F-35 Program To Get Overhaul After Scathing AG Report

First Posted: 04/ 2/2012 8:16 pm Updated: 04/ 5/2012 3:26 pm

Prime Minister Stephen Harper and his government rejected accusations Tuesday that Parliament was misled over the cost of the F-35 program and defended the actions immediately taken in response to Auditor General Michael Ferguson's spring report, which opposition critics are calling "scathing."

The opposition parties seized on Ferguson's report, which determined that the Department of National Defence didn't exercise due diligence in choosing the F-35 fighter jet to replace the CF-18, wasn't forthcoming with Parliament about its true estimated cost, and made key decisions without required approvals or proper documentation. Critics called for the resignations of both the prime minister and Defence Minister Peter MacKay.

Harper and his associate minister of national defence, Julian Fantino, rejected accusations in question period that the government deliberately hid the true cost estimates for buying the 65 planes from Lockheed Martin planes, but said they accept Ferguson's recommendations. Fantino is in charge of military procurement.

"The auditor general has identified a need for greater independence and supervision over some of the activities at the Department of National Defence. In this regard, the government will put that supervision in place before we proceed," the prime minister said.

Harper, Fantino and Public Works Minister Rona Ambrose fielded the questions and outlined the steps the government is taking in response to Ferguson's report that were revealed earlier in the day soon after Ferguson's report was tabled in the House of Commons.

"The government of Canada has taken action today to ensure that due diligence, oversight and transparency are firmly embedded in the process to replace Canada's aging fighter jets. That is why we have frozen funding for the acquisition and are establishing a separate F-35 secretariat outside of National Defence to lead this project moving forward," Fantino said.

The funding envelope allocated for the acquisition of the F-35 is $9 billion, which doesn't include costs for maintaining and operating the planes.

The Treasury Board will also commission an independent review of DND's acquisition and sustainment project assumptions and potential costs for the F-35, which will be made public, the government said, and DND "will continue to evaluate options" for replacing Canada's fighter jets.

NDP Leader Tom Mulcair said that if Harper knew the wrong figures were given to Canadians, it's "unconscionable" and if he didn't, it's "incompetence." Either way, Harper and his lead ministers on the file should be held accountable, he said.

'They've lied to Parliament'

"There's no possible way you can have confidence in this government on F-35s. They've cooked the books, they've lied to Parliament and they've put in place a completely phoney process that could only have one possible result — that aircraft," he told reporters after question period.

Interim Liberal Leader Bob Rae said he thinks the prime minister should be accountable, saying Harper could resign and someone else could take over.

"This prime minister has systematically misled the Canadian people on this issue," Rae told CBC's Evan Solomon. "And he's not going to be able to get around this — he can twist and turn all he wants, but he can't."

"This is not about officials — this is about ministers and ministerial accountability, and this is about a government which is run from the top."

Rae said he doesn't think the concerns about the planes have been fixed and he said there is still time for a competitive tender.

The government announced in July 2010 that Canada would be buying the F-35 Lightning II through its participation in the U.S.-led Joint Strike Fighter Program, but Ferguson said in his report that it was the fighter jet of choice as far back as 2006.

"When National Defence decided to recommend the acquisition of the F-35, it was too involved with the aircraft and the JSF program to run a fair competition. It applied the rules for standard procurement projects but prepared key documents and took key steps out of proper sequence," the report says.

"As a result, the process was inefficient and not managed well. Key decisions were made without required approvals or supporting documentation."

The report also shows that DND estimated the total cost of the F-35 program at $25 billion over 20 years when the decision was made internally to go forward with it in 2010. But in 2011, when DND responded to a report by Parliamentary Budget Officer Kevin Page, officials said the cost would only be $14.7 billion.

Ferguson won't point fingers

"We felt that that would have been a prime opportunity for National Defence to bring forward to Parliament the full cost of the project and they didn't do that, and that really would have been the chance to set the record straight on what the cost of the project is going to be," Ferguson said at a news conference after his report was tabled in the House of Commons.

Even the $25 billion estimate isn't accurate and should be "refined" because it doesn't include upgrade costs, for example, or the cost of replacing any jets that are lost over their life cycle.

Ferguson would not point fingers at any individual bureaucrats or ministers, repeating only that his audit identified weaknesses in the processes used to choose the F-35 and that there were significant information gaps.

"It's in the hands of Parliament to decide what to do with the report," he said. Ferguson suggested his report could be studied by parliamentary committees, which have the ability to call ministers and other witnesses.

The NDP's military procurement critic, Matthew Kellway, said Ferguson's report shows the decision to buy the F-35 was "rigged from the start."

