F-35 Cost: Auditor General's Report Means Defence Department Will Have To Re-Cost Other Purchases, Says Peter MacKay

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Prime Minister Stephen Harper addresses the crowd at the Halifax Shipyard in Halifax on Thursday, Jan. 12, 2012. The federal government and Irving Shipbuilding Inc. have reached an agreement in principle to build the navy's next fleet of warships. (THE CANADIAN PRESS/Andrew Vaughan)
Prime Minister Stephen Harper addresses the crowd at the Halifax Shipyard in Halifax on Thursday, Jan. 12, 2012. The federal government and Irving Shipbuilding Inc. have reached an agreement in principle to build the navy's next fleet of warships. (THE CANADIAN PRESS/Andrew Vaughan)

OTTAWA - Defence Minister Peter MacKay says last week's auditor general report will force the military to recalculate the costs of tens of billions of dollars worth of planned equipment purchases.

MacKay says routine, lifetime operating costs — everything from salaries and fuel to shoe laces and boot leather — will have to be factored into the projections for new programs.

In his criticism of the F-35 stealth fighter program, auditor general Michael Ferguson took the Defence Department to task for not including $10 billion in continuing operating expenses.

Those operating costs, separate from the maintenance bills on military hardware, include such things as the salaries of pilots and the fuel that goes into the planes.

MacKay has said including those expenses is something the Defence Department has never done, but it will comply with the instructions.

"If this is the way the auditor general wishes us to present program costs in the future, to include those salaries and fuels and fixed costs, we'll do so," he said in Halifax on Tuesday.

"And that's part of the, I guess, lesson learned."

That means coming programs, such warship construction under the $33-billion National Shipbuilding Strategy, will have to be re-costed to include the salaries of sailors and other routine items.

"We did not calculate it with a view to including the salaries of military personnel, or fuel, or oil," he said, referring to shipbuilding program announced with fanfare last fall.

MacKay seemed exasperated at the thought of such an accounting exercise.

"If you went out ... and bought yourself a new minivan and you wanted to drive it off the lot ... you wouldn't calculate the gas, the washer fluid the oil and give yourself a salary to drive it for the next 15 or 20 years."

The Conservatives have a shopping list of ships, planes and armoured vehicles either on order or in the planning stages as part of their often-hyped Canada First Defence Strategy.

When it was announced in 2008, officials estimated the strategy would cost as much as $490 billion, most of it on new hardware and sustainment, over several decades.

Ferguson's report accused the air force of keeping decision-makers in the dark about the short-comings of the F-35 project and essentially rigging the process in order to get the stealth fighter.

The defence industry levelled a similar accusation a few years ago when the Defence Department was shopping for a new search-and-rescue planes. In that instance, MacKay called for an outside assessment in the form of National Research Council report.

He ducked a question Tuesday about whether such practices indicate a systemic problem with air force procurement.

A series of briefing notes for MacKay show senior defence officials have paid a lot of attention over the last few years to the turmoil and lessons Australia has learned in the way it buys military equipment.

The Australian Defence Organization, a procurement agency separate from that country's defence ministry, was trashed a few years ago by their auditor general for the way warship construction was handled.

The appointment of Julian Fantino as associate defence minister last year was seen by some in military circles as a step toward setting up a completely separate procurement branch.

But MacKay said Tuesday that such a decision belonged on the prime minister's desk.

Asked why he seemed more willing to defend the F-35 purchase than some of his cabinet colleagues, MacKay replied: "I'm just an optimistic guy."

The opposition parties have called on him to resign or be fired.

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