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    Canada’s F-35 jet fighter purchase debacle

    A test version of the F-35 jet fighter aircraft. First operational model was delivered to the U.S. Marines in  mid-November, 2012, following 16 years and several billion dollars in trouble-plagued development. Final cost and start of full-scale production were still unknown.

    Excerpt from About Canada. Toronto: Civil Sector Press. ©Earle Gray.

    Trillions of long-term dollars, including billions of Canadian taxpayer money, are at issue in a multinational effort to develop the world’s most costly piece of military equipment, while the effort teetered on the edge of collapse. In Canada, the planned fighter jets produced a scandal of bureaucratic bungling and political cover-up, misinformation, and contempt of Parliamentary democracy.

    The F-35 Lightning II Joint Strike Fighter jet aircraft is a manned, single-engine, multipurpose, fifth generation plane, under development by 11 countries since 1996. They planned to acquire 3,100 of the jet fighters; more than 2,400 by the United States, 65 by Canada and the rest by Britain, Australia, Italy, Turkey, Norway, Denmark, the Netherlands, Japan and Israel.

    “Manned fighter jets are essential to our ability to maintain and control sovereignty over our air space,” Chief of Staff Lieutenant-General André Deschamps assured the House of Commons Defence Committee in 2010. Deschamps claimed that “Only a fifth generation fighter” can meet Canada’s requirements, and Lightning II is the only fifth generation aircraft available to Canada.1

    Two years later, after spending $400 million helping develop the F-35 Lightning II and bolstering its aerospace industry to join in building the planes, Canada seemed likely to cancel its planned purchase. Cost estimates had risen and anticipated delivery dates were delayed and uncertain.

    The government needed to replace what was left of the 138 CF-18 Hornet jet fighters it purchased in 1980 for $4 billion. Their useful lifespan was originally expected to expire in 2003. Extensive modernization and retrofitting had extended this for a few of the remaining Hornets to between 2017 and 2020. Upgrading and retrofitting CF-18 Hornets cost an estimated $2.6 billion. Only 77 of the upgraded Hornets were still in service in 2012. There was no certainty what the cost of the F-35s would be, whether they would be available before the extended life of those 77 Hornets expired, how much longer more fixing up could keep them flying, and at what cost. If the F-35 is abandoned and a competition is held to pick an alternative fighter jet, “It will cost taxpayers $1 billion and will create an operational gap for the air force,” according to Defence Minister Peter MacKay.2

     

    Long tribulations

    of a fighter jet

    There were three phases to the Joint Strike Fighter (JSF) program that would span decades to develop and produce all the 3,100 planned jets: concept design, system development and demonstration, and continued development and production.

    The program started in late 1996 when the U.S. Defence Department awarded $750 million contracts each to the Boeing Company and Lockheed Martin Corporation to produce a pair of concept aircraft. Canada, under the Liberal government of Jean Chretien, signed on to this phase the next year, with a US$10.6 million commitment spelled out in a memorandum of understanding.

    Lockheed’s concept aircraft won the competition, and in November 2002, Canada joined in the system and development phase, committing an additional US$150 million to the program.

    The driving force behind this commitment was not the need to replace the CF-18 Hornets, nor about Canada’s defence requirements, according to Alan Williams, who signed this second memorandum of understanding as the defence department’s assistant deputy minister in charge of procuring military equipment. The purpose “had nothing to do with buying these jets,” Williams told the Commons Standing Committee on National Defence, speaking after he had retired from the department. The entire purpose, he said, was to provide “an opportunity for Canada’s aerospace industry” to compete for F-35 contract work. “If Canada did not participate, its industry would not even be provided the opportunity to compete… This possibility was one we could not contemplate, and so Canada entered the program.”3

    And compete it did, at least in this phase. The industry won 144 contracts for US$490 million in work from 2002 to 20012. There was also a prospect of an estimated US$4.8 billion to US$6.8 billion by the time the last of the fighter jets were expected to be in the air.4

    On December 13, 2006, Canada committed up to another US$510 million for on going development, testing, and support of the F-35 over a 45-year period, in the third phase of the program. Including the two earlier phases, the total could grow to as much as US$710 million, Auditor General Michael Ferguson later reported.5 That didn’t include billions of dollars in purchase and operating costs if Canada later decided to buy the then-planned 80-jets. “We are convinced the aircraft is going to be a technological marvel… superior probably to everything else that’s out there,” Michael Slack, the Defence Department’s director of the JSF program, told Canadian Press. While the Liberals committed to the first two phases, it was Stephen Harper’s Conservative who, less than a year after coming to power, signed up for the costly third phase.

