F-35 jets cost to soar to $29B: watchdog

It will cost close to $30 billion to buy and maintain 65 F-35 fighter jets according to Parliament's budget watchdog billions more than estimates given by the Conservative government.

Parliamentary Budget Officer Kevin Page said in a report Thursday that his $29.3 billion estimate covers the purchase price and sustainment costs for the fleet over 30 years. The budget officer said the "total ownership" cost estimate from the department of national defence over the same period amounts to $17.6 billion based on his calculations.

The difference in numbers prompted accusations from opposition parties that the Conservatives are being dishonest with Canadians about the fighter jet deal that was announced last summer.

The government, however, said it stands by its figures. It says it has committed $9-billion to buy the 65 planes and they will cost around $70 million each. It estimates they will cost between $250 million and $300 million to service per year.

"I'm not going to get into a lengthy debate on numbers," Prime Minister Stephen Harper said at a news conference in Toronto. He said the F-35 is the "only option available" to replace the aging CF-18 fleet and to serve the purposes of the Canadian Forces.

"We're following a long-term plan here and we're purchasing at a time where we know the cost of production will be the lowest," the prime minister said.

Page, who has cast doubt before on goverment estimates, was asked by the Liberals to provide an independent analysis of the jet purchase, which is being done through the multinational Joint Strike Fighter program with Canada's allies.

In a memorandum of understanding, Canada has committed to buy 65 of the Lockheed Martin planes that are now in development and scheduled to be ready in 2016. Canada joined the JSF program in 1997 and in 2001 Lockheed Martin was chosen as the company that would manufacture the high-tech planes.

Thursday's report puts Page at odds with the Conservatives and gives weight to opposition party arguments that the pricetag for the planes would be higher than the government has been saying. The opposition has also accused the Conservatives of being secretive about the deal and Page agreed Thursday that the government isn't fully informing the public about the F-35s.

"I don't think they have been transparent," he told reporters. He said there's "a lot more" the department of national defence could do to share information.

"It's hard for me to understand how you stand by an acquistion cost of $70-million," said Page. He said that figure is likely from Lockheed Martin and "it's somewhat dated."

Page cautions that any cost estimates, his own or those from other sources, should be viewed in the context of the methodology used and the data available. The budget officer said in his report that his office asked DND to explain the methodology behind its estimates.

"DND confirmed that such an analysis has not yet been undertaken," the report says.

To arrive at his estimate of $29.3 billion, Page said he used a "top-down" model that considered historical trends on the cost of aircraft and key cost drivers. Page estimates the acquisition cost for the fleet at $9.7 billion and the ongoing sustainment cost for it at $19.6 billion.

The sustainment cost breaks down as follows:

• initial logistics set-up cost: $1.7 billion;
• operating and support cost: $14 billion;
• overhaul and upgrade cost: $3.9 billion.

Page was asked to weigh in on whether a competitive bid would have saved money compared to the cost of the sole-sourced deal, but Thursday's report doesn't include an opinion. The budget officer said there is insufficient data available for him to make such an assessment.

The Liberals say they would cancel the memorandum of understanding and hold a new competitive bid for the plane contract if they win the next election. The NDP is also opposed to the purchase, and Thursday on CBC's Power & Politics with Evan Solomon, Bloc Qubcois defence critic Claude Bachand said his party no longer supports the deal.

Possible election issue

An election may come this spring if the Conservatives are defeated on their March 22 budget or if the Liberals present a non-confidence motion and secure the support of the other parties for it.

The Liberals will make the F-35 deal a key line of attack against the government during a campaign, just as they have hammered the government over it in the House of Commons for weeks. They say the Conservatives are wasting millions of dollars on the planes.

The Conservatives respond that canceling the deal would kill jobs for Canadians and that the procurement is going to bring billions of dollars in economic benefits for the aerospace industry through maintenance and other contracts. It also argues that the F-35 is the best plane out there for the Canadian Forces and scrapping the deal would not only endanger their lives, but Canadian sovereignty.

Page warns that the total pricetag for the F-35s is subject to change due to a number of factors including: possible modifications to the technical specifications of the aircraft, any reductions in the number of planes countries participating in the Joint Strike Fighter program end up purchasing and the "circumstances prevailing" when the planes are due for a mid-life overhaul.

He also points out that his analysis is based largely on historical data and that the possibility exists that the F-35 deal won't fit with historial cost trends. "This means that it is possible that the F-35 constitutes an outlier, in that its costs might be significantly different relative to what the historical trend would suggest," the report states.

The JSF program has already been plagued by delays and cost overruns during the development phase of the aircraft. Page's report says that of those problems translate into a higher purchase cost, "overall production volume may be threatened."