Defence Minister Gordon O'Connor confirms Ottawa will go ahead with its plan to commission the construction of three naval supply ships at a cost of $2.1 billion.

O'Connor made the announcement in Halifax, from the deck of a navy frigate -- HMCS St. John's. He was joined Monday by Chief of Defence Staff Gen. Rick Hillier and Public Works Minister Michael Fortier.

The new ships will replace vintage vessels built in the 1960s.

"They've done an excellent job for us, but they are now over 35 years old and have become difficult and costly to maintain," O'Connor said.

"The new ships ... will be capable of refueling and re-supplying other ships at sea and providing support for ship-borne helicopters. But they will also provide the navy with a three-ocean capability and the global reach necessary to transform Canadian Forces."

Hillier said the ships are crucial to the military's performance.

"Without them our ability to do what Canadians ask of us would be greatly diminished," he said.

Irving Shipbuilding, ThyssenKrupp Marine Systems AG, BAE Systems Ltd. and SNC Lavalin ProFac Inc. are bidding for the contract to build the 28,000-tonne ships.

The winning bidder will also receive an $800 million contract to provide support and maintenance throughout the life of the ships.

O'Connor said the announcement is part of the government's "Canada first" military strategy.

"By fixing, transforming, expanding and properly equipping the Canadian Forces we will build a Canadian Forces where our men and women in uniform have what they need to effectively do the jobs Canadians expect them to do here at home and on the world stage," O'Connor said.

"We will build a stronger Canadian Forces. We will build a stronger Canada."

The announcement is the first of $15 billion in planned military spending announcements this week.

Liberal defence critic Ujjal Dosanjh has claimed O'Connor has a conflict of interest with several of the companies bidding on contracts, and should remove himself from the process.

O'Connor has continually dismissed the claims, and says he has no personal involvement in awarding the contracts.

"I have disclosed everything," O'Connor said. "I own no shares in any company. I get no remuneration from any company. I have no connections with any company."

Fortier said the process is simple, fair and transparent.

"The Minister of National Defence expresses the need, the Treasury Board approves the funding, and as minister of public works I decide how the equipment will be purchased," Fortier said.

"In this respect I wish to assure you the acquisition process will be done fairly, openly and in a transparent way."

The four bidders are required to agree that the principal construction of the ships take place in Canada -- which will create up to 400 jobs. The design work and maintenance does not have to be done in Canada.

Irving Shipbuilding has stated it would commence construction in either Halifax or Levis, Que., BAE Systems and ThyssenKrupp Marine named Newfoundland as their site, while SNC Lavalin ProFac Inc. has named a Victoria shipyard as their preferred location.

The remaining federal spending announcements will be unveiled in four Canadian cities this week including capital purchases of ships, aircrafts, helicopters and trucks to strengthen Canada's fighting forces.

The spending announcements still fall short of a Senate committee's spending recommendations as well as some of the military's own requests, but O'Connor said the new ships are the first item on a long shopping list.

Most of the spending announcements were either promised by the Tories during the election campaign or were planned by the previous Liberal government.

In addition to the $2 billion for the three naval support ships, the government is expected to announce $1.1 billion for new army trucks, $4.2 billion for 15 heavy-lift helicopters, and $7.5 billion for tactical and heavy-lift aircraft.

With a report from CTV's John Vennavally-Rao