MacKay stands by F-35 jets, calls cost jump an accounting issue

OTTAWA — The Globe and Mail

Canada's Defence Minister Peter MacKay speaks during Question Period in the House of Commons on Parliament Hill in Ottawa April 5, 2012. (CHRIS WATTIE/Reuters/CHRIS WATTIE/Reuters)

Ottawa can still opt out of buying 65 new U.S.-built fighter-jets, but Defence Minister Peter MacKay says the government is convinced the F-35 is the “best” choice for Canada in spite of its eye-popping price.

Mr. MacKay said Sunday there would be a cost to cancelling a multi-billion-dollar purchase deal with Lockheed Martin, the lead contractor.

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“There are consequences for withdrawing from it,” he told CTV’s Question Period. “But it’s not prohibitive. There is not money that has been spent.”

As opposition politicians called for an open competition for a new fighter-jet, Mr. MacKay warned that cancelling the memorandum of understanding on the F-35 would mean losing Canada’s place in the production line and a delay in taking delivery of aircraft to replace the aging CF-18s.

Mr. MacKay also rebuffed opposition calls that he resign in the wake of a damning report last week by Auditor-General Michael Ferguson. The report faults the government for mismanaging the F-35 program and misinforming Parliament and Canadians on the true cost of its largest-ever military purchase.

The Auditor-General concluded that the F-35 purchase would cost at least $25-billion, including operating costs, or some $10-billion more than the roughly $15-billion the Conservatives have consistently claimed.

But Mr. MacKay denied the government purposely hid the true cost of the F-35 and said the yawning $10-billion price gap is simply a matter of “accounting.”

“There’s a different interpretation in the all-up costs at arriving at $25-billion,” Mr. MacKay said. “And that information goes back to the year 2010. Those figures are there for all to see.”

For the past two years – and right through last spring’s federal election – the Conservative government mocked critics who claimed the aircraft would cost significantly more.

Mr. MacKay said missing from the estimate until now were such “sunk” costs as pilot salaries, fuel and extending the life of the CF-18s – costs not associated with the direct purchase of the planes from Lockheed-Martin.

“This is the way that accounting has been always been done for major procurements whether it’s tanks, trucks, ships,” he said from his riding in New Glasgow, N.S. “We do not calculate as part of the acquisitions costs what we pay military personnel. Or the fuel. Or the cost of keeping that existing equipment running.”

Mr. MacKay insisted there was no manipulation of information.

“I’ve acted in good faith, always with an eye to providing the men and women in uniform with the best equipment that we can possibly get.”

In spite of his assurances that the F-35 is Canada’s best option, it’s a point of considerable debate among experts. The right aircraft is a trade-off between cost and the type of combat missions the jets would be expected fly. And so far, Ottawa has been vague on exactly what it wants its aircraft to do.

There are cheaper alternatives that would perform far more than the CF-18s at substantially less cost than the F-35, including upgraded U.S. F-18s or F-15s. Even unmanned drones could accomplish much of what the military might need.

Mr. MacKay promised more transparency and better accountability on the F-35 purchase, which is now being spearheaded by officials at Public Works and Government Services.

The minister’s explanations didn’t sit well with opposition critics, who accused the government of botching the purchase and misleading Canadians.

Liberal Leader Bob Rae said Mr. MacKay is “trivializing and completely misrepresenting” the problem with the F-35 purchase.

“He does not begin to understand the problem, and has learned nothing from the Auditor-General's report,” Mr. Rae said in an e-mailed response to questions from the Globe and Mail.

The Liberals want the government to re-evaluate the kind of aircraft the military needs and then put it out to public tender. “We certainly should not be proceeding on the track we've been on, and appear to still be on,” Mr. Rae said.

NDP defence critic Jack Harris said no one knows what the F-35s will ultimately cost and Ottawa owes it to Canadians to fully justify their purchase – even if that means canceling the MOU and possibly paying more.

“The whole thing has been about misleading Canadians and using low-ball numbers,” Mr. Harris said in an interview.

Liberal MP Ralph Goodale said the problem goes well beyond Mr. MacKay and the Defence Department. He argued that the ultimate responsibility lies with Prime Minister Stephen Harper.

“The Prime Minister is going to wear this one,” he told CTV. “It’s gross incompetence and it’s dishonesty.”

Follow on Twitter: @barriemckenna

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