F-35s would cost $45.8 billion; feds hit ‘reset button’
Published Wednesday, December 12, 2012 12:54PM EST
Last Updated Thursday, December 13, 2012 10:30PM EST
The government is “hitting the reset button” on its plan to replace the country’s aging fighter jets with a fleet of 65 Lockheed Martin F-35s, following a report that pegs the total cost of the purchase at $45.8-billion over a 42-year period.
Minister of Public Works and Government Services Rona Ambrose said the government will now look at other replacement options, but will not make a decision on which plane to buy until every step of its comprehensive seven-point review plan and options analysis is completed.
“The next step is a full review of options," Ambrose said. "We have hit the reset button and are taking the time to do a complete assessment of all available options."
Defence Minister Peter MacKay told reporters that as the government continues to review all options, it will work to ensure any decision balances military needs with taxpayer interests.
“Ultimately, our government will get the best plane for the Armed Forces, for our pilots and for Canadian taxpayers,” he said.
The independent audit by accounting firm KPMG was released Wednesday, looking at the total cost of buying a fleet of 65 of the advanced stealth fighter jets. The amount of $45.8 billion includes attrition costs, fuel, and maintenance, on top of the jets themselves.
The amount is at least three times higher than what the federal government had been saying the sole-source procurement from Lockheed Martin would cost, and more than four times higher than the initial price tag of $9 billion.
The government's latest figures were based on projections for a 20-year maintenance program, while Auditor General Michael Ferguson's scathing springtime report pegged the "full life-cycle cost" at $25 billion over 20 years.
Ambrose said that by factoring in the full-life cycle cost of any purchase of jets, any new fleet will come with a “significant price tag.”
MacKay defended the cost and said that despite the hefty price, military investment remains a high priority for the government and any future investment is “well worth it.”
“Defending Canadian sovereignty is serious business and it requires substantial investment,” said MacKay. “The reality is that protection, security, ensuring Canadian forces have the right equipment and respecting tax payers is what this entire exercise is about.”
Moving ahead with the government's procurement reboot, a committee of independent experts -- comprised of University of Ottawa professor Philippe Lagassé, Communications Security Establishment chief Keith Coulter, former federal comptroller-general Rod Monette and former civil servant turned policy consultant James Mitchell -- has also been struck to vet the process, including the consideration of alternatives to the F-35.
Following the release of Wednesday’s report, officials had no word on when the review process might wrap up. Canada, one of nine nations signed on to the Joint Strike Fighter project, had been expected to begin taking delivery of the jets in 2016.
Ahead of the report's release in Ottawa Wednesday morning, NDP Leader Thomas Mulcair took aim at the government, criticizing its push to buy Lockheed Martin's F-35 jets without accepting tenders from competitors.
"They sole-sourced this contract. That's the best way to be played for a chump by the company that you're dealing with and that's what's happened in this case," Mulcair said, repeating an often-cited argument against the procurement process.
Mulcair also hammered into the Conservatives for their handling of the file daily during question period Wednesday.
“Fear-mongering and buck-passing: that’s what the F-35 file has been about -- a debacle since day one,” said Mulcair. “When is the government going to come clean with Canadians and admit that they’ve misled Canadians since day one?”
The prime minister defended his party, saying that since the Auditor General released a report questioning the deal to buy the planes, the minister of public works and the minister of national defence have been working with an expert panel to provide more information about the purchase.
He also said the Conservatives remain committed to providing the necessary resources to Canada’s air force.
“We remain fully committed to ensuring that our air force has the planes they need to do their job,” Harper said, adding no money had been spent or lost on the acquisition.
Liberal leader Bob Rae also used question period to slam the Tories for their lack of transparency.
The process to replace Canada's current fleet of 77 CF-18 Hornet fighter jets has long been mired in controversy, dating back to the announcement in 2010 that Canada would buy the F-35s, as they were the only jets that met its military requirements.
The government came under fire in the months that followed, including in a report from Parliamentary Budget Officer Kevin Page that concluded the jets would cost double the government’s initial estimate.
At the time, Prime Minister Stephen Harper said he wasn't about to debate numbers and reiterated the position that F-35s were the only option available to serve the needs of Canadian Forces.
In the ensuing to-and-fro, a parliamentary committee recommended the government be held in contempt for failing to disclose details of its costing.
Then, in the election that followed, Harper stood behind plans to buy the F-35s and told voters that increasing production costs in the U.S. would not affect the price for Canada.
Critics of the procurement process were assailed as unpatriotic and misinformed until a year later when, in testimony to the Commons defence committee in April 2012, Associate Defence Minister Julian Fantino said the government could yet back out of the purchase.
The next month, Auditor General Michael Ferguson released his own scathing report on the process, concluding that the fighters could wind up costing $10 billion more than officials had publicly acknowledged.
Beyond the low-balling, Ferguson also said that Canadians had been oversold on the spinoff benefits to Canadian companies and kept in the dark about delays and cost overruns plaguing the production of F-35s south of the border.
At that point, Harper instituted a seven-point "action plan" that included freezing the budget for the jets, and shifting the procurement process out of the Defence department and into Public Works.
The independent review contracted to KPMG was also part of the plan, as was a commitment to "evaluate options" for sustaining Canada's fighter jet capabilities in the future.
In addition to the KPMG report, Canadians can expect to hear about the proposed F-35 purchase in a Department of National Defence report detailing its latest costs forecast, and an Industry Canada report focused on benefits the project will bring Canadian businesses.
The Canadian Press reports that, to date, 70 Canadian companies have secured more than US $435 million in contracts related to development and initial production of the fighter jet.
In his comments Wednesday morning, Mulcair said that's well short of the historical precedent.
"The past on this type of military procurement has seen us go after industrial regional benefits that would equal the sum total of the contract," he said. "Here the total of the contracts in private deals with companies in Canada is less than 1 per cent of the overall contract that's being awarded here."