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The Joint Support Ship program and the MV Asterix: a Fiscal Analysis

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Carleigh Busby; Christopher Penney
Published on November 17, 2020 PDF

In response to a request from the House of Commons Government Operations and Estimates Committee (OGGO), this report estimates the construction costs of the Joint Support Ship program to build two supply ships and costs of contracting converted commercial vessels named the MV Asterix and the Obelix to provide military support. This report also attempts to compare the two projects by incorporating additional project cost elements. Our independent point estimate of the construction cost is $2.4 billion, with an additional estimated $0.6 billion to account for budgetary contingency, producing a total of $3.0 billion. Accounting for the non-construction costs stated by the Department of National Defence, we estimate the total project cost of the JSS to be $4.1 billion, inclusive of provincial sales tax.

The total potential net cost of the government’s contracting of the MV Asterix is $733 million, inclusive of provincial sales tax. We project that a five-year provision of service contract of the Obelix would cost the government $801 million, inclusive of any applicable taxes.

As the project costs of the JSS cannot be directly compared to the costs associated with the provision of service contract of the Asterix or any potential similar contract for the Obelix, we opt for a comparison of the JSS project to the cost of the purchase options for the Asterix and Obelix. Our calculations suggest that the Asterix and Obelix replenishment vessels could be obtained by the Government of Canada for a total of approximately $1.4 billion, as compared to our estimated $4.1 billion JSS project cost.

