On December 12, 2012, the National Fighter Procurement Secretariat released several key documents further to the Government’s Seven-Point Plan on the replacement of Canada’s fighter jets.
The released documents will provide the Government with important information decision on the replacement of the CF-18 fleet. However, the Government of Canada will not proceed with a decision until the Seven-Point Plan is complete.
Below is a summary of the highlights from each document.
Seven-Point Plan Status Report
The National Fighter Procurement Secretariat has made great strides in completing the implementation of the Seven-Point Plan. The Status Report outlines the progress on each element of work and explains why it is important.
Terms of Reference for the evaluation of options
The Seven-Point Plan calls for the evaluation of options to sustain a Canadian Forces fighter capability. This new evaluation of options will review and assess available fighter aircraft. Each option will be evaluated against the roles and missions of the Canada First Defence Strategy. The work will result in a comprehensive report with the best available information on each of the options including associated capabilities, costs and risks. This work will be informed by the guidance of an independent review panel.
During the evaluation of options, the Statement of Operational Requirement prepared by the Royal Canadian Air Force that led to the selection of the F-35 (False. The SOR was completed several years after Canada joined the F-35 program, not before—Ed.)will be set aside and not used as part of this new evaluation of options, allowing for a full consideration of the options available to sustain Canada’s fighter capability. Any effects on the Statement of Operational Requirement will be assessed once the options analysis is complete.
The Terms of Reference that will guide evaluation of options are posted on the National Fighter Procurement Secretariat Web site.
National Defence Annual Update
The National Defence Annual Update responds to the Auditor General’s recommendation to provide refined and detailed cost estimates for the F-35 based on a full life cycle costing framework developed by KPMG.
The Annual Update estimates a life cycle cost spanning 42 years, beginning in 2010 and ending in 2052. The life cycle reflects the period from when the aircraft is developed to the disposal of the last aircraft. The total estimated life cycle cost for the F-35A is $44.8 billion over a 42-year period. (see editor’s note at bottom)
The additional estimated cost is almost completely attributable to the increase in time frame from 20 years to 42 years.
Independent review by KPMG
The National Defence Annual Update was independently reviewed by KPMG.
KPMG has provided two reports:
1) the Next Generation Fighter Capability: Life Cycle Cost Framework and
2) the Next Generation Fighter Capability Independent Review of Life Cycle Cost.
KPMG’s verification of National Defence’s Annual Update notes that it “did not identify any significant quantifiable differences in the estimate resulting from National Defence’s application of the Framework.”
Industry Canada’s Report on Canadian Industrial Participation in the F-35 Joint Strike Fighter Program
Industry Canada’s report on Canadian Industrial Participation clarifies how industrial opportunities are calculated and explains how they have evolved over time.
The report notes that as of June 2012, 72 companies in Canada received US$438 million in contracts. The report also indicates that there are up to US$9.3 billion in additional identified opportunities for the future, for a total of approximately US$10 billion in identified industrial participation to date.
(EDITOR’S NOTE: Releasing the above avalanche of documents the day before Parliament rises for the holidays is a clear attempt by the Canadian government to prevent their effective analysis.
Nonetheless, three points should be made:
a) The government has attempted to dilute the F35’s total cost by adding 12 years of development time to the life cycle, which thus increases to 42.
This is clearly wrong, as the life cycle begins when the aircraft enters service, but allows the government to claim, brazenly, that KMPG’s costs are no different from its own.
This is false. The government cost estimate was $16 billion over 20 years, while KPMG’s is $45.8-billion over the projected 30-year service life (from 2022 to 2052).
b) The government also evaluates the value of Contracts and Identified Opportunities” available to Canadian industry in the F-35 program at “up to $9.8 billion.”
In fact, Canadian industry will simply be allowed to bid for contracts worth that amount, in competition against companies from all F-35 partner nations, with no absolutely no guarantee of winning any contract, so this figure is a mirage.)