    Two days after Canada signed on for the third and final phase of the JSF development program, the first JSF F-35 Lighting II fighter jet test aircraft took flight. Sixty-three test planes were produce over five years in a process the military dubbed “concurrency.” The process involved concurrent computer design, manufacturing the aircraft, and test flights, followed by more design, repairs and retrofits to correct deficiencies revealed during the tests. Concurrent work turned out to be a major problem. The process was foolish, the head of the U.S. Air Force later admitted. “There was a view that we… could design an airplane that would be near perfect the first time it flew,” General Norton Schwartz, U.S. Air Force Chief of Staff, told a conference of aerospace industry investors. “I think we actually believed that. And I think we’ve demonstrated in a compelling way that that’s foolishness.”6

    The government’s decision to purchase the F-35 appears to have been made in 2008, although it was not publicly announced for another two years. A 21-page Canada First Defence Strategy, released with fanfare at a news conference held by Prime Minister Harper and Peter MacKay May 21, states: “Starting in 2017, 65 next generation fighter jets [are] to replace the existing fleet of CF-18s.” That could refer only to the F-35 Lightning II jets.

     

    The political storm breaks

    Peter MacKay’s announcement July 16, 2010 confirming that the government had decided to purchase 65 of the fighter jets (15 fewer than originally planned) triggered a storm of controversy that grew only louder during the next two years. The announced purchase price was $9 billion. No mention was made of development, operating, and maintenance costs. Delivery of the first planes was expected in 2016.

    Liberal Leader Michael Ignatieff called for immediate hearings by the Commons Defence Committee, blasted a “secretive, unaccountable decision,” and promised that a Liberal government would put the sole-source contract on hold.

    The government and the military were staunch in their defence of the planned purchase and the critics were strident in their opposition, during the months that followed.

    “This is the right plane. This is the right number. This is the right aircraft for our Canadian forces and for Canada,” MacKay told the Defence Committee. “If we don’t make this purchase there is a real danger we’ll be unable to defend our airspace, unable to exercise our sovereignty or unable to share our responsibility to both NORAD and NATO.”

    “Head and shoulders above” any alternative aircraft to “address the security needs of Canada,” former chief of air staff Lieutenant General Angus Watt, told Maclean’s.

    The critics were not appeased. Lack of competitive bidding was one bone of contention. Alan Williams, the retired Defence Department procurement chief who talked about the second phase of the JSF program in remarks to the Defence Committee, talked also about the decision to buy the aircrafts. He said government’s stated reasons for flouting policy requirements for competitive bids were “all flawed,” and “insult our intelligence.” Only by “rigorous examination” of competitive proposals can the government be certain “which aircraft best meets Canadian requirements.” Sole-sourcing, he noted, had dramatically increased to more than 42 percent of Defence Department’s purchase contracts. “Sole-source deals leave the procurement process more vulnerable to fraud, bribery, and behind-the scenes deal making,” risking billions of dollars in potential losses.7

    William’s concerns about the Defence Department’s procurement process were amplified 19 days later in the final report of retiring Auditor General Sheila Fraser. In auditing the purchase of new military helicopters, Fraser found “troubling” systemic problems, rigged competitions, and cost overruns in procurement programs. The contract award process for the helicopters failed to comply with regulations and policies, and “was not fair, open, and transparent,” Fraser wrote.

    Other critics claimed the F-35’s short range and single engine were unsuited for patrolling an air space as big as Canada’s. The CF-18 Hornets were chosen, in large part, because twin engines were considered essential for long-range patrols of Canada’s vast Arctic and coastal spaces.

    Retired Major General Leonard Johnson questioned the need for any fighter jets. “It’s hard to see any useful military role for the F-35 Joint Strike Fighters,” with the passing of the age of major interstate war, Johnson wrote in the Ottawa Citizen.8 Yet six months later, Canada’s Hornets flew 10 percent of the NATO missions that struck Libya’s military to enforce a UN-sanctioned no-fly zone, leading to the overthrow of dictator Moammar Gadhafi. The Hornets were pressed near their limits, raising concern about the possible effect on the ancient machines.9

    If the government had intended to sow confusion about its commitment to the F-35 and the cost, it could hardly have done a better job. “Mr. Speaker, let us look at the actual contract,” MacKay said in Commons Debate.10 “What the Canadian government has committed to is a $9 billion contract for the acquisition of 65 fifth generation aircraft.” In fact, there was no purchase contract, and no commitment: there was simply an announcement that this is what the government had decided to do.

