Janes Defence Review


April 4, 2012:


Title: Canada’s auditor slams JSF procurement process

Sub-title: Decries delays, cost overruns and lack of a competitive bidding process.


Canada’s move to replace its ageing F-18 fleet with 65 new Lockheed Martin’s F-35 Joint Strike Fighters, took another heavy blow this week. The procurement process, which was already beset by delays and cost overruns, was slammed by Canada’s auditor general in a report tabled in Parliament on Tuesday.


Michel Ferguson’s first report in his new position criticized the government for not being forthcoming with Parliament as to the program’s actual costs, and for making decisions early in the initiative that eliminated the possibility soliciting competitive bids.


“There were significant weaknesses in the decision making process,” reads the report. “Key steps were taken out of sequence, decisions were made without the required approvals or supporting documentation, and Public Works and Government Services Canada did not fully carry out its role as the government’s procurement authority (and) endorsed the key decision to sole-source the acquisition.”


The auditor general also says that the government underestimated the full life-cycle costs of the F-35. The initial acquisition (CDN $9 billion) and long-term support ($16 billion) budgets were established without the benefit of complete information.


The report lands amidst mounting criticism of the JSF program, related to its high and ever-increasing costs, amidst growing governmental austerity measures, such as cuts in spending on health and educational programs.


Even program supporters have been hard-pressed to defend the initiative. There are several reasons for this. For example agreements which would have required Lockheed Martin to deliver economic offsets to Canadian firms to help balance out the export costs, which are standard in these types of acquisitions appear to have been brushed aside. This leaves the company without a large self-interested Canadian supplier base that would normally have jumped to the program’s defence. Likewise, any serious study of possible alternatives such as the F-18 Super Hornet or European aircraft, were ruled out by the government’s early decision that the new planes must have stealth capability. The result was a sole-source contracting process, which as defence insiders acknowledge, tends to rapidly ramp up program costs.


Prime Minister Stephen Harper noted in Parliament late Tuesday that no formal contracts for the Joint Strike Fighters had yet been signed. And while the government has invested considerable amounts of money in the project, and claims to remain committed to it, it has recently given hints that it may be reviewing that commitment. 


For example its budget delivered last week highlighted a desire to find an “affordable alternative,” to Canada’s existing F-18 fleet. Use of the words “affordable alternative” and the omission of any specific mention of the JSF have been interpreted by some to mean the government may be opening the door to alternate solutions.






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