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CDA Institute Research Fellow Chuck Davies examines the Liberal Party’s proposal to cut Canada’s involvement in the F-35 program.

A new plan to strengthen the economy and create jobs with navy investment Page 1The Liberal Party’s weekend commitment to terminate Canada’s involvement in the F-35 program and exclude the aircraft from any future procurement process inevitably leads the thoughtful observer to George Santayana’s dictum: “Those who cannot remember the past are condemned to repeat it.” Although the current situation is different in important respects, it is hard not to see shadows of Jean Chrétien’s famous “zero helicopters” statement in the 1993 election. As the fallout from that showed, abandoning any program carries costs that may or may not be offset by the hoped-for benefits.

I will leave it to others to comment on the operational impact on the Canadian Armed Forces and confine myself here to other aspects. From an industrial perspective, the F-35 program is fielding new, leading-edge technology in aerospace, software, hardware, sensor, materials, systems integration, and other disciplines. The other aircraft being considered are all late in their production cycles and have more mature technologies with certainly some, but clearly limited, opportunity for Canadian industry participation in their further development:

• The F/A-18 E/F Super Hornet entered service in 1999, with its technology roots deriving from the original F/A-18 Hornet which first flew in 1978;
• The JAS 39 Gripen E/F is a current upgrade to the original model that entered service in 1999; and
• The Rafale entered service in 2001, and continues to be upgraded with a view to extending its service life to 2040 or later.

This means two things: these aircraft will become obsolete and require replacement earlier than the F-35; and they offer measurably less opportunity for Canadian industry to gain access to new, exploitable advanced technologies. Industrial benefits will be largely related to the small number of aircraft purchased by Canada, supplemented by more generic offsets that may or may not include commitments to high-value work in other areas. Past cases where maple syrup sales were deemed to meet Industrial Regional Benefit commitments inevitably come to mind.

Canada can certainly extract its traditional dollar-for-dollar industrial benefits from any of the contenders, but getting enduring value from them is another matter. In that respect, the F-35 program stands out as it will unquestionably see the production of over 1,500 conventional take-off and landing A Models (and likely well over 2,000) before production eventually ceases. Another 500+ of the B and C Models will also be built. As a partner nation in the aircraft’s development, Canada currently has privileged access to contracts for the production and lifetime support of the global fleet, which it would largely lose by leaving the program. As current contracts expire, other purchasing nations will pick them up.

None of the alternative aircraft will come close to these production numbers, and most that are going to be built have already been delivered. The Super Hornet will end production in two or three years at well under 1,000 aircraft. Production of the Gripen and the Rafale will not exceed a few hundred each, including those built in countries under license where there is little opportunity for Canadian involvement.

Consequently, at both the qualitative and quantitative levels, the F-35 program offers Canadian aerospace and technology companies far greater opportunities for technology adoption, exploitation, and long-term corporate growth than any of the other candidates. While the Conservative Party’s claim that the Liberal plan would “crater” the Canadian aerospace industry certainly overstates the case, it is a fact that walking away from the F-35 program has distinct echoes, though clearly at a different level of magnitude, of the 1959 Avro Arrow cancellation.

Turning to cost, the Liberal Party claims that withdrawing from the F-35 program would free up significant funding for redirection towards other defence needs. Clearly, the Party has fallen into the same cost numbers trap it (and others) pilloried the Conservative government for walking into before. For example, unlike the F-35, which is operating under its own procurement framework, the Super Hornet will undoubtedly have to be purchased through the US Foreign Military Sales process, which adds a 30 percent administrative fee to the aircraft price. Significant additional costs for essential equipment such as external fuel tanks, pylons, sensor pods and so on are also not evident in the numbers presented. According to my CDA Institute colleague Richard Shimooka, when all relevant costs are factored in for both aircraft, a Super Hornet delivered near the end of production in 2017 or 2018 will have a “fly-away” cost of between $75M and $85M, while the equivalent cost for an F-35 delivered in Canada’s provisional 2020 production window is currently forecast to be $77M.

“Fly-away” costs, however, do not reflect full program costs. A cursory analysis of the many published independent analyses of Canada’s fighter program, and the findings of the Parliamentary Budget Officer and Auditor General, reveals that regardless of the aircraft selected it will cost about $1B a year over its life to acquire and maintain a viable fighter capability. By far the greatest cost is in sustaining and operating the aircraft, not its purchase price.

As a result of the political storm over the current government’s initial decision to buy the F-35, a clearly defined program costing framework has been agreed by Officers of Parliament, Parliamentarians, and the government. It would have been wiser for the Liberal Party to use the same framework in providing costs for its campaign commitment. The agreed basic cost model for the F-35 program shows that Canada’s contribution to development costs would only represent 1 percent of total cost, aircraft acquisition 21 percent, and sustainment and operations 28 percent and 49 percent respectively.

It further needs to be recognized that the life cycle costs of the F-35 have continued to trend down, as the engineering design is refined. There are also clear indications that its operating costs will be lower than the legacy aircraft it is replacing. The potential for further improvement remains also high, raising more doubts that an objective like-versus-like analysis would show the cost of ownership of the Super Hornet to be materially less that the F-35.

No political party can claim the moral high ground on the fighter replacement program. The Conservative government’s political management of the fighter aircraft file has been, frankly, inept. But the Opposition parties have been no less so in their partisan criticisms of the program. They have clearly forgotten past history, where virtually every advanced defence system development program in the Western world over the past 50 years has experienced challenges in meeting cost, schedule, and performance expectations.

Given the costs involved, political and public debates about these programs have become de rigueur, but unfortunately these are not always well-informed and are occasionally even deliberately misinformed. This was the case with the F/A-18, which Canada acquired as the CF-18, and it is happening now with the F-35. What tends to be forgotten is the fact that, in the end, most program issues do ultimately get resolved, costs are contained, and in the great majority of cases the system performs well over its planned life.

In this context, the great risk to political parties is in failing to look critically at the information and misinformation that swirls around any large complex defence program, and making sure they have a valid understanding of what is fact and what is fiction. An even greater risk lies in making rash decisions based on inaccurate or incomplete information, or in selectively filtering for information that supports a short-term political aim. The Liberal Party did both in 1993, at great financial cost to the nation, significant operational cost to the Canadian Armed Forces (still being felt today), and some political cost to the Party for a number of years thereafter.

All political parties would do well to think carefully before making superficially analyzed and consequently poorly considered commitments on defence acquisitions in the heat of an election. History shows that there are far greater short-term and long-term downside risks to parties (not to mention the nation) than any possible campaign boost that might be hoped for.

Colonel Charles Davies (retired) is a CDA Institute Research Fellow and a former Logistics officer who served for four years as the strategic planning director for the Material Group of the Department of National Defence and three years as the senior director responsible for material acquisition and support policy in the department. (Image courtesy of Lockheed Martin.)

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