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$45.8 Billion F-35s on Hold Until Review Done

Jet purchase ‘reset’ as life-cycle estimates balloon

By Matthew Little
Epoch Times Staff
Created: December 12, 2012 Last Updated: December 14, 2012
Related articles: Canada » National
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OTTAWA—The government has put a new $45.8 billion price tag to the controversial purchase of 65 F-35 jet fighters but attributed much of the new higher figure to different costing practices rather than skyrocketing prices.

It is a new way of presenting military procurement costs.

— Defence Minister Peter MacKay

That at least is the takeaway Defence Minister Peter MacKay seemed to want reporters to leave with after he and Public Works Minister Rona Ambrose gave their Wednesday update on the planned purchase of the jets.

Controversy has dogged the F-35 issue since Parliament’s defence committee scrutinized the purchase in 2010 raising doubts about the costing of the jet, the economic benefits of participating in the international program to develop and manufacture it, and whether it was the best jet for Canada to buy.

But while MacKay emphasized points supporting the government’s previous commitment to purchase the F-35, Ambrose stressed the procedure underway to ensure Canada gets the best bang for its buck.

“We have hit the reset button and are taking the time to do a complete assessment of all available options,” she said.

Part of that reset is setting aside the list of requirements that originally led the Department of National Defence toward purchasing the F-35.

Ambrose promised the government would make sure Canadians were confident in the process to replace the country’s aging fleet of CF-18s.

She said the government has frozen funding for the F-35 and no purchase will be made until the National Fighter Procurement Secretariat has finished its seven-point plan to evaluate the purchase. That plan includes independent review by a panel of experts.

MacKay said the government would ensure the military purchased the best jet possible, with taxpayers firmly in mind.

Wednesday’s update came in tandem with the release of an audit done by KPMG on the full life-cycle cost of the jet, which puts the cost of buying, maintaining, and operating the F-35 at $45.8 billion over 42 years. But while the number reflects a dramatic jump over earlier estimates, the government is standing by a potentially low-ball purchase price of $9 billion for the jets. Also, that 42-year lifespan is misleading due to the real 30 years of service life KPMG based its figures on. 

Secretariat Chair Michelle d’Auray acknowledged the purchase price is at the low end of estimates but the overall figure includes higher end estimates on maintenance and operation.

AG Criticism

Auditor General Michael Ferguson slammed the process costing the jet in an April report, detailing a lack of documentation and analysis surrounding the planned purchase.

Both MacKay and Ambrose credited the AG’s report for prompting the government to create the National Fighter Procurement Secretariat that will ensure the Royal Canadian Air Force acquires the aircraft it needs through a transparent process Canadians can trust.

Costing for the F-35 has climbed, but price estimates have come with different lifecycles, ranging from 20 to 42 years, and different parameters.

MacKay’s stance on the jet came with an emphasis on the need to defend Canada’s sovereignty while working in concert with its military allies. The F-35 has been touted in the past for its wide adoption among key NATO members, and the Joint Strike Fighter program was created in part to lower the cost per plane by creating cost efficiencies through large production runs of the jet.

The government originally put the total price at $16 billion over 20 years, a number that did not include operation costs. Parliamentary Budget Officer Kevin Page later put the figure at close to $30 billion over 30 years. Ferguson noted in his report that DND put the cost at $25 billion internally in 2010 but did not disclose the figure.

Ongoing Costs

MacKay defended the price of replacing the CF-18s during times of austerity as a matter of national security.

“Defending Canadian sovereignty is serious business and it requires significant investment,” he said.

MacKay noted there are ongoing costs with any fighter jet program, and that Canada is still paying to maintain and operate its current fleet of CF-18s—costs included in the new estimate that would be incurred regardless of which jet was purchased.

KPMG said it was an uncertain process to estimate lifecycle costs.

“It is a new way of presenting military procurement costs,” said MacKay who added costs would continue to be refined.

The government has been left scrambling to regain credibility on the F-35 file after a series of contradictions put it in the difficult position of explaining varying estimated costs for the jets and inconsistencies on whether or not the Conservatives had made a hard commitment to purchase the F-35.

MacKay said the government would ensure the military purchased the best jet possible, with taxpayers firmly in mind.

No decision on what jet will replace the CF-18 will be made until the secretariats seven-point plan is complete, pledged Ambrose.

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