"The auditor general's report is a scathing indictment of how the Conservative government has bungled the F-35 from day one," he told reporters.

Opposition critics have long called for an open competition to replace Canada's aging CF-18 fleet and repeated that demand Tuesday.

Liberal MP Ralph Goodale said the government misled Parliament while his party's defence critic John McKay said there was "deceit and incompetence at the highest levels."

McKay said the government trashed the parliamentary budget officer when he released his own higher estimates of the F-35 program and that Tuesday's report shows Page was "far more right than he was wrong."

Page also responded to the auditor general's findings in a statement that suggested he was right and that his estimate was in line with DND's internal estimate.

"The parliamentary budget officer remains ready and willing to serve Parliament by providing independent analysis on any new options the government may wish to consider replacing Canada aging fleet of CF-18s," Page said.

F-35 was jet of choice in 2006

The audit found that by the end of 2006, DND and Canadian military officials were actively involved in the development of the F-35 plane and that it "was clearly the fighter jet of choice."

The proper procurement process should have kicked in then because decisions and activities were already underway that led to its eventual procurement, Ferguson's report said. Ferguson found that many of the steps and documents used to support the government's 2010 decision to buy the F-35 were "of little consequence" because the key questions, including whether to run an open competition, were taken much earlier, "calling into question the integrity of the process."

Ferguson also found that DND did not provide complete or timely information to senior decision-makers — or to parliamentarians. He said briefing materials did not explain the risks of relying on projections for decision-making, for example, or the risks of relying on the F-35 to replace the CF-18.

In 2008, for example, DND did an analysis of three contender aircraft including the F-35 and it determined that the Lockheed Martin model offered the best value. This analysis was pivotal in the decision to buy the F-35, the audit said, but its conclusions were given to senior decision-makers with no documentation to support those conclusions.

Ferguson said he has significant concerns about the cost information that DND officials gave to MPs. They said that cost data provided by U.S. authorities had been validated by experts and all the countries participating in the program when that wasn't "accurate," and that DND officials knew the program costs were likely to increase and didn't tell Parliament.

The auditor general also found that the estimated budget set aside for the F-35 — $25 billion — likely isn't enough to cover the costs. That budget was established without complete information, he determined, and some of the information still won't be known for years to come.

If the $25 billion proves to be too low, DND will have to find ways to cover the additional costs or ask the government for more money. Ferguson alternatively suggests the military might have to reduce the number of planes being bought, or their flying hours.

Public Works and Government Services, meanwhile, didn't carry out its responsibilities properly either. The audit found that DND didn't bring the department in until late in the process and that Public Works endorsed the key decision to sole source the acquisition of the F-35 "without the required documentation and analysis."

But Ferguson largely blames DND, for "hampering" the Public Works Department's ability to carry out its work, saying it didn't give the documentation it was asked for in a timely manner.

The government has often defended the F-35 purchase by saying it will mean billions of dollars in industrial benefits for Canadian companies, but Ferguson also casts doubt on DND's figures in his report. The estimations of contract opportunities have fluctuated wildly over the years, from as low as $5.2 billion US to as high as $16.6 billion US, and he said the projections were never independently validated.

He also said that briefing materials for ministers and decision-makers did not explain the basis for the projections and only put forward the most optimistic scenario, not the real range of potential benefits. Ferguson ends his harsh assessment of DND's role in the F-35 procurement by recommending it should refine its cost estimates and regularly provide "the actual complete costs" for the full life cycle of the aircraft.

Lockheed Martin declined an interview request from CBC News but provided a statement saying it supports the government's response to the auditor general's report.

Fantino first suggested to the House defence committee in March that the purchase of the F-35 was not a foregone conclusion.

Canada would remain involved in the Joint Strike Fighter program, he said, but "the decision, the determinate decision, has not as yet been made as to whether or not we are going to actually purchase, buy, acquire, the F-35."

"We haven't yet signed a contract, as you know, we retain that flexibility but we are committed to continuing our aerospace sector's participation in the development of the F-35."

Ferguson was appointed in November 2011, taking over from interim auditor general John Wiersema, who led the office after Sheila Fraser retired.

Tuesday's report also includes audits of:

- Transport Canada's oversight of civil aviation safety.

- How the Canada Border Services Agency works with other departments to monitor the health and safety risks of imported consumer goods.

- What the Canada Revenue Agency has done to address non-compliance in filing tax returns.

- Several Crown corporations, including the Canadian Dairy Commission and the Canadian Race Relations Foundation.

