'Significant things' missing from Tory tab for F-35s: Auditor-General

OTTAWA — The Globe and Mail

Auditor-General Michael Ferguson testifies before the Commons public accounts committee in Ottawa on April 26, 2012. (CHRIS WATTIE/Chris Wattie/Reuters)

Auditor-General Michael Ferguson is expanding on his concerns over the Harper government’s budget for the purchase of new F-35 fighter jets, saying Ottawa hid key elements of the price tag over the aircraft’s 36-year lifespan.

Speaking in front of the House public accounts committee, Mr. Ferguson responded to questions Thursday from Conservative MPs by saying he is not “nitpicking” when he calls for more information on the full life-cycle cost of the new jets. In particular, he said Ottawa has to factor in costly upgrades to the aircraft, as well as the need to replace some of them in the case of accidents, when it eventually restates the program’s full budget.

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So far, the government has talked about a $25-billion cost over the first 20 years of the program, even though the jets are predicted to last 36 years.

“There were some significant things that were missing from the life-cycle costing in this, for example attrition, for example upgrades, and the fact that these aircraft were going to last for 36 years, not just 20 years,” Mr. Ferguson told MPs.

“When we raised the issue of life-cycle costing and the fact that it was not complete, I don’t believe that we were nitpicking in any way. We were saying that there were significant elements that were missing,” he said.

The issue of cost is a sensitive one for the Conservatives, who have capped the purchase price for the new jets at $9-billion and want to ensure that the F-35 file does not hamper their reputation as strong fiscal managers.

Conservative MP Laurie Hawn said in committee that the only definitive number at this point is the $9-billion budget that has been set aside for the acquisition of new fighter jets, explaining that everything else – such as maintenance and operating costs – “is an estimate.”

Conservative MP Bev Shipley argued it was seemingly impossible to calculate the full life-cycle cost of a program that will happen at least five years down the road, with the aircraft sharing key infrastructure with other Canadian military assets. Mr. Shipley also got the Auditor-General to confirm the audit of the F-35 acquisition process has not identified violations of Treasury Board rules and regulations.

Conservative MP Andrew Saxton pointed out that the federal government has yet to purchase a single aircraft, and added that at this point, the F-35 is simply “being considered” by Ottawa.

In a report released earlier this month, the Auditor-General argued that the government moved toward a sole-sourced purchase of F-35 fighter jets that was handled “out of sequence” by the various departments in charge of the purchase. Mr. Ferguson said National Defence was “ overly confident” about the program, which is still in development and faces a variety of technical and financial challenges, and omitted releasing the full cost to Canadians over the lifespan of the fighter jets.

In his appearance before MPs, he was particularly harsh as he spoke about the role of Public Works and Government Services Canada, which normally handles big government purchases but was kept out of the loop for almost four years by National Defence.

“They did sign off on the sole-source on the basis of a very short letter,” Mr. Ferguson said. “Yes, they exercised some due diligence, but we deemed it was not sufficient.”

Despite the controversy surrounding the purchase, the Auditor-General said that everything still points toward the government’s continued intention to purchase F-35s to replace Canada’s fleet of CF-18s toward the end of the decade. However, he said the government’s newly formed secretariat, tasked with overseeing the process, could receive a clear direction from the government to consider other aircraft to replace the existing fighter jets.

Still, Mr. Ferguson said the secretariat would need to come up with mitigation measures to level the playing field for all other manufacturers in the event of full competition.

Mr. Ferguson was the first witness to appear in front of the public accounts committee. The next hearing is scheduled for Tuesday, with the appearance of senior officials from National Defence, Public Works, Industry Canada and Treasury Board.