Vanguard Magazine

VALUE FOR CANADA The cost versus benefit to Canadians of the National Shipbuilding Strategy 20 AUGUST/SEPTEMBER 2017 www.vanguardcanada.com SHIPBUILDING S Figure 1: Benefit-Cost Ratio: Benefit to Canada from every $1bn spent 1.8 0.5 1.9 1.1 0 0.5 1 1.5 2 'Build in Canada' 'Build in Europe' Lower end of range Higher end of range CAD$bn A s part of its National Shipbuild- ing Strategy (NSS), Canada is looking to procure 15 modern frigates to bolster its defence capabilities and replace its existing gener- al-purpose frigates. In doing so, it aims to bring an end to the boom and bust cycles of vessel procurement that have slowed down Canadian shipbuilding and secure sustainable jobs for Canadians. Irving Shipbuilding Inc.'s shipyard in Halifax was awarded the prime contract to build the frigates under the NSS. Our report compares the value for mon- ey to Canada from building 15 modern frigates in Canada versus purchasing them from overseas. The overseas comparator we use is based on a blend of Western European shipbuilders from France, Ger- many, Netherlands, Spain and the UK – referred to in this report as "Build in Eu- rope.". No matter where the ships are built, we assume that the national security benefits will be the same, and these have therefore not been included in the analysis in this report. It is worth noting that building the ships in Canada will contribute to the development of sovereign shipbuilding ca- pabilities in Canada. This report compares the economic and fiscal benefits to Canada in terms of job creation, impact on GDP and the public finances, as well as the cost differential of building the ships in the two locations. Our report specifically excludes the costs of administering the NSS, initial on-board spares and full lifecycle costs as well as the longer term benefits as a result of the NSS. Findings We have used a Benefit-Cost Ratio (BCR) as the best measure to assess the value for money to Canada of the two scenarios – "Build in Canada" and "Build in Europe." The wide range on the BCR for "Build in Europe" is a result of the significant un- certainty in the scale and timing of benefits to Canada under the current Government offset policy. The economic and tax benefits in the "Build in Canada" scenario are greater and more certain, driven by more on-project by PwC Photo: DCNS

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