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{"id":9,"created_at":"2020-11-13T11:53:47-05:00","updated_at":"2021-02-25T15:07:04-05:00","slug":"COM-2021-009--pbo-pegs-total-cost-of-the-navys-joint-support-ship-project-at-41-billion--le-dpb-evalue-a-41-milliards-de-dollars-lensemble-des-couts-lies-au-projet-de-navires-de-soutien-interarmees-de-la-marine-canadienne","title_en":"PBO pegs total cost of the Navy\u2019s Joint Support Ship project at $4.1 billion","title_fr":"Le DPB \u00e9value \u00e0 4,1 milliards de dollars l\u2019ensemble des co\u00fbts li\u00e9s au projet de navires de soutien interarm\u00e9es de la Marine canadienne","body_en":"The Parliamentary Budget Officer (PBO) today released an independent cost estimate of the Royal Canadian Navy\u2019s project to build two Joint Support Ship (JSS) vessels, and an estimate of the cost of contracting similar capacity from Chantier Davie Canada Inc. (Davie). This report was prepared in response to a request from the House of Commons Standing Committee on Government Operations and Estimates (OGGO).\n\nThe JSS project aims to build two new support ships to replace legacy Protecteur-class auxiliary oiler replenishment vessels decommissioned in the last decade. Since the two new vessels are expected to be delivered in 2023 and 2025, the federal government contracted Davie to convert a commercial vessel, the MV Asterix, to military support ship specifications to maintain the Navy\u2019s at-sea replenishment capability during JSS construction. Davie has also offered the government an option to contract a second vessel, the Obelix.\n\nThe report, The Joint Support Ship program and the MV Asterix: a Fiscal Analysis, estimates the total cost of the new JSS vessels to be $4.1 billion. This is comparable to the $4.1 billion estimate published by the Department of National Defence (which does not factor in the cost of the provincial sales tax).\n\nThe total net cost of the current MV Asterix contract is projected to be $733 million over 5 years ending in 2023. The PBO projects that total cost of a new 5-year contract for the Obelix, starting in 2023-2024, would be $801 million. \n\nThe Department of National Defence also has the option to purchase the contracted vessels from Davie.\n\n \u201cNet of any costs associated with this initial contract, we estimate a total cost of approximately $1.4 billion for the purchase of the two Davie vessels\u201d, explained Yves Giroux, PBO. \u201cThis is lower than the cost of new vessels under the JSS project.\u201d\n\nAn assessment of the capabilities of the Asterix and Obelix as commercial vessels converted for military purposes versus those of the built-for-purpose JSS vessels is outside the scope of this report.\n\nThese estimates do not assume any COVID implications on the costs or schedule of the JSS.","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui une estimation ind\u00e9pendante des co\u00fbts li\u00e9s au projet de construction de deux navires de soutien interarm\u00e9es (NSI) de la Marine royale canadienne ainsi qu\u2019une estimation des co\u00fbts relatifs \u00e0 l\u2019octroi d\u2019un contrat \u00e0 Chantier Davie Canada Inc. (Davie) pour obtenir des capacit\u00e9s semblables. Le rapport du DPB fait suite \u00e0 une demande du Comit\u00e9 permanent des op\u00e9rations gouvernementales et des pr\u00e9visions budg\u00e9taires de la Chambre des communes (OGGO).\n\nLe projet de NSI vise \u00e0 construire deux nouveaux navires de soutien pour remplacer les p\u00e9troliers ravitailleurs d\u2019escadre de la classe Protecteur mis hors service au cours de la derni\u00e8re d\u00e9cennie. Comme les deux nouveaux navires ne devraient \u00eatre pr\u00eats qu\u2019en 2023 et 2025, le gouvernement f\u00e9d\u00e9ral a octroy\u00e9 \u00e0 la Davie le contrat de conversion d\u2019un navire commercial, le NM Ast\u00e9rix, afin que celui-ci r\u00e9ponde aux sp\u00e9cifications militaires pour assurer la capacit\u00e9 de ravitaillement en mer pendant la construction des NSI. Davie a \u00e9galement offert au gouvernement l\u2019option d\u2019acheter un deuxi\u00e8me navire, l\u2019Ob\u00e9lix.\n\nLe rapport, Programme de navire de soutien interarm\u00e9es et du NM Ast\u00e9rix : analyse financi\u00e8re, \u00e9value le co\u00fbt total du projet de nouveaux NSI \u00e0 4,1 milliards de dollars. Cette \u00e9valuation est comparable \u00e0 l\u2019estimation de 4,1 milliards de dollars publi\u00e9e par le minist\u00e8re de la D\u00e9fense nationale (bien que cette derni\u00e8re ne tienne pas compte de la taxe de vente provinciale).\n\nLe co\u00fbt total net du contrat actuel pour le NM Ast\u00e9rix devrait \u00eatre de 733 millions de dollars sur cinq ans, soit jusqu\u2019en 2023. Le DPB estime que le co\u00fbt total d\u2019un nouveau contrat de cinq ans pour l\u2019Ob\u00e9lix, qui entrerait en vigueur en 2023 2024, s\u2019\u00e9l\u00e8verait \u00e0 801 millions de dollars. \n\nLe minist\u00e8re de la D\u00e9fense nationale a aussi l\u2019option d\u2019acheter les navires vis\u00e9s par les contrats octroy\u00e9s \u00e0 Davie.\n\n\u00ab Nous estimons que le co\u00fbt total de l\u2019achat des deux navires de Davie s\u2019\u00e9l\u00e8verait \u00e0 1,4 milliard de dollars, d\u00e9duction faite de tous les co\u00fbts li\u00e9s au contrat initial, explique Yves Giroux, DPB. Cette somme est moins \u00e9lev\u00e9e que les co\u00fbts des nouveaux navires du projet de NSI. \u00bb\n\nL\u2019\u00e9valuation des capacit\u00e9s de l\u2019Ast\u00e9rix et de l\u2019Ob\u00e9lix en tant que navires commerciaux convertis \u00e0 des fins militaires par rapport aux capacit\u00e9s int\u00e9gr\u00e9es aux navires du projet de NSI ne rel\u00e8ve pas de la port\u00e9e du pr\u00e9sent rapport.\n\nLes estimations ne tiennent pas compte des r\u00e9percussions de la COVID sur les co\u00fbts ou l\u2019\u00e9ch\u00e9ancier du projet de NSI.","release_date":"2020-11-17T09:00:00-05:00","is_published":"2021-02-25T15:07:04-05:00","internal_id":"COM-2021-009","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/COM-2021-009--pbo-pegs-total-cost-of-the-navys-joint-support-ship-project-at-41-billion--le-dpb-evalue-a-41-milliards-de-dollars-lensemble-des-couts-lies-au-projet-de-navires-de-soutien-interarmees-de-la-marine-canadienne"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/COM-2021-009--pbo-pegs-total-cost-of-the-navys-joint-support-ship-project-at-41-billion--le-dpb-evalue-a-41-milliards-de-dollars-lensemble-des-couts-lies-au-projet-de-navires-de-soutien-interarmees-de-la-marine-canadienne"}},"pivot":{"publication_id":55,"news_release_id":9}}
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