Rising F-35 price tag setting up tough choices, DND report suggests

A new Defence Department report says the cost of the F-35 has continued to rise, and suggests the Conservative government will face a tough choice if it goes ahead with the controversial stealth fighter.

In particular, the government may be forced to pony up an extra $1 billion or else cut back on the number of aircraft as a result of the weaker Canadian dollar, inflationary changes, and other countries slashing their own orders.

The F-35 annual update obtained by the Citizen presents the most up-to-date cost estimates for the stealth fighter. The reports are part of a government promise to inject more transparency after the auditor general blasted its handling of the project in 2012.

The Conservative government has refused to say whether it plans to move ahead with buying the F-35 or hold an open competition, and it has not set a timeline on when a decision will be made. Most analysts don’t expect a decision until after next year’s federal election.

In the report, National Defence assumes it will begin receiving the first of 65 F-35s in 2020, and that the last will be delivered in 2025.

The report says Canada can expect to pay $45.8 billion to own and operate the stealth fighters through 2052, an increase of only $141 million, or about 0.27 per cent, from the estimate in 2013.

However, behind the apparent stability was an increase in the expected cost of buying the F-35s, that cut into contingency funds set aside for future problems.

Specifically, National Defence now has only $76 million in wiggle room for purchasing 65 F-35s within the Conservative government’s self-imposed $9-billion budget envelope as the price of buying the warplanes rose $266 million, or three per cent.

Defence officials estimate they will actually need more than $1 billion in contingency funds to protect against the effects of a weaker Canadian dollar, inflation and other countries cutting back on how many planes they purchase.

The report suggests that if an extra $1 billion is needed, “the remaining shortfall could be met by buying fewer aircraft.” It adds that the government “will consider the frozen acquisition envelope,” suggesting the $9-billion cap could be removed.

An attached government-commissioned review of National Defence’s numbers by Quebec accounting firm Raymond Chabot Grant Thornton noted defence officials had not actually studied whether it was feasible to buy fewer than 65 F-35s.

Canada had originally planned to purchase 80 F-35s to replace its CF-18s, but scaled back the order in 2006. The government has not said why it reduced the plan, but senior military commanders have suggested 65 is the minimum the air force needs.

Original Article
Source: canada.com/
Author:  LEE BERTHIAUME