An audit of the F-35 procurement has led the government to put the potential cost at $45.8 billion over 42 years, with a decision to start fresh on requirements for a CF-18 replacement – including market analysis of available fighters.
The change is needed to present a balance between "military needs and taxpayer interests," said Defence Minister Peter MacKay following the release of several documents Wednesday afternoon.
Here’s how the costs for 65 F-35A jets break down from 2012 to 2052, according to a new “cradle-to-grave” life cycle framework developed by KPMG:
- $565M – development
- $9B – acquisition
- $15.2B – sustainment
- $20B – operations
- $65M – disposal
- $982M – attrition aircraft to keep the fleet at 65 kets
Senior government officials were keen to point out that the new 20-year estimate is $25.8 billion, only $700 million more than the Auditor General’s spring estimate of $25.1 billion.
The National Fighter Procurement Secretariat asked KPMG to review F-35 cost estimates in early September. Their report was finalized on Nov. 27, according to senior government officials.
The life cycle cost estimate was based on “domestic and international best practices.” No such planning document existed previously, according to KPMG.
KPMG used $87.4 million US as the cost per aircraft figure, which is the most recent estimate from the Joint Strike Fighter program office.
---
The Royal Canadian Air Force has been ordered to set aside its original Statement of Operational Requirements and start over in cooperation with the National Fighter Procurement Secretariat. An independent, four-person panel will review their work.
All options are being considered, including paying for CF-18 upgrades to extend their life expectancy. One government document called the process a “reset.”
The new terms of reference were made public. Included are six areas for studying criteria and Canada’s needs:
- analyzing threats
- Assessing mission needs
- Determining the necessary fighter capabilities
- Market analysis of available options
- Analysis on life expectancy and potential CF-18 upgrades
- Risk assessment for each option: capabilities, costs, and risk
“Any effects on the Statement of Operational Requirements will be assessed once the options analysis in complete,” according to a statement.
No decision has been taken on a replacement for the CF-18, according to senior government officials. The number of jets purchased could differ from the 65 planned F-35s.
The officials, speaking on background to reporters Wednesday afternoon, said it was “premature” to look at procurement strategies until the analysis is complete.
No timeframe was offered for the process to complete, aside from a promise to proceed as “expeditiously as possible.”
The independent panel is comprised of Rod Monette (former comptroller general of Canada), James Mitchell, Philippe Lagassé (University of Ottawa), and Keith Coulter.
---
The 2010 estimate of US$10.5 billion in industrial benefits through the F-35 Joint Strike Fighter program has been reduced to US$9.8 billion. Canada’s strong dollar is responsible for two-thirds of the difference, according to the government.
About $438 million in actual contracts have been signed by 72 Canadian companies. The other $9.3 billion is referred to as “identified opportunities” -- but future contracts are dependent on Canada procuring the F-35.
---
The government established the F-35 secretariat following a critical spring report by Auditor General Michael Ferguson that scolded the Department of National Defence, saying a more rigorous and transparent process was needed.
"When National Defence decided to recommend an acquisition of the F-35, it was too involved with the aircraft and the JSF (Joint Strike Fighter) program to run a fair competition. It applied the rules for standard procurement projects but prepared key documents and took key steps out of proper sequence. As a result, the process was inefficient and not managed well. Key decisions were made without required approvals or supporting documentation. Information provided to decision makers was incomplete, and no plan was developed for extending the life of the CF-18 fleet in the event of prolonged delays in the delivery of a jet that is still being developed ... National Defence did not follow the basics of good management that would be expected for a $25 billion commitment by the government."
The report also criticized Public Works and Government Services Canada for failing to exercise its "procurement authority."
Canada joined an international program to develop the F-35 Lightning II fighter in 1997. The government than announced its intention to buy 65 F-35 fighters in July 2010, to replace its aging fleet of CF-18s.
Canada has spent $284.6 million to date on the Joint Strike Fighter program.
The parliamentary budget officer pegged the cost in March 2011 at $29.3 billion (US), more than $10 billion higher than planned. The figure included both the purchase price and maintenance costs over 30 years. The Department of National Defence responded with a $14.7-billion estimate.
Read and Watch More: Timeline: F-35
In 2011, respected military journalist Scott Taylor heard from all sides of the debate and gained exclusive access to some of the most advanced aerial fighter machines on the planet as he examined F-35: The Politics of Procurement.
Read More: Scott Taylor and the F-35 (April 20, 2011)
-Andrew Thomson
Latest Comments