The Sixth Estate

This is how the government officially responds to the Parliamentary Budgetary Officer’s accusation that they kept “two sets of books” on the true cost the F-35 jet fighter:

Fonberg told MPs on the public accounts committee that “there was one book,” but he acknowledged there were two estimates.

Ah, that makes complete sense now. Since there’s a great deal of bafflegab and incompetence on this file, I thought it would be helpful to establish a timeline for Canadian involvement with the F-35, highlighting the various points at which the accounting and policy looks a little bit bonkers to my untrained eye. My chief source for this is the Auditor General’s report, but I also draw on various other media sources.

1997 — The Liberal government joins the Joint Strike Fighter design team with an initial buy-in of $10 million, guaranteeing them the right to have Canadian companies get procurement contracts if they eventually buy the F-35. Another $150 million was provided in 2001. At this point, Canada has only purchased rights to buy the aircraft — it hasn’t actually committed to anything.

2002-2006 — Under the Industrial Regional Benefits Policy, any foreign military contractor must agree to invest in Canadian business activities an amount equal to the cost of the contract (but it doesn’t necessarily have to be in building the specific vehicles which will be supplied to the Canadian military. In a series of memoranda, the Chretien and Harper governments agree to exempt Lockheed from the Industrial Benefits Policy, even though this is the largest military contract so far in Canadian history.

2006 — A new agreement is signed under which Canada gives Lockheed several hundred million dollars to maintain its spot on the purchase rights list. According to the Auditor General, although the Defence Department should have immediately began consulting with Public Works on how to make sure the F-35 purchase was legal, instead, Conservative defence ministers Gordon O’Connor and Peter MacKay conceal the relevant paperwork from Public Works until 2009.

2008 — The Defence Department draws up a list of 14 requirements that future Canadian fighter aircraft must meet. It identifies three aircraft that meet these needs. Although the other two are already available, the review absurdly recommends continued involvement in the F-35 project on the grounds that it is the cheapest aircraft.

2010 – The official purchasing process begins. Government contracting law requires that the government hold a public competition for any non-emergency procurement project valued at over $25,000 unless paperwork is filed with Public Works establishing that only one contractor can meet the statement of requirements. In July, the Harper government announces that the F-35 will be purchased without a competition. In August, the military writes a new statement of requirements for Public Works which allegedly provides retroactive justification for what was, in effect, an illegal announcement.

In subsequent statements, the federal government claims that this statement of requirements was the basis for the decision not to hold a competition, even though the statement was actually drawn up after the decision not to hold a competition.

2010 — In accordance with government policy, the military drew up an estimated cost for the F-35 which included acquisition and operating costs. According to this estimate, it would cost about $9 billion to purchase the plane, plus $16 billion in operating costs, for a total of $25 billion. This estimate is based on a 20-year lifespan for the plane with no replacements for attrition — even though DND is already planning to use the plane for 36 years, and to purchase replacement aircraft as necessary.

2011 — The Parliamentary Budget Officer releases a public report estimating that the F-35 will cost $12 billion to buy and $18 billion to operate, for a total cost of about $30 billion. In response, the government publicly announces that the Budget Officer is incompetent and releases a new estimate claiming that the aircraft will cost $9 billion to purchase and just $6 billion in sustainment costs, for a total of about $15 billion. They do not draw attention to the fact that with the operating costs included, as the PBO report did, their internal estimate and the Parliamentary Budget Officer’s public report are actually pretty much the same.

During the election, in response to concerns that the Budget Officer has identified likely cost increases, Harper states that Canada has signed a “contract” fixing the costs of the F-35. This statement was false; Canada has never signed a contract for the F-35, or at least not yet.

2012 — Peter MacKay files his department’s annual plans and priorities report with Parliament, stating that the F-35 project is in the “definition” phase, with full costing details already approved by the Treasury Board. Later, after the A-G report (see below), he files an “erratum” to the report, indicating that a “typographical error” by a lower-level bureaucrat had replaced “option analysis” with “definition.” (In the “option analysis” phase, the government is still considering a purchase and does not yet have costing details to submit to the Treasury.)

The Auditor-General releases a report indicating that, in addition to covering up $10 billion in estimated costs at the time of the Parliamentary Budget Officer’s report, the Defence Minister has concealed at least that much in additional costs due to the longer planned lifecycle of the aircraft and the failure to include costs for replacement aircraft, upgrade programs, and weapons for the aircraft. (Weapons? For a fighter aircraft?)

Both Public Works Minister Rona Ambrose and Defence Minister Peter MacKay’s departments inform the Auditor-General prior to the release of the report that they disagree with its contents. In Parliament after its release, however, they state that they agree with the report and accept its conclusions.

In response, a Parliamentary committee begins to consider the Auditor-General’s report. The NDP members of the committee propose a list of witnesses to be called for the investigation. However, the Conservatives refuse to accept the list and initially state that the Auditor-General will not be allowed to testify about his own report. In the ensuing uproar in the House, they retreat and agree that allow him to speak. The committee “investigation” is currently ongoing, but is controlled by the Conservative members.

The government has formally announced that it is restarting the Next Generation Fighter program under Public Works supervision. Although they claim the new process will be fair and open-minded, the project management office at Public Works is named the “F-35 Secretariat.”