insidepolicyglobalsecurityThe government’s Defence Policy Review provides financial transparency and a steady approach to naval affairs, writes Timothy Choi. But it lacks a clear connection between means, ways, and ends.

By Timothy Choi, June 16, 2017

Canada’s defence policy review (DPR) statement, officially titled Strong, Secure, Engaged, attempts to provide a comprehensive roadmap for Canadian security and defence for the next two decades. However, like similar documents in Canada’s past, such as the Harper government’s Canada First Defence Strategy, the DPR is a challenging document to analyze: it attempts to address multiple levels of analysis, from cabinet-level policy concerns down to the nitty-gritty of multi-year project financing in the space of little more than one hundred pages.

Of note, the DPR shows that the government intends to account for “fully funding” all fifteen of the proposed Canadian Surface Combatants (CSC). This is a welcome end to the language of the last several years, which had referred to merely “up to fifteen”  CSCs.  Some may no doubt wish for the hull numbers to be even higher, but fifteen hulls actually grants the RCN more multi-purpose surface combatants than the United States Navy on a per-capita basis: fifteen ships for 36 million Canadians compared to roughly 94 for 325 million Americans.

The CSC program, meant to replace the now-retired Iroquois-class air-defence destroyers and the Halifax-class multi-purpose frigates currently in service, had recently returned to news headlines when the Parliamentary Budget Office (PBO) published a damning report on the escalating costs of the procurement. Referencing the original $26 billion figure allotted by the Harper government, the PBO report claims the acquisition costs of the CSCs may be 2.4 times higher, plus or minus 20 percent.

Of note, the DPR shows that the government intends to account for “fully funding” all fifteen of the proposed Canadian Surface Combatants (CSC).

Regardless of the PBO’s assumptions (e.g., modelling costs based on design characteristics despite no design having yet been chosen), there is little doubt that the CSC program will increase in cost. Therefore, the DPR’s commitment to fully fund the program, seemingly without any reservations, is to be welcomed – especially in conjunction with a follow-up speech by Minister Sajjan in Halifax on June 12, which directly addressed the PBO’s conclusions and emphasized the DPR’s ability to fund the all fifteen ships.

In particular, the increased transparency regarding the methods used in accounting for DND program funding provides some insights, though limited, into how the funding will actually work. The emphasis on “accrual” versus “cash” funding models implies that CSC funding would be spread out far beyond the 20 years covered in the DPR. As Philippe Lagassé pointed out, one way to think about accrual funding is to consider it like a mortgage for a house. Just as a private citizen would pay the bank over several decades for the home while the bank pays the former owners up-front, so would DND’s budget “pay” over the expected useful life of a ship while the Government of Canada pays the shipbuilder and other related parties in a more immediate timeframe.

For DND, accrual “payments” begin when the item enters service, not when the procurement process begins. As a result, DND would likely not be required to have procurement funding earmarked for the CSCs until well into the 2020s once the first ship is commissioned. In light of this, it should come as no surprise that much of the major funding increase in the DPR will not occur until the 2020 election year – instead of indicating a lack of commitment, the delayed start in major funding is a recognition of the reality that the CAF cannot spend money until it is ready to do so.

Observers need to remember this when reading future budget reports: measuring the government’s funding commitment to these major recapitalization projects will not be a simple matter of seeing if DND’s budgets for the next few years include increases to help pay for them. Furthermore, the long service lives of major equipment explains the discrepancy between the total 20 year figures for accrual and cash-based models on page 43’s Table 1 from the document (see below): on an accrual basis, it would take longer than twenty years to pay off the equipment, whereas on a cash basis, they would be paid off by the end of those twenty years. Naturally, this means the cash basis total would be higher, with the difference due to remaining “payments” on the procured equipment. We should expect more details regarding the nitty-gritty of the financing models when the yearly Defence Investment Plan arrives in the Fall.

table 1 - dpr

Another item of note in the DPR is explicit mention of the Victoria-class submarines. Although infamous for the trials and tribulations between their procurement and entry into regular service, it should be noted that the technology of the submarines have not been the major point of contention: their problems resulted from several years of improper storage prior to Canadian delivery, not the design.

The DPR has now confirmed the Victoria-class will continue to be modernized and serve into the 2030s. While this is not as desirable as a commitment to full replacement, it is at least better than complete silence that may result in a complete scrapping of the submarine program. Keeping in mind that submarines are the ultimate weapon system for contesting and establishing sea control in the modern era, a country lacking such a capability risks being unable to set the foundational conditions for exercising sea control, such as the safe delivery of equipment across vital sea lanes and projecting force landward. Clearly, however, the maintenance of the four Victorias indicates a wide disparity with the Senate’s recent call for twelve nuclear-powered submarines.

