Redefining industrial benefits: The F-35 program

Americas, Conventional Weapons, News

Lest anyone thinks that the F-35 Joint Strike Fighter (JSF) is out of the running for Canada’s replacement fighter aircraft program, Industry Canada has just issued its third report on the prospective benefits Canada’s military aerospace industry can anticipate if Canada places an order. In sum, the report provides an updated total of $9.93 billion (U.S.) for “contracts and identified opportunities” for Canadian industry from the global F-35 program, a slight increase over the $9.75 billion Industry Canada reported earlier this year.

The purpose of the report must be to keep alive the idea of a Canadian F-35 purchase because it certainly does not provide much verifiable information. Its most obvious problems include:

  • The sole value that is based on fact is the reported sum of F-35 contracts awarded to date to Canadian industry. The total of $504 million is about five percent of the reported sum of all prospective industrial benefits from the program.
  • The remaining “opportunities” or about 95 percent of the total are derived from reports by the two prime contractors for the U.S. JSF program, Lockheed Martin and Pratt & Whitney, hardly the most independent sources of program data. The prime contractors assume that they will sell 3100 aircraft to the U.S. and internationally to program partners, a total that is no longer credible as declining U.S. and European military budgets force reduced orders.
  • The $9.93 billion total is not associated with a particular timeframe so it is unclear how far into the future these “opportunities” will reach. Does the total reflect $500 million in annual benefits over 20 years or $250 million over 40 years? This is a not an insignificant difference. It repeats the problem of misleading timeframes for F-35 expenditures exposed by the Auditor General in early 2012.
  • The surprisingly precise $9.93 billion in prospective Canadian industrial benefits is an optimistic figure at best. The report itself admits that “companies in Canada will not be successful in capturing all opportunities available.” There are just too many unknowns including the extent of competition from the industries of F-35 partner countries, not the least the U.S.
  • Even if the Canadian industry were to realize all opportunities as tangible benefits, the contract value would be far less than the taxpayer expense for Canadian F-35s. The now discredited government total for costs of acquiring the JSF aircraft and costs of maintenance (“contracted sustainment”) over 20 years is $14.7 billion. As demonstrated by audits by the Parliamentary Budget Office and the Office of the Auditor General the final figure will almost certainly be significantly higher. The industrial benefits would need to be double or triple the current opportunities estimate for Canada to recoup the likely payout for the program.

The report may serve to keep alive industry support for an F-35 purchase, repeating the claim that Canada stands to reap substantial economic rewards from the global program. Like many other aspects of the JSF program however, the claim is based more on aspiration than reality.

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