Will Santa deliver F-35 industrial benefits?

Conventional Weapons, News

The F-35 Joint Strike Fighter debacle has delivered an early Christmas present to Canadian (and some attentive international) media. Columnists and commentators across the country have gleefully heaped criticism and scorn on the government about the ballooning costs of the F-35. Two KPMG reports released this week calculated F-35 program expenditures to be much higher than earlier public guesses, including projections by the Auditor General and the Parliamentary Budget Office. And both of these were at least double the paltry program sums the government swore were immutable.

This was all well and good. Now, according to the government, the program to replace Canada’s CF-18 fighter aircraft has been “reset.” We could hope this would mean that the government will undertake what it skipped the first time around and review available options in a transparent discussion of what Canada requires from new aircraft. Better still, the pressed button could reset the entire Canada First Defence Strategy and open up formulation of future Canadian defence policy to public debate.

But Christmas also can bring disappointments. A third document released this week revealed worrying signs that the government is not prepared to drop the F-35 quite yet. The report, Canadian Industrial Participation in The F-35 Joint Strike Fighter Program, is intended to summarize and update the economic benefits to Canada’s aerospace industry of Canadian participation in the F-35 program. The report was produced by Industry Canada, not KPMG, and the lack of distance shows. It is an unembarrassed repackaging of earlier claims about industrial benefits, which hold as much credibility as the government’s calculation of program costs.

The report claims to be a response to the Auditor General’s identification of the challenge of “independently validating projections of industrial participation” in the F-35 program. The AG and program critics have noted that government projections to date of Canadian industrial benefits are based on figures provided by Lockheed Martin, the F-35 prime contractor that stands to gain the most from F-35 sales. The Industry Canada report then goes on to provide “updated” projections of Canadian industrial benefits based on – why are we even surprised? – Lockheed Martin figures.

The report provides a “sum of identified opportunities” equal to a surprisingly precise $9.328-billion. Of this sum, verified contracts total $438-million spread over 72 companies in Canada. In other words, less than five per cent of the projected sum is based on known fact; the rest is speculation, some based on what could be generously described as optimistic assumptions. These include the size of the market among F-35 program partners, such as Canada, of 3,100 aircraft. The largest part of this market – about 2,400 aircraft – arises from projected Pentagon orders. In the current U.S. fiscal climate, many commentators are suggesting that this total cannot stand.

The report does own up to the core problem on its penultimate page: “Because it is difficult to predict what proportion of the identified opportunities companies in Canada will secure, or how large the additional unidentified opportunities will be, an overall prediction of the final value of work that will be secured by companies in Canada (or even a range of possible outcomes) cannot be reliably made at this point.” In other words, because we can’t make a reasonable guess at either the extent to which Lockheed Martin and other major contractors will grace Canadian companies with contract offers or the ultimate size of the F-35 market, we don’t have a clue.

The report sounds like the words of parents who believe in Santa Claus, assuring their children that he is on his way. And even this belief may be enough to keep the F-35 sugar plum alive.

 

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