He highlights a number of concerns with Transport Canada's surveillance program to monitor airlines for compliance with safety regulations. Ferguson found that it can take a long time for the department to address emerging safety issues — up to 10 years in some cases — and that some inspections of airlines are not being carried out properly.

The audit determined that only two-thirds of planned inspections have been done and that the department hasn't determined how long an aviation company can operate without being inspected.

Overall, Ferguson's report said consumer goods that pose a risk to health and safety are adequately controlled at the border but he wants to see the Canada Border Services Agency and Health Canada reach an agreement on what products should be allowed to enter the country.

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    FIIn this file photo taken on July 14, 2011 and released by U.S. Air Force, a USAF F-35 Lightning II joint strike fighter (JSF) aircraft soars over Destin, Fla., before landing at its new home at Eglin Air Force Base. Japan selected the Lockheed Martin F-35 stealth fighter Tuesday, Dec. 20, 2011, to replace aging jets in its air force and bolster its defense capability amid regional uncertainty. (AP Photo/U.S. Air Force, Staff Sgt. Joely Santiago)

  • F-35 Joint Strike Fighter

    A F-35 Lightning II sits on stage during the United Kingdom F-35 Lightning II delivery ceremony on July 19, 2012 at Lockheed Martin Corporation in Fort Worth, Texas. The ceremony marked the first international delivery of an F-35 Joint Strike Fighter to a partner nation. (Photo by Tom Pennington/Getty Images)

  • F-35 Joint Strike Fighter

    (Photo by Brendan Smialowski/Getty Images)

  • F-35 Joint Strike Fighter

    Plane models stand outside the Lockheed Martin Corporation during the United Kingdom F-35 Lightning II Delivery Ceremony on July 19, 2012 in Fort Worth, Texas. The ceremony marked the first international delivery of an F-35 Joint Strike Fighter to a partner nation. (Photo by Tom Pennington/Getty Images)

  • F-35 Joint Strike Fighter

    The F-35 Joint Strike Fighter jet sits in front the entrance of the Asian Aerospace 2004 show in Singapore 24 February 2004. The Asia Pacific offers one of the world's strongest prospects for defence-related spending, US aerospace giant Lockheed Martin said Tuesday as it expressed confidence in remaining a major supplier to the region's governments (AFP PHOTO/ROSLAN RAHMAN)

  • F-35 Joint Strike Fighter


  • F-35 Joint Strike Fighter

    A Lockheed Martin's F-35 Lighning II fighter jet sits on the tarmac for static display at the Singapore Airshow in Singapore on February 12, 2012. Boeing's much-delayed 787 Dreamliner is set to star at the Singapore Airshow this week where companies touting private jets and defence hardware to the Asian market will also be out in force. (ROSLAN RAHMAN/AFP/Getty Images)

  • F-35 Joint Strike Fighter

    (ROSLAN RAHMAN/AFP/Getty Images)

  • F35 JSF Take Off

  • F-35A Flight with External Stores

    On Feb. 16, 2012, the first external weapons test mission was flown by an F-35A conventional takeoff and landing (CTOL) aircraft at Edwards Air Force Base, Calif. The F-35A is designed to carry up to 18000 pounds on 10 weapon stations featuring four weapon stations inside two weapon bays, for maximum stealth capability, and an additional three weapon stations on each wing.

  • F-35 Joint Strike Fighter

    IN AIR, NAVAL AIR STATION PATUXENT RIVER, MD - FEBRUARY 11: (EDITORS NOTE: Image has been received by U.S. Military prior to transmission) In this image released by the U.S. Navy courtesy of Lockheed Martin, the U.S. Navy variant of the F-35 Joint Strike Fighter, the F-35C, conducts a test flight February 11, 2011 over the Chesapeake Bay. Lt. Cmdr. Eric 'Magic' Buus flew the F-35C for two hours, checking instruments that will measure structural loads on the airframe during flight maneuvers. The F-35C is distinct from the F-35A and F-35B variants with larger wing surfaces and reinforced landing gear for greater control when operating in the demanding carrier take-off and landing environment. (Photo by U.S. Navy photo courtesy Lockheed Martin via Getty Images)

  • F-35 First Ship Landing

    Courtesy: NAVAIR/JSF Program/Lockheed Martin

  • F35 Hovering

  • F-35 Flight Test Highlights

    Highlights of F-35 flight testing at NAS Patuxent River, Md., NAS Fort Worth Joint Reserve Base, and Edwards AFB, Calif.

  • F-35 Performs First Night Flight

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  • F-35 Airstart Testing

    An F-35 test pilot talks about airstart testing at Edwards AFB, Calif., in early 2012.

  • F35 Air Show


Filed by Christian Cotroneo  |