Canada stands firm on F-35s
as questions fly on price and production 
| “The government is basing its projections on a really unreliable number at this point, even in the best-case scenario.” | “The F-35 is the only one that addresses the long-term need for the Canadian Forces.” | ||
| — Philippe Lagassé, University of Ottawa | — retired Lieut.-Gen. George Macdonald | ||
It’s been a turbulent summer for the F-35. Production delays and ballooning costs dog the Joint Strike Fighter program and are prompting participant nations to delay or reconsider their purchases. Canada, however, has never wavered.
In July 2010, Defence Minister Peter MacKay announced Canada’s commitment to buy 65 Lockheed F-35s. The decision has been under fire ever since.
The federal Conservatives are known for their many and varied press conference backdrops, but Peter MacKay had the help of a larger than average prop for his July 16, 2010 announcement that Canada would buy 65 F-35s.
CP/Adrian Wyld
Final unit cost is the No. 1 concern and a great unknown. Opposition parties and some of Lockheed’s competitors argue that the procurement process was neither fair nor open, but the government insists that only the F-35 meets such guidelines as survivability as set out under the Statement of Requirements for a next generation fighter.
The F-35 grabbed headlines last March when a report from Canada’s Parliamentary Budget Office suggested each plane could cost as much as $128 million — significantly more than the mid-$70 million the government had been touting. Not long after, the U.S. Government Accountability Office echoed the PBO estimate, also predicting a final price tag at more than $100 million per plane.
The cost discrepancy made news, as did other related issues during the federal election campaign, but then the F-35s dropped out of sight in Canada, despite persistent problems and news that other countries are reconsidering the program. Throughout, Canada has remained fully committed.
The lack of concern worries defence analysts like Philippe Lagassé, an assistant professor of Public and International Affairs at the University of Ottawa.
“Certain countries are asking questions that, it’s simply bizarre in my point of view, we’re not asking,” he told iPolitics. “The government is actually engaging in a fairly risky venture at this point.”
Rising costs
It was a summer of challenges for the F-35.
Lockheed Martin delivered two new test planes to Eglin Air Foce base (including the AF-9 CTOL variant), but weeks later a problem with the cooling system grounded the entire fleet. Lockheed has not said what’s wrong, only that a “permanent resolution is in the works.” Some of the planes, though not the two most recent deliveries, have since been cleared to fly.
This summer, a cooling problem grounded the entire fleet of F-35s, like the one seen here arriving at Eglin AFB, July 14, 2011. Photo: Angel DelCueto, Lockheed Martin.
The program is also chewing through money. In July, the U.S. Department of Defence requested an additional $264 million from Congress to cover production costs of the initial 28 F-35 jets. In addition it asked for $496 million to pay for overruns on three production lots. John McCain, Arizona senator and ranking member of the armed services committee, blasted the Pentagon and vowed to oppose the request.
That same week, Joe Dellavedova, spokesman for the Joint Strike Fighter program office, told Aviation Week that the additional costs for the first three lots were likely to be around $918 million, plus $136 million for modifications. In all, the total overrun would be just over $1 trillion.
The news came in the face of partisan wrangling over the debt ceiling deal, which will see $350 billion cut from defence budget during the next decade. Analysts have already identified the F-35s as a possible place to start cutting.
Meanwhile, Australia, a signatory nation to the JSF development Memorandum of Understanding, has put off its final decision on its purchase of as many as 100 F-35s. The delivery for the original 14 planes it committed to buy has been delayed three years until 2014. In the meantime, Australia purchased 24 Boeing F/A-18 Super Hornets and is contemplating buying more in place of the F-35.
The Canadian government continues to insist its $9 billion will pay for 65 aircraft, along with related weapons systems, supporting infrastructure, initial spares, training simulators and contingency funds.
Cost is related directly to the number of planes produced and sold. While Canada plans to buy when production is high and prices are low, production delays will influence when it gets its planes.
Earlier this month, Julian Fantino, associate minister of National Defence told CBC’s Power and Politics that the government is “mindful of ensuring that the taxpayer nickel is spent in a most efficient, effective way.”
He added, “our government has committed and we are committed to ensuring that our men and women serving in what now is the Royal Canadian Air Force are given the tools and the equipment they need to do the jobs that we require them to do.”
The comments are consistent with Conservative messaging since the purchase was announced. Those who challenge the plan are told that anything less will put Canada’s armed forces at risk.
