Irving Shipbuilding Quietly Awarded a $26-billion Contract for Future Canadian Ships.

The Halifax-based Irving Shipbuilding will lead Canada’s $26-billion frigate replacement program. On January 16th, it was announced that Irving was awarded a $2.3-billion contract to build six Arctic patrol ships. However, the contract stipulate that only five ships could be built due to unforeseen factors such as an increase in costs. Having said that, if the six ships are built, they will each worth approximately $383 million dollars. Irving is expected to fully deliver the Arctic patrol ships by the end of 2022. The first Arctic patrol ship should be delivered to the Royal Canadian Navy in 2018. Another $1.2 billion will be spent on infrastructure such as new jetties, ammunitions, spare parts, contingency funds and training.

Canada's future AOPS
Canada’s future AOPS

Irving was also quietly chosen—behind closed doors—to lead the Canadian Surface Combatant program, a project worth more than $26-billion dollars —which is part of the national shipbuilding program evaluated at approximately $35-billion dollars. However, the contract to oversee the frigate replacement still have to be approved by the federal Treasury Board before Irving gets the green light to start working on the project.

The Conservatives are expecting that Irving build more than 15 warships, which is a daring amount knowing that inflations and several outside factors could mean less ships. If Irving is successful, each frigate will be worth $1,73 billion. In the meantime, the French FREMM frigate are worth approximately $841-million per ship. The FREMM frigates are deemed one of the most advanced and efficient frigate in the world. The then Minister of Defence, Peter Mackay toured the FREMM back in 2013 and was very impressed by the warship.

While Irving is the main player in the contract, they will rely on sub-contractors to build specific parts of the ships such as the design itself, and the weapon system. French DCNS Shipbuilding Company could very well end up designing the ships. DCNS has design the French FREMM Frigate. It is very likely that Lockheed Martin—who was also bidding to get the contract—will take care of the weapon system including missiles and anti-aircraft guns. Bofors could also be one of the sub-contractor to provide reliable weapons such as the Bofors 57 mm Mk 3 guns, an upgrade from the Bofors 57 mm Mk 2 already used on the Halifax-class frigates. Thales could also be one of the main sub-contractors to provide communications systems such as the SURFSAT-S (or L) SERIES, a compact satellite communication solution.

Irving will receive approximately $26-billion and will decide who and what will be used on the new Canadian ships. Meanwhile, the Canadian government will have no say in the decisions of Irving when they will award sub-contracts to different companies. However, it will be easier for the Canadian government to keep track of all development since only Irving will have to report progress or delays. Having said that, it is very unlikely that the lowest bidder will be chosen during the sub-contracting process. While it could mean higher costs, it could also mean better quality of equipment on the future ships. It will be Irving’s responsibility to balance between cost and the efficiency of installed equipment.

Knud Rasmussen-class offshore patrol vessel
Knud Rasmussen-class offshore patrol vessel

The 30-year project also means that Irving will be accountable for almost every ship built within that timeframe. It is understandable that in a “peace time economy”, the Canadian government’s main priority is to create jobs for Canadians. Yet, if we take the Arctic patrol ships as an example, The Royal Danish Navy will be supplied with the Knud Rasmussen-class offshore patrol vessel. These ships are very similar to what the Canadian government is looking for. However, while being built in Denmark, they are worth approximately $95-million dollars ($513 mill Dkk). Meanwhile, Irving will build similar ships for approximately $383-million per ships. Of course, the $95-million dollars for a Knud Rasmussen-class offshore patrol vessel does not include service and future upgrade contracts, but it is very unlikely that these contracts are worth more than $288-million dollars.

Is it very important to create jobs in Canada but when you can build similar ships for less than a third of the price set by Irving, the Canadian government should look abroad. The Canadian shipbuilding companies could very well be awarded with service and future upgrade contracts. The current Canadian economy cannot sustain such contract, especially one extended over a 30-year period. For the Arctic offshore patrol ships, Irving Shipbuilding is planning to employ 1,000 workers during the peak of the construction and will recall recently laid-off employees. Additionally, another 600 to 800 more workers will be hired to work on other projects.

The Royal Canadian Navy is really in need of ships that can sustain the harsh Arctic conditions and is in need of new ships such as destroyers, and joint support ships. However, the Canadian taxpayer shouldn’t have to issue an almost blank check to a Canadian company just for the sake of job creation. Having the ships build abroad for the third of the price would also give Canada’s the ability to save valuable billions of dollars and invest it in other sectors such as alternative energy and technology.

The Canadian shipbuilding companies might not have the same amount of money through the current contracts, but they would still have the ability to hire workers to keep the future ships in shape and upgrade it during the next 30-years.

It is very unlikely that Canada will go shop abroad for its future ships. However, it is clear that it would be at its advantage to do so. Saving money these days is everyone’s priority.

 

 

 

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Copyright 2015 The Sentinel

Jonathan Wade, CD

Jonathan Wade is the director of the ‘The Sentinel Analytical Group’ and a decorated veteran of the Canadian Forces. Specialized in tactical, strategic, intelligence and geopolitics analysis, Jonathan has a fondness for technical details. His military experience brought him valuable insight on the realities of conflicts and war. A combat veteran of Afghanistan, Jonathan brings in in-theatre experience. Jonathan writes about Russia, Canada and Arctic.