Preserving capacity, General Tom Lawson, Chief of the Defence Staff, Keys to Canadian SAR
Issue link: http://vanguardcanada.uberflip.com/i/196923
F Next-Gen Fighter * All figures assume U.S. and Canadian dollars at par. The price does not include DND reserves or Government-to-Government Production, Sustainment and Follow-on Development (PSFD), attrition and disposal. KPMG's relationship between acquisition and total LCC reveals a 2013 ratio of between 1:5.7 or 1:10, depending on whether the auditor is using the F-35A acquisition unit cost of $129 million or the LRIP 7 unit cost of $75 million. Whatever the figure, these ratios are excessive. The table also displays prices of the F-35 partners' initial quantities and the 2013 reduced quantities: the Netherlands (NL) went from 85 to 55 units (down 35%), the United Kingdom from 138 to 51 units (down 63%, though F-35B quantities will be reinstated), Denmark from 48 to 30 units (down 38%), Italy from 131 to 90 units (down 31%), and Australia from 100 to 72 units (down 28%). Whether the Royal Canadian Air Force also scales down, to 42 as some have stated, remains to be seen. In many ways, Holland and Canada have experienced similar issues over the cost of the F-35A program. The comparisons in the table are possible because Dutch lawmakers in March 2013 challenged the F-35 JPO to come up with a total LCC per flight hour (CPFH) that can be guaranteed. The program executive officer, LGen Christopher Bogdan, presented the RNLAF with a tailored CPFH of $24 million as the total ownership cost over a 50-year program. Incidentally, Bogdan performed his study by comparing the F-35A with the F-16C/D – based on the latter's actual sustainment costs – and found that the USAF F-35A had an average CPFH of $31.923 million and F-16C/D had a CPFH of $24.899 million. The final figure of $24 million was based on his interpretation of the RNLAF philosophy of Operations and Sustainment and, interestingly, it shows a lower ownership cost than that of the F-16C/D. In discussion with L-3 MAS of Canada, the presumptive ISS contractor for a Canadian F-35A fleet, they concurred with the lower Dutch CPFH as appropriate also for the RCAF. This observation is based on the sustainment cost experience between Canada's CF-18s and the USAF F-18s. A number of sources peg the USAF yearly flying hours at an average of 300, compared with Canada's average of 200 hours annually. The table shows 34 OCTOBER/NOVEMBER 2013 www.vanguardcanada.com that DND was not far off in its cost estimates for LCC and that KPMG's CPFH acquisition to total LCC of 1:5.8 to 1:10 is two to three times higher than the USAF F-35A CPFH of 1:2.8. To complete the picture, we know that the Pentagon in Q1 2013 announced that the initial cost of the Research, Development, Test, and Evaluation (RDT&E) phase of the F-35 program had grown over the last decade from $50 billion to $70 billion, much of it related to B and C variants. Overlooked in the Canadian debate was the fact that the government has invested only $150 million in RDT&E, a very low contribution toward the total RDT&E budget. Had Canada contributed a share in line with its potential order of 65 aircraft, the figure should have been closer to $1.3 billion. Finally, little has been said about the industrial benefits that Canadian companies have already accrued from just the development phase of the program – $440 million to date – and the potential billions in export opportunities over the life of the program. Given the discrepancies in total ownership costs, one can certainly speculate about why the government commissioned the KPMG study – to step back from an unpopular program, perhaps, or lessen a protracted debate that could affect the next general election? However, stopping and restarting programs has rarely proven successful for the government. Witness the Joint Support Ship program, which may result in little savings and less capability than what was originally offered in 2007 when the ships finally enter service. Ultimately, buying a fourth generation fighter that will be dated the day it enters Canadian inventory will prove to be an unacceptable outcome. A fourth generation fleet will limit Canadian options in coalition and NATO operations, making the RCAF mostly irrelevant to international campaigns. After reviewing LRIP 7, it would appear that Lockheed Martin has moved a long way toward making its F-35A offer more acceptable to Canada – both conceptually and financially – and it would be wrong, may even irresponsible, to change direction now.