The costs, $25-billion more than the current National Defence estimate, are contained in a section of the department’s latest report to Parliament on the F-35 that outlines “cost risk and uncertainty” and is intended to provide a range of effects on the cost of buying and operating a fleet of stealth attack planes if factors such as inflation, the exchange rate between the Canadian and U.S. dollar, the cost of fuel and the rate of aircraft to be produced by Lockheed Martin fluctuates either higher or lower than the estimates that are behind the current National Defence figures.
If Lockheed Martin expectations of more efficiency through continued production and economies of scale as it makes and sells an expected 3,100 jets are even just three per cent less than expected, the extra cost to Canada would be $6.1-billion over a current acquisition calendar which has the 65 aircraft being delivered over a seven-year period beginning in 2017.
That timeline is up in the air after Prime Minister Stephen Harper (Calgary Southwest, Alta.) and his government put the F-35 project on hold last year following a scathing report by Auditor General Michael Ferguson. The government is now engaged in reviewing final cost and industrial benefit submissions from four aircraft manufacturers, including Lockheed Martin and its F-35, as part of an options analysis it promised at the same time it suspended the F-35 plan.
Though the Canadian project has been put on hold, Canada remains a partner with eight other countries in the F-35 Joint Strike Fighter consortium, and has Canadian Forces officers assigned to the project’s Joint Program Office at the U.S. Department of Defense in Washington, D.C.
Other risks the National Defence report outlines include a likelihood that Lockheed Martin will sell 250 aircraft less than the number previously expected during the period Canada would potentially buy, leading to lower economies of scale in production and an extra cost to Canada of $500-million.
The risk analysis shows if the Canadian dollar were valued at 78 cents per U.S. dollar, instead of the current forecast of 92 cents, it would add $1.6-billion more to the acquisition cost. If the inflation rate were one per cent more over the lifetime of the fleet than the inflation rate on which the current National Defence forecast is based, the extra cost for sustaining Canada’s fleet would be $3.1-billion over the aircraft lifecycle. A change of one cent in the exchange rate could mean an extra $2.1-billion in lifetime sustainment cost. On the other side of the coin, a one-cent change in the exchange rate to the benefit of the Canadian dollar would lower the lifecycle sustainment cost by $2.1-billion.
The National Defence forecast of $19.8-billion in operating costs over the F-35 fleet’s lifecycle would increase by $5.4-billion with just a one per cent increase in the inflation rate from the rate the National Defence estimates are based on. It would correspondingly drop with a reduction of one per cent in the inflation rate from the current forecast rate.
The National Defence report forecast of fuel costs over the fleet’s lifetime is based on a price of 87.9 cents per litre, and a 10-per-cent increase in that cost could raise the forecast of life cycle fuel costs by $1.5-billion, with a reduction of the same amount in the unlikely event fuel costs would drop by 10 per cent.
Opposition MPs say the cost risk analysis, reviewed independently by the accounting firm Raymond Chabot Grant Thornton, fuels suspicion that if the Conservative government goes ahead with the F-35 acquisition, it is buying a pig in a poke.
The NDP and Liberals argue a full-blown competition is required to replace Canada’s aging F-18 fleet of fighter jets, and the government has to take another stab at defining what Canada’s needs are for the new fighter fleet.
The F-35, still in development and testing stages although several countries and the U.S. military have purchased the planes, is a sophisticated stealth version of first-strike attack jets. NDP MP Jack Harris (St. John’s East, Nfld.) said the updated risk analysis demonstrates Prime Minister Harper’s government has been “reckless” with the F-35 acquisition.
“The whole thing demonstrates how risky and frankly, for a government, reckless to throw so many eggs into this basket of one plane that hasn’t even been determined is suitable for Canada’s needs,” Mr. Harris told The Hill Times. “Absolutely there should be a competition … but we’re at the point now also of having to seriously consider what function we want a jet fighter to play, what Canada’s needs are. There should be a significant evaluation of what Canada’s needs are, for domestic interceptor, patrol, surveillance, that sort of work, as opposed to this strike fighter.”
Liberal MP Joyce Murray (Vancouver Quadra, B.C.), her party’s new defence critic, also called for competitive bidding to replace Canada's fighter fleet.
“There is lack of transparency. There is a need for a competition to really get out the facts of the cost, and we’re still waiting to see an analysis of the activities that the equipment will be required to support, to know the F-35 is the right solution,” Ms. Murray said.
She criticized the fact that the government at the moment does not have an up-to-date statement of requirements for the F-18 replacements that is in force. “I think that’s key. This is a massive investment of public funds for something for which there has been no public justification of what this needs to fulfill,” said Ms. Murray, who was responsible for a B.C. government major services secretariat in former Liberal premier Gordon Campbell’s Cabinet.
The Public Works department, which is houses the National Fighter Procurement Secretariat the government established in response to Mr. Ferguson’s 2012 report, had not responded to emails as of 5 p.m.
Original Article
Source: hilltimes.com
Author: TIM NAUMETZ
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