Question Period Note: Parliamentary Budget Officer Report - Polar Icebreakers

Parliamentary Budget Officer Report - Polar Icebreakers

The Canadian Coast Guard (CCG) appreciates the work completed by the Parliamentary Budget Officer (PBO). The CCG cooperated fully with the PBO’s review and welcomes the report.

We are now reviewing the report, which was informed by CCG’s own costing information.

Polar Icebreakers Budget

At this time, an Umbrella Agreement to formalize the third large shipyard under the National Shipbuilding Strategy is not finalized and negotiations and contract awards for engineering and construction have also not been finalized with Seaspan Shipyards. We will release our detailed costing once these discussions are concluded.

The final costs for this procurement will obviously be higher than the original budget estimate (2012) which was for one Polar icebreaker, and was done without a full understanding of what was involved in modern large vessel construction. Estimates for things such as engineering work, construction, project management, and contingencies have since been refined.

Ten years into the National Shipbuilding Strategy, with three large ships delivered for the Canadian Coast Guard and others under construction, the Government of Canada has a much better understanding of the costs associated with building large ships and has adopted internationally accepted cost estimation practices.

• On December 16, 2021, The Parliamentary Budget Officer(PBO) released a report on the Polar Icebreakers. Coast Guard fully cooperated with the development of the report and are currently reviewing its contents.
• Initial estimates for one Polar Icebreaker were developed back in 2009 and 2012. Coast Guard recognizes that initial cost and schedule expectations were not realistic as there was not a fully understanding of what was involved in modern large vessel construction in Canada. Items such as engineering costs, construction, project management, and contingencies were underestimated.
• To support the 2021 decision to procure two Polar Icebreakers, Coast Guard has calculated a cost estimate in accordance with Treasury Board guidelines on cost estimating. This estimate should be considered Rough Order of Magnitude and was prepared using preliminary design specifications. Details of this estimate were fully disclosed to the PBO to assist in their analysis.
• A substantive cost estimate will not be available until the engineering and build proposals are received and negotiations occur with the two shipyards. The final budget for the Polar Icebreakers will be released once build contracts are signed for both Polar Icebreakers.
• On July 7, 2021, Canada awarded the Ancillary Contract to Vancouver Shipyards (VSY) to finalize the design and undertake work in preparation for comprehensive construction engineering. This contract was awarded following the signing of the revised Umbrella Agreement, which added the Polar Icebreaker back into the queue at VSY, in May 2021.
• Work on the other Polar Icebreaker is tentatively expected to commence in 2022, once the third shipyard is officially part of the National Shipbuilding Strategy, and the Ancillary Contract is signed.
• On May 6, 2021, Canada announced the procurement of two Polar Icebreakers for the Canadian Coast Guard. One will be built at Vancouver Shipyards and the other is expected to be constructed at the third shipyard, once it qualifies under the NSS.
• On May 22, 2019, it was announced that a long production run of up to 16 Multi-Purpose Vessels for the Canadian Coast Guard would replace the Polar Icebreaker in Vancouver Shipyards’ program of work. The Umbrella Agreement with VSY was amended to reflect that decision.

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