During the federal election campaign, the Conservatives insisted the F-35 is “a necessary and responsible investment to re-equip Canada’s air force and to strengthen Canadian sovereignty.”
A spokeman for Fantino’s office made the same point in a recent interview.
“The F-35 is the best — and only — aircraft that meets Canada’s operational requirements,” wrote Chris McCluskey in an email. “Canada’s participation in the Joint Strike Fighter program ensures Canada is giving our Canadian Forces the equipment they need to protect our interests well into this century.”
Lagassé says the government has made assumptions about the number of planes that will ultimately be produced. If the number falls, it will likely affect the unit price, he said.
Earlier this month, it emerged that the U.S. Department of Defense is considering cutting planes from the next low-rate production run if it can’t get $264 million to cover overruns.
Back to the drawing board?
Then-government House leader John Baird looks at a 150,000 pound thrust engine test facility model as he takes part in a press conference at MDS Aero Support Corporation in Ottawa on Jan. 11, 2011. In response to critics of the F-35 program's costs, the Conservatives have sought to highlight its benefits to Canadian industry.
“The government is basing its projections on a really unreliable number at this point, even in the best-case scenario,” Lagassé said. “There have been questions about performance and the ability of the plane to operate on schedule. It could be at least in the government’s best interest at this point to re-examine and hold a competition to see if another aircraft could be a better purchase on a number of levels.”
The first step would be to re-evaluate the Statement of Requirements for a new batch of fighters. A new SoR, says Lagassé, could establish modified performance criteria for industry to meet.
“You would then be in a situation where you could balance cost versus performance. That’s what we’re not doing; we’re not really looking at the trade-offs,” he said. “We’re simply assuming we want peak performance and therefore we need the best aircraft possible.
But retired Lieut.-Gen. George Macdonald says there has been a proper evaluation.
“The F-35 is the only one that addresses the long-term need for the Canadian Forces,” he told iPolitics. Only the F-35 can fuse data from its sensors with other aircraft while delivering survivability and interoperability, he says.
“The reality is that we’re going to buy an aircraft that will be in service for probably four decades,” he said. “You don’t want to start with something less than an advanced, capable platform.”
Lagassé argues that Canada should reconsider what it wants in its next fighter if only to ensure it does not short-change other defence services.
“I understand that no other aircraft can meet everything that the F-35 can. But does Canada or the Canadian Forces absolutely need to have that capability?” he asked. “If they might be able to make do with less, what kind of savings would you accrue from that, and where could that money go?”
Lagassé says these are the questions Canada ought to be asking.
While there is no guarantee looming defence budget cuts in the U.S. will directly affect the F-35 program, it is something Canada should to be aware of, particularly if the design and technological difficulties persist, he says.
Get it in writing
The government could tackle the issue by signing a contract, Lagassé says. In doing so, Canada would be able to negotiate penalties for delays or technological difficulties. It would also have a better sense of a delivery timetable — dates that will influence plans for the current CF-18s.
“The minute that you have a contract, you can also lock in the price,” Lagassé said. “While we’re waiting now without one, the price goes up, and there’s nothing that we can do.”
Macdonald concedes that if there are further delays Canada may need to extend the life of its current fighters. “They’re going to have to determine how they can keep the CF-18 fleet going for a bit longer and make sure there’s no capability gap.”
No doubt there is a contingency plan, he says.
But Macdonald disagrees a new contract is even an option. Each year, partner JSF nations submit a procurement request to the program office for aircraft quantities, support equipment and the like. That request, he says, is collated and the program office negotiates a contract with Lockheed Martin for a delivery date four years later. All the aircraft produced that year would then be the same price for all the partners, says Macdonald.
So there is no reason to sign a contract any earlier, he says.
“Trying to jump the gun or trying to lock in a price is really not part of the formula right now,” Macdonald said. “We get the best price there is when we get it.”
Canada’s deadline for its procurement request is October 2012, with the initial delivery four years later. It is still unclear when the planes will become operational.
The U.S. House Armed Service Subcommittee was told in March that the U.S. Air Force expects a two-year delay on the F-35’s operational capability. And according to Lockheed Martin, Canada may have to wait until 2020 before its planes are operational.
Lagassé says that before the deal is a fait accompli, Canada’s government and its opposition must determine what the F-35s will ultimately cost.
© 2011 iPolitics Inc.
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