Buying submarines instead of building them may lead to missed opportunities for Canada
One of the reasons why defence procurement is so difficult is because every decision sits at the intersection of conflicting strategic priorities for government. The realities of politics and economics cannot be easily excluded from the process, despite the potential desire to do so. Overlay onto such a compromised system a new “strategy” for building defence industrial capacity , as well as a new organization intended to sort through all of this, and the level of difficulty increases exponentially.
This is where we find ourselves as it relates to the Canadian Patrol Submarine Project (CPSP). The bids from the two down-selected manufacturers — Hanwha Ocean of South Korea and Germany’s TKMS — are now closed after a short three-week extension to get more “value for Canada” from the bidders.
Value in this context comes in many forms, especially given the disparate interests mentioned above. Value could, for example, mean more capability, a lower price, direct, or indirect benefits. In this case it appears to be primarily focused on offsets (indirect benefits) that are designed to make the deal more lucrative for Canada. Time will tell what exactly that will mean for the Canadian taxpayer.
The good news is that either submarine, and their associated partnerships will be great for Canada. Both submarines are state-of-art and the associated offsets will be impressive in their own right. The bad news — if I can put it that way — is that in our pursuit of relief to many of our current economic and political problems, we might have missed the boat in terms of the potential opportunities to build the kind of resilience and domestic capacity explicit in the language of Prime Minister Mark Carney and the recently promulgated Defence Industrial Strategy .
I fear that we may be squandering real opportunities in advanced manufacturing specifically by not being part of the production of the submarines themselves. This approach appears to be intentional based on what I can only describe as simplistic and self-defeating arguments by officials that to do so would be too risky in terms of schedule and cost. This is not conjecture. Behind the scenes, there are clear indications that Canada has been sending mixed messages and that there is apparently no interest or desire for Canadian industry to participate in a significant way in the production of the submarines. Some readers may see this as a good thing, but if we continue to focus on short-term benefits at the expense of long-term ambition, we will never be able to stand on our own two feet. The decision seems to be myopic and in direct conflict with what I understand Carney has been saying. There’s a disconnect somewhere and my concern is that in the complexity of the intersecting interests mentioned above, we aren’t appreciating the full implications of pursuing one interest at the expense of another.
The strategy to buy the submarines directly from one of the two OEMs and then subsequently develop the capability to support them after the fact is fundamentally inefficient and risky in the long run. This approach is partly how we got ourselves into the mess we are in today with the current Victoria class submarines. For Canada to have a robust and sovereign capacity to even simply support the submarines over their decades of service, we should be part of the production process from the outset. Otherwise we are creating an arbitrary transition wherein we must depend on a foreign builder’s supply chain and are vulnerable to whatever risks that might entail. This might make sense in a relatively low-risk commercial arrangement; it however fails in an unpredictable and volatile world where national defence is at stake.
I’m not suggesting that the submarines be built in Canada in their entirety. Submarines however, like cars, airplanes and ships, can be manufactured with components produced in multiple locations prior to final assembly. In the same way that a Toyota RAV 4 is still the same vehicle irrespective of where the components are produced or the final assembly completed, the real value comes from the integration of multiple supply chains into the final product.
Why would we not want to be part of that higher value-chain rather than just being a consumer? What happens when the foreign supply chains are compromised at some point in the future? What if we decide to develop our own future submarine capability in the decades ahead — perhaps using a made-in-Canada modular nuclear propulsion system?
If we continue to be constrained by our own biases, risk-aversion and self-defeating attitudes we will potentially restrict options for future governments to avoid the kinds of generational challenges we are trying to overcome now. I understand, and respect, the pressing need to try and fix as many problems as possible as quickly as possible. Let’s be careful, however, to not try and do it all at once through one single procurement. Playing chess is not the same thing as playing checkers despite the same playing surface — and right now I’m not sure which game we think we are playing.
Mark Norman is a retired vice-admiral who commanded Canada’s Navy and was vice-chief of defence. He advises several Canadian defence companies.