    As for cost, MacKay used only one figure in his public statements, $9 billion, the stated acquisition cost. “I have no idea where these other figures are coming from,” he told the Conference of Defence Associations. “They’re simply made up—or they’re guessing.11 Perhaps MacKay should have talked to Laurie Hawn, his Parliamentary assistant, who was more forthcoming in Parliamentary debate. “In fact, the total cost we are talking about for 20 years, plus the acquisition of the airplane, is $16 billion,” Hawn told MPs.12 In actual fact, Hawn must have—or certainly should have—known that the government’s undisclosed estimate of the total 20-year cost was $9 billion more than he told Parliament.

    Cost estimates became the focus of Parliamentary debate in 2011, not only the cost of the F-35s but also the cost of the government’s tough-on-crime bills, whose mandatory sentences are expected to send more people to jail for longer periods. The opposition parties demanded to see the documents supporting the cost figures. The government refused.

    Demands to see the F-35 cost documents intensified on March 10 when Parliamentary Budget Officer Kevin Page released a report that estimated the lifetime costs of the jets at $29 billion, almost double what the government had been saying. In response to the Page report, the government released an even lower cost estimate, $14.7 billion. But it still refused to release either the F-35 or crime bill documents. “There is no doubt the order to produce documents is not being complied with, and this goes to the heart of the House’s undoubted role in holding the government to account,” House Speaker Peter Milligan ruled. Two weeks after the Page report was released, the government fell on a contempt of Parliament motion based on its refusal to release the documents. It is the only government in the Commonwealth of Nations to fall on contempt of parliamentary democracy. National elections were called the day the government fell, March 25.

    Re-elected with its first majority in the House, the government was all gung-ho for the F-35. “We will purchase the F-35,” Associate Defence Minister Julian Fantino vowed at a November news conference in Fort Worth, Texas, where the fleet of F-35 test planes are being built. “We’re on record. We’re part of the crusade. We are not backing down.”13

    That fierce stance wilted under a barrage of continuing F-35 problems throughout 2012.

    January 13: “The program has demonstrated very little missions system capability,” says a U.S. Defence Department report. The 63 test planes “will require significant numbers of structural modifications and upgrades to attain the planned service life.”14

    January 26: U.S. Defence Department to defer 179 of the 429 F-35’s it had planned to order in the next five years, to help cut $259 billion from total military spending during that period, Reuters reports.

    February 11. Fantino hosts a meeting of countries in the F-35 program at the Canadian Embassy in Washington to discuss adverse cost implications of the U.S. slowdown.

    March 13: Four months after vowing Canada would not back down Fatino tells the Commons Defence Committee, “The… decision has not been made as to whether or not we are actually going to purchase, buy, acquire the F-35… we have not as yet discounted the possibility, of course, [of] backing out of the program. None of the partners have.”

    March 20: The plan to produce affordable F-35s in large numbers “could be in question,” the U.S. Government Accountability Office warns in a report to Congress. “Full production rate has been delayed five years, and initial operational capabilities are now unsettled,” Michael Sullivan, GAO’s director of acquisitions, tells a Congressional committee. Projected funding needs of more than $13 billion a year for the next 23 years were said to be “unprecedented,” with “risks of additional cost overruns and retrofit cost,” from flight testing that “has years to go.” Sullivan blamed “most of the instability in the program” on “highly concurrent development, testing and production.”15

    April 2: Pentagon documents estimate the full, lifetime costs of the government’s planned 2,457 F-35s at $1.5 trillion, up from $1.38 trillion a year earlier, Reuters reports.16 The cost is $615 million per jet fighter. Norway has estimated the lifetime costs of its planned 55 F-35 jets at $769 million each.17

    The U.S. and Norwegian estimates suggest a lifetime costs for Canada’s 65 jets at $39-50 billion, about $10-20 billion more than even Kevin Pages’ estimate.

