campaign, presented as an option.  The main explanation done through the press in newpaper articles, then once it's all explained do some polls and see where the support is.  It would have to be presented as a comprehensive package, showing how we get benefits for the ships we buy/build elsewhere, and how what we do spend in Canada will actually help build a sustained industry.

Your right though, the top politicians are all into pork, it's a big part of the machine, and the reason they would say no, as opposed to Canadians.

 

[Kirkhill]

It would have to be done as a bit of a campaign, presented as an option.  The main explanation done through the press in newpaper articles, then once it's all explained do some polls and see where the support is.  It would have to be presented as a comprehensive package, showing how we get benefits for the ships we buy/build elsewhere, and how what we do spend in Canada will actually help build a sustained industry.

Your right though, the top politicians are all into pork, it's a big part of the machine, and the reason they would say no, as opposed to Canadians.

Who is eating all the pork though?  As ERC has often noted - politicians deliver what the public wants.

 

[AlexanderM]

Who is eating all the pork though?  As ERC has often noted - politicians deliver what the public wants.

Look, if they pay what is being reported for ships, the money is going somewhere.  It is way more than what the ships cost.  Just like when they give over $200 million to Irving for design work, when that work will only cost a small fraction, where does the money go, don't ask me.  The money we are paying just for that design work for the AOP's is more than the cost to build one of the existing ships.  What is one supposed to call it?

 

[Kirkhill]

Alex,

The problem is that the choice is between 32 BCAD being paid by Canadians to Canadians to build ships for Canadians or 10 BCAD being paid by Canadians to Danes and Dutchmen (eg) to build ships for Canadians.

In one case 32 BCAD is taken from "the guvmint" which has deep pockets from whence money magically appears and is paid to Canadians who can then claim unemployment after the construction campaign is over.

In the other case 10 BCAD is taken from the pockets of hard-working tax-paying Canadians to give those lazy ne'er-do-well Euros so that they can live in the lap of luxury and early retirement.

"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."
Book 3, Chapter 10, Section 6 pg.129 "The General Theory.."

 

[AlexanderM]

Alex,

The problem is that the choice is between 32 BCAD being paid by Canadians to Canadians to build ships for Canadians or 10 BCAD being paid by Canadians to Danes and Dutchmen (eg) to build ships for Canadians.

In one case 32 BCAD is taken from "the guvmint" which has deep pockets from whence money magically appears and is paid to Canadians who can then claim unemployment after the construction campaign is over.

In the other case 10 BCAD is taken from the pockets of hard-working tax-paying Canadians to give those lazy ne'er-do-well Euros so that they can live in the lap of luxury and early retirement.

Yes, but then one makes the case of what will be done with all the money we save and value added contracts.  The money that goes into labor is a small percentage of the $32 billion, so we show people the numbers.  If we put the money we save into healthcare, education, training, most Canadians will be quite pleased.  If we build 2 large ice breaker and all the other slated coast guard vessels, that will help build a sustainable industry on the West Coast.

Then, if we build corvettes and AOP's on the East coast, at the right yard, that might just get a sustainable industry going there.