MacKay, Ambrose and the F-35: They’re still not getting it

As we begin 2013, the jury is still out as to whether Canadians can expect the government to honestly pursue an open, fair and competitive process to replace Canada’s jet fighters. It’s hard not to remain sceptical when ministers continue to make remarkably foolish statements reflecting a lack of understanding of the basics of procurement.

First it was Public Works Minister Rona Ambrose, who proudly announced this past fall that the statement of requirements (SOR) “will be set aside while that full option analysis is done.”

Fact check: any analysis of options must be constrained by an SOR. Would Canada consider purchasing a DHC-6 Twin Otter to replace its CF-18s? Of course not. There are basic requirements with respect to speed, range, systems and weaponry that must be met. These are outlined in an SOR. While the current SOR should be set aside — given that it was wired so that it could only be met by the F-35 — the government still needs a fair SOR against which possible options can be considered.

Then it was Defence Minister Peter MacKay’s turn. Read what he wrote in the Dec. 18 issue of his riding newsletter: “But let me be clear: Regardless of what aircraft we end up buying, the purchase cost will be no more than $9 billion. That is the maximum acquisition price Ministers Ambrose, Clement and I announced in 2010, and that has not changed.”

Pursuing such a commitment could lead to irrational actions. First, it could result in purchasing jets with significantly higher costs than necessary. What matters most are the life-cycle costs, not merely the acquisition costs.

For example, consider two bidders who provide technical bids of similar quality. One bidder has an acquisition cost of $8.8 billion and a life cycle cost of $35 billion, for a total of $43.8 billion. The other bidder has an acquisition cost of $9.1 billion and a life cycle cost of $25 billion, for a total of $34.1 billion. Under the minister’s criteria the first bid would be accepted — notwithstanding the fact that it’s costlier than its rival bid.

Second, trying to stay within an artificial limit of $9 billion could lead to harmful, even bizarre cost-cutting decisions. We’ve heard already about the potential cancellation of modifications necessary to permit the F-35 to perform air-to-air refueling. Such a cut would undermine Canada’s ability to operate these jets without the support of third parties or foreign countries. Canada’s sovereignty would be compromised.

The government could also, for example, defer purchasing the appropriate quantities of aircraft parts typically included as part of the initial buy. This would artificially reduce the acquisition cost — along with raising the risk of grounding the F-35 fleet due to maintenance problems.

It’s time for the government to start with a clean page, stop wasting valuable time on a needless options analysis and conduct an open, fair and transparent competition — one that is not constrained by its many past commitments and flawed arguments brought forward to support its sole-source decision to acquire the F-35.

Original Article
Source: ipolitics
Author: Alan Williams