    The full lifetime cost of all the 3,100 fighter jets that had been planned seemed likely to exceed $2 trillion. But the number on order is declining, as most—perhaps all—countries reduce or cancel their planned purchases. Japan has joined Canada in considering whether to buy any; the Dutch have cancelled their planned 65; Britain has reduced its planned purchases by 90; Australia has committed for only two of its planned 100; Italy has committed for only 19 of its planned 75 planes; others are likely to follow suit.  In mid-September, the United States said that there would be no further increases to its F-35 budget; continued cost overruns would mean further deferral of purchases, reduced capabilities, or fewer planes. As the order book shrinks, the price of each jet expands.

    Meanwhile, Canada’s need to replace its ancient CF-18 Hornets grows increasingly urgent. The 77 still in service are more than three-quarters of the way through their already extended life expectancy. On September 28, the Australian National Audit Office warned that the use of that country’s 71 Hornets needs to be scaled back to avert structural fatigue concerns. Annual maintenance cost for the Australian fleet was forecast to almost double, from $AUS118 million in 2001, to $214 million by 2018. The outlook for Canada’s similar vintage Hornets can hardly be any better.

     

    “There is no moving on

    from a lie this big”

    A full year after the government ignored the Speaker of the House and defied Parliamentary democracy, Auditor General Michael Ferguson, in his April 4, 2012 report to Parliament, disclosed the $25 billion cost estimate that the government had kept under wraps.

    The Defence Department was accused of lack of due diligence in the procurement process, with general bungling, improper procedures, withholding documents, and providing false information, among other things. Public Works was castigated for blindly accepting the Defence Department strategy, which “compromised an important control in the procurement process.”

    The big issue in the uproar, however, was misleading Parliament and the public about the cost. The opposition parties laid the blame at the top, on the shoulders of Prime Minister Harper. “He cannot now pretend that he was just the piano player in the brothel who didn’t have a clue as to what was really going on upstairs,” said Liberal Leader Bob Rae.

    Among the political pundits, none were more outraged than conservative journalists, particularly two columnists who write for the National Post and the Postmedia chain of newspapers. “So that’s it then: They knew and they lied,” wrote Michael Den Tandt. “There is no moving on from a lie this big.”

    “This is about whether departments are answerable to their ministers, and whether ministers are answerable to Parliament—or whether billions of public dollars can be appropriated without the informed consent of either Parliament or the public,” Andrew Coyne wrote. “It is about whether we live in a functioning Parliamentary democracy, or want to.”

    Read more excerpts from About Canada in a free, 34-page Sampler book. For your copy, click now.

    (Endnotes)

    1 House of Commons Standing Committee on National Defence (Defence Committee), September 15, 2010.

    2  Speech, Conference of Defence Associations, February 25, 2011.

    3 Alan S. Williams, Defence Committee, October 7, 2010.

    4 Williams. Reinventing Canadian Defence Procurement: A View From the Inside. Kingston, Breakout Education Network, Queen’s University, 2006.

    5 Michael Ferguson, Report of the Auditor General of Canada to the House of Commons, April 4, 2012.

    6 Marcus Weisgerber, “DoD Anticipates Better Price on Next F-35 Batch,” Defense News, March 8, 2012.

    7 Defence Committee, September 15, 2010.

    8 Ottawa Citizen, September 23, 2010.

    9 Murray Brewster, Wear tear on CF-18 fleet worried Air Force planners. Canadian Press, September 10, 2012.

    10 December 13, 2010.

    11 Speech, February 25, 2011.

    12 March 10, 2011.

    13 News media reports, news conference, Fort Worth, Texas, November 8, 2011.

    14 Tony Capaccio, “F-35 Showed Mixed Results in Tests,” Bloomberg, January 13, 2012.

    15 Michael J. Sullivan, Director, Acquisitions and Sourcing Management, U.S. Government Accountability Office. Prepared statement on testimony presented to the Subcommittee on Tactical Air and Land Forces, Committee on Armed Services, House of Representative, Washington, March 30, 2012.

    16  Andrea Shalal-Esa, “Government sees lifetime cost of F-35 fighter at $1.51 trillion.” Reuters, April 2, 2012.

    17 Norwegian Rear Admiral Arne Roksund, House of Commons National Defence Committee, Ottawa, November 24, 2011.

    TAGS: F-35 Lightning II Joint Strike fighter jet aircraft, aircraft, armament, Canada, Parliament, democracy, public finance.

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