$45,802,000,000. That’s the number that will stand out when the Harper government releases KPMG’s report on the cost of the F-35 program early next week.The National Post has seen sections of the report, including the cost estimates calculated by the accountancy firm charged with forecasting the entire 42-year life cycle cost of buying 65 new fighter jets.
According to KPMG, it will cost Canadian taxpayers nearly $46-billion to replace the fleet of 77 aging CF18s with the F-35s — nearly twice the numbers circulated by the Department of National Defence and roughly what the province of Ontario spends on health care every year.
The cost per plane is now estimated to be $88-million in five years, when production is expected to be at full throttle, compared to DND’s earlier forecast of $70-75-million.
The sticker shock is likely to put a severe dent in public, and ministerial, enthusiasm for the F-35, which the Conservatives defended against all comers as the best plane and the best value for money, until the Auditor-General, Michael Ferguson, released a scathing report on the amount of due diligence done on the fighter last spring.
However, contrary to rumours of its demise, the F-35 program is still very much alive. The government’s operations committee has discussed the roll-out of the KPMG report but full Cabinet has not made any decisions on the program. The KPMG report, when viewed in context, does not suggest the F-35 should be dismissed as a contender to succeed the CF18s.
The report validates much of the costing done by National Defence. The acquisition costs are identical at $8.9-billion. DND calculates sustainment costs will be $7.3-billion, while KPMG says $15.2-billion. On operating costs, DND estimates $9-billion, whereas the accountancy firm calculates $19.9-billion.
But the vast majority of those cost differences can be explained by the different time-scales used – DND’s costs are for a 20-year period, while KPMG fulfilled the mandate given it by the Auditor-General to give Canadians a full costing over the 42-year lifespan of the F-35s.
The conclusion that Canadians should draw is that it will cost them a little over $1-billion a year to operate a fleet of F-35s, according to both National Defence and KPMG.
Government sources are at pains to point out that the F-35 is still an option. “If we rule out the F-35, Boeing increases its prices by 15%,” said one person familiar with the procurement process.
As the National Post reported on Nov. 23, the Conservative government is approaching other manufacturers seeking cost estimates and information on availability and capabilities.
The F-35 secretariat in charge of buying the CF18 replacements will then decide whether it needs to re-write the statement of requirement that dictates what the air force needs. If it does so, the government will move to an open competition in which the F-35 is sure to be a contender.
As Alan Williams, former head of procurement within National Defence, pointed out: Unless the government states that it is modifying its statement of requirement, it is not committed to a change in direction.
However, it’s clear that the opposition parties will leap on the $46-billion price tag and attempt to turn public opinion even further against a plane that is already seen as too expensive by many.
Sentiment in the Public Works department appears to favour moving to an open competition, once it has completed its market analysis.
The Department of National Defence, on the other hand, remains a staunch advocate of the F-35. Sources point out that cancelling the program would see Canada lose $1-billion from the deal it has struck with the U.S. Department of Defence’s Foreign Military Sales program, where Canada buys the F-35s from the U.S. government, rather than the manufacturer, Lockheed Martin.
They also say that the Americans are already expressing alarm at reports the government here has cancelled the program. “There were lots of phone calls.
The fear is that Canada is going to be the first domino to fall [among allies signed up to the joint strike fighter program],” said one person.
As a result of the KPMG report, Canadians can at least have some confidence in the costs of the F-35 program. But its tabling in the House of Commons threatens to usher in a new phase where political manoeuvring will trump sensible public policy decisions.
We have seen this movie before, when Jean Chrétien cancelled the AgustaWestland EH101 helicopters purchase made by Brian Mulroney’s Conservatives, paid a $500-million termination fee and rigged the subsequent contest to prevent AgustaWestland from winning.
$46-billion is a big number but it should be viewed in context and compared to the equivalent figure for its competitors before it is sent to that great procurement scrapyard in the sky.
Original Article
Source: national post
Author: John Ivison
No comments:
Post a Comment