Thank you very much, Chair.
Thank you very much to our witnesses.
The government intends to deliver six to eight ships, including infrastructure, by 2024, at a cost of $2.8 billion. But the Parliamentary Budget Officer's main finding is that the current budget is not sufficient to acquire six to eight ships. Currently, should there be no delays, the budget would allow for just four ships to be built. A one-year delay would bump up the cost of building four ships by an estimated $206 million more than currently budgeted. A two-year delay would bump up the cost by an estimated $310 million.
Even with no delays, to achieve four ships with 80% confidence is $201 million over the budget. The confidence level calculates the range of potential cost estimates and then orders from the lowest to the highest; the mid-point of these estimates is called the 50% confidence level. This is a minimum acceptable standard when selecting a budget. Fifty per cent of the anticipated outcomes yield cost estimates less than the budget and only 50% yield estimates greater than the budget. So only four ships can be delivered with the $2.8 billion budget at the minimum acceptable confidence level. If the government wanted to deliver the stated minimum of six ships and the maximum of eight ships, the budget would need to be augmented by $470 million to achieve a 50% confidence level. Any delay over a year would mean that the budget would likely only be sufficient to build three ships. Schedule slips, therefore, may have a significant impact on the government's purchasing power and on other projects down the pipeline such as the Canadian surface combatant.
As this program stagnates, it is understood that we lose ships in numbers. Does this lag affect the capabilities of those ships as well and, if so, how?