Defence contracts are messy.
That’s as much an oft-heard sentiment on Parliament Hill as a historical pattern. Few things a government does prove as difficult to explain and likely to blow up in their face as massive procurements of military hardware. Cost overruns and production delays are the norm and rarely does the average Canadian ever understand why we need exactly what we are buying.
So it is with the purchase of 65 next-generation multi-role F-35 Joint Strike Fighters.
Depending on who you talk to, this is either an opportunity to upgrade our aging fleet of fighters and get in on the ground level of the largest military manufacturing program ever, or an overly expensive indulgence in sole-source contracting.
Aerospace folks are saying the F-35 could be the last manned fighter before robots start flying our planes with human oversight from bunkers a thousand kilometres away. Those robo-jets won’t be restrained by a pilot’s physiology and can be smaller and lighter without their human cargo. According to Hollywood, they could also turn on their human overlords and take over the world, but either way, they aren’t quite ready yet.
Canadians can be forgiven for not knowing what to think as Parliament now investigates and debates the government’s plan to purchase the F-35s.
For a few weeks, the Liberals demanded the government thoroughly explain and defend the purchase but then changed their minds and promised that if they came to power they would cancel the contract and hold a competition to replace our aging CF-18s.
That shift came on the heals of Auditor General Sheila Fraser’s report blasting a previous military helicopter procurement. That deal has become a black eye for National Defence after the purchase price doubled to $11 billion—in large part because military officials low-balled the price by neglecting to mention all the bells and whistles they needed on their choppers.
But holding an open a bid is no simple issue. The JSF program is a monster with all kinds of arms and legs you need to contend with.
JSF a Bit of a Crapshoot
Canada has been a third-level partner in the program since the beginning, kicking in $150 million to help fund research and development. The two top-level partners, the U.S. and U.K., are the big spenders, though second-level partners Italy and the Netherlands kicked in $1 billion and $800 million respectively. Canada is joined by five other third-level partners.
Joining the program means your country’s aerospace and defence contractors can bid on JSF contracts, though Lockheed Martin gets to decide who they will award work to based on a fair competition. Lockheed says Canadian companies will get some $11.5 billion worth of contracts, but aerospace unions say that could mean little to workers here because some of those companies have facilities in the U.S. and elsewhere or may subcontract to countries as far away as Turkey.
Common practice in defence procurements is to have the selling company offer some kind of offset program that guarantees companies in the purchasing country get contracts worth close to the procurement costs. So if Canada buys a billion dollars worth of tank, Canadian companies will see a billion dollars worth of work from the tank seller.
The JSF program doesn’t allow that, however. It’s a bit of a crapshoot in that if you are in the program your companies can bid on contracts, but there is no guaranteed business. So far Canada has done pretty well, getting $350 million worth of contracts from the $150 million we pitched in. But defence officials say orders started to dry up until we promised to purchase 65 jets.
If we want to hold a competition to purchase a jet and demand some kind of offset as we normally would, we would have to leave the agreement we made with the JSF program. Defence folks like Col. Dave Burt say that would mean we either get a less capable jet or buy the F-35 for more money and watch our companies miss out on billions in work.
Other defence people say it could take years to run a competition and we could be left with no jets at all if our CF-18s start to fall apart before new planes arrive.
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