PARLIAMENT HILL, Ottawa—Auditor General Michael Ferguson has laid waste to the government’s line of the F-35 fighter jets in a report outlining a deeply flawed procurement process.
The report was eerily reminiscent of another scathing review of military procurement by former Auditor General Sheila Fraser, raising questions about why the fundamental issue raised in both reports has never been dealt with, namely National Defence providing decision makers with incomplete or inaccurate information.
The previous report looked at massive cost overruns in the purchase of military helicopters by the Department of National Defence (DND). Fraser, like Ferguson, noted that DND didn’t properly cost the purchase and decisions were made on low-balled figures.
While Ferguson found a long list of deficiencies with the plan to purchase the F-35s, he stopped short of allocating blame. More than any other question, the new AG has been badgered to name who is to blame, a question he has deflected by explaining that his office looked at the process, not the individuals.
But when pressed repeatedly, he noted the report is a public document with frank conclusions.
“I think the information is there for people to hold the government or the decision makers accountable.”
Ferguson’s detailed look at Canada’s participation in the U.S.-led Joint Strike Fighter program behind the F-35s uncovers a broken process that resulted in misleading information coming from the government.
The government announced its plan to buy the jets in July 2010 without following a competitive process, notes the report.
National Defence initially handled well the plan to join the F35 Joint Strike Fighter (JSF) program, making a commitment to fund parts of it and thereby earn the right for Canadian companies to bid on the avalanche of contracts connected to it.
However, when it came time to decide whether to buy the jet, DND provided decision makers with misleading information used in a mangled process.
“In the lead-up to the government’s 2010 announcement, required documents were prepared and key steps were taken out of sequence. Key decisions were made without required approvals or supporting documentation,” notes the report.
“[Public Works] endorsed the key decision to sole source the acquisition of the F-35 in the absence of required documentation and completed analyses.”
DND left out risks and limitations while emphasizing potential benefits, the report says.
“Briefing materials did not inform senior decision makers, central agencies, and the Minister of the problems and associated risks of relying on the F-35 to replace the CF-18. Nor did National Defence provide complete cost information to parliamentarians.”
Sidestepping Policy
National Defence looks to have sidestepped normal procurement policies due to the unorthodox nature of the F-35 program.
While a 2006 MOU further committed Canada to the JSF program, because it was not an actual purchase order, National Defence did not consult with Public Works, the department responsible for procurements. By that point Canada was committed to contributing US$710 million to the program.
A crucial DND analysis prepared in 2008 concluded that of three aircraft considered to replace the CF-18, the F-35 offered “exceptional capability at the lowest cost and unparalleled benefits for the Canadian aerospace industry.”
Unfortunately, that analysis was also incomplete and overly optimistic.
National Defence had a critical opportunity to come forward with full costing for the jets in March 2011 when Parliamentary Budget Officer Kevin Page issued his analysis of cost estimates.
The government had maintained the total price for the jets would be around $16 billion over 20 years, including maintenance. Page put that figure at closer to $29.3 billion over 30 years, which is closer to the actual life cycle of the jet.
The government dismissed Page’s report, but Ferguson’s report reveals that in June 2010, DND estimated the cost of the program at $25 billion, a figure that dropped to $14.7 billion less than a year later when DND responded to Page’s report.
In response to the AG’s report, Page’s office issued a statement saying it was “ready and willing to serve Parliament by providing independent analysis on any new options the Government may wish to consider replacing Canada’s aging fleet of CF-18s.”
Despite DND’s inconsistent budgeting, Ferguson let the government off with a single recommendation: DND should refine its estimates with complete cost estimates.
Laying Blame
Ferguson’s ambiguity about who should be blamed for the debacle was liberally interpolated by NDP leader Thomas Mulcair.
“The Auditor General has concluded that the Conservatives knew their figures were misleading but they gave them to Parliament anyway. The Auditor General’s report on the F-35 is a litany of poor public administration, bad decision-making, and lack of accountability by Conservative ministers,” he said.
While Ferguson did not make any statement that could be paraphrased in the manner Mulcair suggested, his report raises questions about why the government was so unwilling to scrutinize costing for the jets, especially given the pattern of cost overruns in DND procurements.
NDP military procurement critic Matthew Kellway said it isn’t hard to connect the dots. While Ferguson didn’t point fingers, Kellway said everything leads to Defence Minister Peter MacKay and his associate minister Julian Fantino.
Kellway noted that the opposition has known for over a year of the cost overruns, so the minister has little excuse not to have made inquiries to verify estimates.
“Why wouldn’t the minister, who is repeatedly barraged by questions about the costs and estimates, not go back and ask?” questioned Kellway.
Government Response
The government has fully accepted the report and has responded with a seven-point plan to fix the problem, beginning with freezing the amount of funding allocated for the jets.
The procurement will also be taken out of the hands of DND and put under a new F-35 Secretariat within Public Works.
The secretariat will give Parliament annual updates on costing forecasts within 60 days of learning of them from the JSF program office.
Any decision to move ahead with buying the F-35s will hinge on an independent and public review of DND’s costing commissioned by of the Treasury Board Secretariat.
The government has pledged Canada will not sign a contract to purchase the jets unless the costing and process pass muster.
The government notes the program has already garnered $435 million in contracts for some 60 Canadian companies.
But the opposition wants nothing short of an open bid for Canada’s next fighter jet, a move the AG says would be difficult to take given how committed Canada is to the F-35.
