03/15/2013 04:58 EDT | Updated 05/15/2013 05:12 EDT

Defence officials dismiss budget officer's cost warnings on navy ships

OTTAWA - A leaked memo shows officials at National Defence scrambled behind the scenes last month to reassure the Harper government that they knew how much it would cost to replace the navy's supply ships.

In a report released last month, parliamentary budget officer Kevin Page said not enough money had been set aside for the $2.6-billion joint support ship program.

Page suggested that it would cost more than $4.1 billion to replace the existing vessels — HMCS Protecteur and HMCS Preserver. Both ships are over 40-years-old and the stop-and-start process to acquire new ones has been going on in earnest for a decade.

To stay within the government's existing budget envelope, Page said the capabilities of the new ships would have to be scaled back even further.

But a briefing note, prepared for Defence Minister Peter MacKay and Public Works Minister Rona Ambrose on the same day as Page's report, suggests the budget officer's analysis is more theoretical than practical.

It says National Defence's numbers are further along than the budget officer's projections, which were based on a sophisticated software model in use around the world, most notably with the U.S. Government Accountability office and even the British Ministry of Defence.

The Canadian navy is using a different system with the help of outside naval contractors, and its figures rely on "actual cost estimates" for both designs that are under consideration.

Even still, they remain estimates, which have been analyzed by independent experts, said the memo written by the navy's project manager.

"Concurrently, construction estimates are being matured to conform project affordability," said the briefing. "These cost estimates are being validated through third-party expertise provided by First Marine International."

MacKay, questioned in the aftermath of the Page's report, insisted the navy will get the ships it needs.

Similarly, Ambrose underscored during question period in the House of Commons that the budget was carved in stone and that the final design would be tested for affordability.

It was Page's report that questioned National Defence's numbers on the F-35 that set off a political firestorm in the spring of 2011 and eventually led to the stealth fighter program being reviewed.

At the time, the Conservative government responded with a full frontal assault that openly questioned the budget officer's numbers and credibility.

Defence expert Dave Perry, of Carleton University and the Conference of Defence Associations, said the leak of the supply ship memo demonstrates the government is taking a softer, less inflamatory approach to his challenge over the supply ships.

"I would hope the intent is to put forward more of the basis of why the department of defence's approach is accurate, and not to discredit what is being undertaken by the PBO," he said.

"There has been major difficulties for whatever reason on the part of the government and bureaucratic side to articulate what goes behind their costing estimates. And I think, with the F-35, had all the information been put our originally at the same time and clearly communicated it would have shown that the government and the PBO really weren't that far apart in their estimates."

The question to be asked in the case of the supply ships is not whether the government will meet its budget, but what capabilities will be taken out in the affordabilty review, Perry said.

"I have confidence the joint support ship is going to be obtained within the budget of $2.6 billion, but the real issue is: What are you getting for that?" he said.