Unlike past defence documents, Canada’s sovereignty in the High North was not a major concern in the DPR. Instead, the emphasis is on cooperative endeavors between the Arctic states when it comes to security and defence issues. That being said, the DPR language clearly distinguishes between Russia and other Arctic states when it comes to the extent of reliable cooperation, though without specifics on potential risks. Perhaps as a result of this perspective, there was no commitment on the sixth Harry DeWolf-class Arctic offshore patrol ship (AOPS). Recent statements by government and RCN officials referring to “six AOPS,” without the “five-to-six” qualifier, had led to some observers to hope the sixth ship would be confirmed – alas, this was not to be.

Unlike past defence documents, Canada’s sovereignty in the High North was not a major concern in the DPR.

Also absent in the DPR was any mention of the Kingston-class maritime coastal defence vessels (MCDVs). Comprising of roughly half the available fleet, their absence is noteworthy. With recent successes in drug interdiction off Latin America and an extensive overseas deployment to west Africa, the Kingstons have proven to be incredibly useful in maritime security and naval diplomacy, despite their minimally-armed status. As they approach their twentieth anniversaries, questions remain as to what will happen to these twelve MCDVs. Will they be quietly decommissioned to make physical and financial space for the new ships, or will they be modernized and kept in service? There are mixed messages so far.

Perhaps one of the most unexpected statements in the DPR was an operational requirement for two self-sustaining task groups of four CSCs each. Yet missing was why two such task groups are required and at what level of availability. Will these task groups be used for short-term support of alliance high-end warfare operations? Will they be used more for lower-end, but longer-endurance, missions like Operation Apollo 2002-2003 in and around the Arabian Sea?

OP Apollo demonstrates the realities and difficulties of constant multi-year and multi-ship presence. Beginning with six Royal Canadian Navy (RCN) ships, it was gradually scaled back down to just one frigate by December 2003. The high-tempo, two-year operation saw the entire RCN combat fleet serving in an interdiction and escort role off Afghanistan and Iraq. This was only to enable one forward-deployed task force – to try to have two such task forces at once would be an incredible challenge with fifteen CSCs and two replenishment ships (AORs). To some extent, having a third AOR would alleviate the situation, but the DPR makes no mention of such an option, and zero mention is made of the controversial Project Resolve tanker conversion currently carried out by Quebec’s Davie Shipyards.

The DPR needs to recognize the limits of its proposed naval force structure – having fifteen surface combatants means only five of those could be on deployment at once.

In any case, the DPR needs to recognize the limits of its proposed naval force structure – having fifteen surface combatants means only five of those could be on deployment at once, while the rest are in refit, training, or transit. While some of the latter could be “surged” forward, the stress and fatigue caused by saltwater operations means a long-term deployment of eight CSCs and both Queenstons would be nigh impossible.

Given the Liberal government’s emphasis on renewed global engagement, the DPR would have been an excellent opportunity to articulate how the RCN could directly facilitate Canada’s foreign policy objectives. Navies offer governments flexible opportunities to engage in and disengage from situations with minimal entanglements. With Minister Freeland’s recent foreign policy statement recognizing the need for greater “hard power” to effect foreign policy objectives, naval diplomacy could be deeply incorporated into an overall foreign policy approach.

In the past few decades, Canadian warships have held a pride of place in American naval commands, allowing us a much larger say in theatre level operations than other allies. Similarly, our Iroquois-class destroyers had the task force command capabilities to make them preferred flagships of NATO’s Atlantic standing naval forces. With this in mind, are permanent independent five-ship task groups the optimal configuration? Or would more widely-distributed and more frequent flagship contributions in alliance fleets be more useful?

With challenges to the liberal world order being one of Canada’s main foreign policy concerns, the navy can have an enormous role in maintaining the maritime aspects of that order. Whether it is directly intervening in maritime territorial disputes or providing training to local maritime forces in support of the liberal order at sea, there is clearly room for greater integration of naval operations, maritime strategy, and Canadian foreign and defence policies.

As it stands, the DPR is to be commended for its “steady as she goes” approach to naval affairs and increased financial transparency, but suffers from similar drawbacks to its predecessors – chief among them a lack of clear and explicit connection between means, ways, and ends.

Timothy Choi is a PhD Candidate at the Centre for Military, Security, and Strategic Studies, University of Calgary, and a Research Fellow at the Centre for the Study of Security and Development, Dalhousie University.