Budget Office Report into CSC
The Parliamentary Budget Officer (PBO) provides independent analysis to Canadian Parliament on the state of the nation's finances, the government's ...
www.pbo-dpb.gc.ca
That report is from the Parliamentary Budget Office (PBO), not the government's own accountants. They don't have any deep inside knowledge as to costs and capabilities. They also depend on a model which scales cost to tonnage, something which knowledgeable ARRSE posters have said on other threads to not be a reliable means of predicting costs.
Here's a couple of news stories giving their explanation as to what this actually means.
The first is from the CBC.
PBO says mixed frigate fleet and other designs offer cheaper options to navy program
The second is from industry trade publication Canadian Defence Review, where they published a statement from the DND.
DND Releases Statement Regarding PBO Report on the Canadian Surface Combatant
I've mentioned before, possibly on this thread, to take PBO figures with a grain of salt. They aren't shipbuilding experts, and they don't know what is actually going into the ships, what capabilities are being bought, and what the actual costs are. They report to parliament directly, but they're not part of the DND or other involved ministries.
I haven't read the whole report yet, so I'll base my current comments on the CBC and CDR reports for now.
One option the PBO look at is to build a mix of ships, with some being Type 26, and the rest being either Type 31 or FREMM. This goes against the DND's concept for the project of having a single base type of ship with two variants, air defence and ASW/GP. The DND want a single base type with two variants as they say this will reduce full life cycle costs, including infrastructure, manning, training, spares, and maintenance. I don't know if the PBO have taken any of this into account. I suspect not, but I will confirm that later.
The PBO also looked at two alternatives, Type 31 and FREMM. They see Type 31 as being roughly a third of the cost of Type 26. However it would result in a significantly less capable navy than Canada had planned for. This really takes this issue into the realm of defence strategy and what we want the navy to be able to do, rather than strictly an issue of budgeting. So far nobody in Canada is looking for less capability. Indeed, the real problem will be in keeping the DND from engaging in capability creep in an effort to get more and more top end kit into the ships.
An all-FREMM fleet would come in at roughly 15 per cent cheaper than T-26. That's close enough that given the PBO are basing their estimates on a somewhat dubious model rather than on actual builder's estimates it's probably safe to say that there don't appear to be significant savings there. Fincantieri (FREMM) had stormed out of the bidding saying they could build the ships at a third of the cost if only we would give them the contract on their terms and that we would come crawling back to them once we had realised the error of our ways. The PBO estimates seem to have driven a stake through the heart of that story, as if it needed doing.
The DND say that a fair bit of the difference between the PBO estimates and the DND estimates for an all T-26 fleet comes down to the PBO's numbers including tax while the DND's don't. On top of that the DND (and PWGSC) are working with actual prices as opposed to a model. The DND are saying they are still quite confident in their numbers.
A defence procurement expert quoted in the CBC story confirms that there is less difference between the DND and PBO number than meets the eye once things like tax are taken into account. He also said that looking at T-31e doesn't make much sense when looked at what it is the RCN want out of the ships and that going with an all T-31e or T-26//T-31e mix means building a very different navy than what was envisioned in the defence plans.
He does say that comparing FREMM to T-26 makes sense, as they are similar in capabilities, or at least more so than the T-31e is. Given how close the PBO's estimates for a FREMM fleet is to that of a T-26 fleet though, it wouldn't seem to make much sense to consider changing our minds now.
The real issues with the new frigates are things that are happening under the covers with respect to whether the DND's efforts to get top end American missile and radar kit (see previous posts) in the air defence version are going to introduce so many design complications as to delay the start of the build and it introduces considerable technical risk as well. This is the problem they are struggling with now and are trying to find solutions to.
Personally I would be satisfied with cutting back on the capabilities of the air defence variant (the first three ships) if that would keep the project on track. I might even be happier if the air defence variant were delayed and they went straight into the ASW version for the first ships.
I will try to find time to read the PBO report in detail, but I don't expect to see anything to earth shaking in it.
