Thank you, Mr. Chair.
Dear Mr. Chair and honourable members, thank you for inviting me to provide my insights to this august committee.
Many other witnesses have already spoken to you about the complexities and challenges of the processes behind the NSS, so I will focus my remarks on three major issues.
The first is Canadian naval ambitions as a driver of CSC design. The RCN essentially operates as two smaller navies, with one on each coast. In standard practice, the so-called rule of three means that for every ship deployed overseas, you need at least two more to maintain fleet maintenance and training requirements. For Canada this means essentially every combat vessel that it aims to deploy overseas must have the ability to defend itself against modern air, surface and underwater threats because it will often be operating on its own. This has driven the decision to ensure that all 15 ships are built to the same standard that incorporates modern air defence systems into the anti-submarine Type 26 hull. Even so, modern submarines are equipped with anti-ship missiles, so even an ASW-centric vessel needs a very robust anti-air capability.
Are CSCs able to perform air defence in addition to their ASW focus? My assessment is yes. The bottom line up front is that the ships can carry air defence missiles that are an order of magnitude greater than current frigates, if they are using the same types of missiles, so even if the exact number of missiles gets reduced during the remaining design work on ships, they will still be much more capable than in our existing Halifax class. The new decision to acquire F-35s also further enhances the CSC's combat ranges.
Second is the geostrategic need to develop Canadian shipbuilding. Other speakers have noted the Chinese navy's rise as the world's largest in the number of ships. What I haven't seen discussed is the limited capacity in western naval shipyards to help maintain our collective lead. By mid-decade, the U.S. will have only three shipyards dedicated to building complex warships like the CSC, all of which will be at their maximum capacity. In this context, Canada's Halifax yard, thus, has the potential to provide North America with basically 25% of its advanced warship construction capacity. This is on its own a very important thing, but also it can be leveraged in our discussions with the Americans when the topic concerns Canada's willingness to pull our weight in defence spending.
More importantly, the alternative of buying ships from abroad would bind our foreign policy to the country building our ships. The decades-long period required to build all 15 CSCs means that the country building our ships would have a multi-billion dollar hostage that it could leverage in any negotiation or crisis. Warships should serve as a tool of Canadian foreign policy, not hold it hostage.
Third is the limitations of current cost estimation methods. “Steel is cheap and air is free” is the common rule of thumb for naval architects. This means that the cost of a ship does not scale linearly with its size. Unfortunately, size is precisely the metric being employed by the PBO to arrive at their cost estimates for the CSC. In fact, combat engineering systems contribute approximately 60% to 70% of a ship's overall cost, whereas the hull contributes the relatively small remainder. Thus, the size of a CSC should not be the metric for determining its cost increases. Rather the combat systems should be the point of focus.
However, unlike the growing size of the ship's hull, the scope of the CSC's combat engineering systems are unlikely to increase between now and construction. In short, if the CSC's actual costs do increase, inflation will likely play the dominant role as the ships await their turn to be built over the next two decades, rather than the design.
Finally, some witnesses have used a theory-based rule of thumb to determine that the CSC's operational costs will be three times that of its acquisition costs, and that this will be unaffordable. However, recent empirical evidence suggests that reducing acquisition costs do not guarantee a linear reduction in operational costs. Much of this is attributed to the fact that a ship's crew comprises approximately 50% of its operational costs, so we cannot expect the CSC to have significantly reduced operational costs unless we were to also purchase a design that has a significantly smaller crew, which comes with its own significant downsides.
I will conclude there.