Vanguard Magazine

www.vanguardcanada.com FEBRUARY/MARCH 2019 33 Minister Qualtrough and Kevin McCoy, President of Irving Shipbuilding Inc. stand in front of the future Her Majesty's Canadian Ship (HMCS) Harry DeWolf at Irving Shipbuilding's Halifax shipyard. Photo: Public Services and Procurement Canada (PSPC). Shipbuilding to planned shipbuilding schedules. Failure to do so opens production gaps and neces- sitates that Ottawa and Canberra consider alternative options. In Canada this has meant turning to contracting a non-NSS yard to convert commercial vessels for na- val and coast guard use and purchasing a sixth AOPS, respectively. In Australia, the Navantia yard in Spain was hired in 2016 to build two supply ships rather than risk building them at home. Given such cost sensitivities there may come a time when both countries need to consider what the trade-offs are between committing more money to continuous shipbuilding at the expense of acquiring other military capabilities. Canada, for instance, will need to make decisions at some point on whether to spend billions on replacing the North Warning System in the country's North and, separately, its four Victoria submarines – none of which is funded for in the 2017 defence policy, Strong, Secure, Engaged. Australia, living in a more uncertain geopolitical environ- ment, will have to grapple with an Indo- Pacific region proliferating with relatively cheaper but lethal anti-ship missiles. In this context, money spent on nine surface combatants or 12 submarines may be per- haps better spent on other capabilities. None of this is to say that progress has not occurred in either the NSS or NSP – after all, ships are getting built, or that these respective strategies will not achieve their goals of bypassing the boom-and- bust eras. They are, though, a reminder that even with the best-laid plans, naval shipbuilding is complicated. This article was condensed from its original format that appeared as a policy paper on Canadian Global Affairs Institute's website in January 2019. Jeffrey F. Collins, PhD, is an experienced policy advisor and a Fellow with the Cana- dian Global Affairs Institute. His first book, "Reassessing the Revolution in Military Affairs" was published by Palgrave Mac- millan in 2015. A second book, "Canada's Defence Procurement Woes", is due out in 2019. He lives in Prince Edward Island. for a province's or state's fair share of shipbuilding dollars will not dissipate, es- pecially when delays begin mounting in those selected yards and/or when existing capabilities begin aging out. Still, for the time being, domestic ship- building remains an attractive defence industrial policy in both countries. The production of other big ticket defence platforms like fighter jets (either indig- enously or under licence) has long been abandoned in Canada and Australia and yet successive governments across party lines have remained committed to under- taking ambitious shipbuilding projects. The likely explanation lies in the ability of the NSS and NSP to offer governments the ability to do highly visible multi-year projects that employ thousands of people, and spend large sums of money using largely existing shipyards without being too susceptible to the pressures of export sales to justify public expenditures. International trade agreements per- mit deviation away from prohibitions on protectionist policies on the grounds of national security; as such, shipbuilding industrial policies are an accepted interna- tional norm. Sending such large sums of money to overseas yards can make for bad politics and it opens a governing party up to pressure from provinces, industry, la- bour and opposition parties. There is also a sovereignty calculation at play. As Australia and Canada experi- enced with overseas submarine purchases, foreign builds bring problems in obtain- ing spare parts and maintenance support. At a minimum, domestic shipbuilding provides a means to develop domestic supply chains and, crucially, local exper- tise in the maintenance and refit of ves- sels. Likewise, it's not always clear in the long term how much cheaper building ships overseas is when intellectual prop- erty transfer costs and overseas in-service support are factored in. Altering foreign designs to meet RAN and RCN needs is a given, and if the money is going to be paid, at the very least a domestic build carries the bonus of stimulating local in- dustry and generating expertise in highly skilled advanced manufacturing. With the brunt of the NSS and NSP dollars going to one yard in each country, there is a risk of fostering a powerful con- stituency that may make it hard to main- tain flexible policy options. At the same time, such a constituency may prove use- ful in incentivizing government decision- making. Either way, this will prove to be a headache for naval planners and govern- ment decision-makers alike. However, even with a focus on jobs and industrial rejuvenation, cost increases are a reality. Project delays increase this pre- mium, something Canada has already expe- rienced when initial NSS acquisition costs, pegged at $37.7 billion nearly a decade ago, jumped to an estimated $73 billion. Australia's delays in securing an agreement with Naval Group on its $A50 billion future submarine project could mean additional cost increases. In this context, in both the NSS and the NSP, schedule is king. Avoiding cost increases requires keeping

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