Ottawa Officially Scraps F-35 Purchase As Audit Pegs F-35 Costs at $45 Billion
(Source: The Globe and Mail; published Dec. 12 2012)
OTTAWA --- Stephen Harper’s Conservatives are officially recanting their 2 1/2-year-old decision to buy the cutting-edge F-35 fighter plane – but the federal government is still resisting calls to hold an open competition to pick Canada’s next jet purchase.
The Harper government on Wednesday officially announced it was backing off a sole-source plan to buy 65 F-35 Lightning jets as a replacement for Canada’s aging CF-18 Hornets. It was a rare U-turn for an administration that only infrequently acknowledges it was wrong – but one the Tories felt was necessary to repair their fiscal stewardship credentials.
“No decision has been taken on a replacement for the CF-18,” a senior government official told reporters in a not-for-attribution media briefing set up by the Tories so that top civil servants on the file could speak plainly about Ottawa’s new jet purchase policy.
The Conservatives have been dogged for months by a damning auditor general’s report last spring that said they selected the F-35 without due regard for price and availability. Back in July, 2010, the Tories announced to great fanfare they would forgo an open competition and would buy the Lockheed warplane because it was the only plane that would serve Canada’s needs. They defended the decision in the 2011 election and often excoriated critics who suggested they had made a mistake.
On Wednesday, Ottawa made a great show of backing away from that decision – while unveiling a full lifetime cost estimate for the Lockheed Martin plane that is five times greater than what the Tories originally advertised it would cost.
The “cradle-to-grave” bill to taxpayers for buying and operating the controversial F-35 warplane will exceed $600 million per jet – or $45-billion in total, the government announced Wednesday. The Tories originally sold the aircraft as a $9 billion purchase.
The $45-billion lifetime estimate may ultimately prove to be too low if the cash-strapped U.S. government cuts its own order for the F-35 – a move that would increase the average price.
Defence Minister Peter MacKay and Public Works Minister Rona Ambrose went to great effort Wednesday to distance themselves from the July, 2010, purchase announcement, an event where Mr. MacKay posed for photos in a dummy version of the fighter. “We are pressing reset on this acquisition in order to ensure a balance between military needs and taxpayer interests,” Mr. MacKay told reporters. “Let me be clear: The government of Canada will not proceed with a decision to replace the CF-18 fighter aircraft until all steps … are completed.” (end of excerpt)
Click here for the full story, on the Globe & Mail website.
The Federal Government’s Continuing Spin On F-35 Costs Is Inexcusable (excerpt)
(Source: National Post; published Dec. 12, 2012)
So, just to be clear, they’re still spinning us. Even now. Even after all that has gone before, even with the release of its own specially commissioned independent review by the accounting firm of KPMG, the Conservative government still can’t bring itself to tell us the whole truth about the costs of the F-35.
I’ll leave others to try to figure out the rest: whether there will be a truly open competition now that the original sole-source contract is dead, whether Canadian firms will still be able to bid on F-35 work if we don’t buy it, and so on. I’d just like to focus on the comparatively simple question of how much these planes really cost, and why it matters.
You will be familiar with how the government’s official estimate of the cost of the planes has, ahem, evolved over the years: from $9-billion originally (just the acquisition cost), to $16-billion (including acquisition and “sustainment,” but not operating costs), to the $25-billion (including all costs, but only over 20 years) it grudgingly owned up to after the Auditor General’s report last spring.
As you’ll recall, the Auditor General said even that figure severely underestimated the true cost of the project, as the actual service life of the planes was not 20 years, but 36 years. Others, including the Parliamentary Budget Officer, put it at 30 years: that’s the number KPMG used. And the figure that popped out of its calculators was $45.8-billion.
The new line, as expressed in government documents and repeated by the Defence minister, Peter MacKay, is that the planes will cost $45.8-billion “over 42 years.” Not 20 years, or 30 years, but 42 years. And then the spin: it was a billion dollars a year before, it’s pretty much a billion dollars a years now. So you see? Nothing’s changed.
Except it isn’t 42 years. Not in any comparable sense. The 20 years used in previous cost estimates was the (supposed) service life of the planes: that is, how long they’re expected to be in use, after delivery. KMPG’s report, as I said, assumed a service life of 30 years. So to compare apples to apples, you would have to say the planes are now projected to cost $45-billion over 30 years.
How does the government get 42 years? By adding in 12 years for “development and acquisition,” from the decision to acquire the planes in 2010 to the delivery of the last plane in 2022. No previous estimate included development costs. And indeed they add next to nothing to the total: just $565 million. But by tacking on another 12 years, they allow the government to spread the cost over a much longer time frame, and make the annual cost of the planes seem much lower than it is. (end of excerpt)
Click here for the full story, on the National Post website.