Liberals fork over another $30 million to keep Canada at F-35 table Lockheed Martin says it 'would openly welcome discussions about interim fighter solutions'
By Lee Berthiaume, The Canadian Press Posted: May 25, 2017 1:22 PM ET Last Updated: May 25, 2017 5:29 PM ET
An F-35 jet sits on the tarmac at Hill Air Force Base, Utah. Canada is still a partner in the joint strike fighter program, though Prime Minister Justin Trudeau campaigned on a promise to scrap a previous plan to buy the jet. (Rick Bowmer/Canadian Press)
Canada has quietly paid another $30 million toward development of the F-35 — money that could become insurance in the trade dispute between U.S. aerospace firm Boeing and Canadian rival Bombardier.
The annual payment was made to the U.S. military at the end of April, the Department of National Defence says, and will keep Canada at the table as one of nine partners in the fighter jet project for the next year.
Canada has paid US$373 million into the program since 1997, National Defence spokeswoman Jessica Lamirande said in an email.
Staying in the program has advantages, as partners can compete for billions of dollars worth of contracts associated with the building and maintaining of the F-35. They also get a discount when purchasing the plane.
That latter point wasn't considered much of a benefit when Canada paid its annual instalment last year, as the Liberals had promised during the 2015 election not to buy the stealth fighter.
The government instead went out of its way last July to highlight the potential benefits to Canada's aerospace industry when explaining why it had decided to stick with the program.
Those industrial benefits continue to accrue, Lamirande said, with Canadian companies having secured US$926 million in F-35-related contracts over the last 20 years — including US$114 million in the last year alone.
But the trade dispute between Boeing, which builds Super Hornet fighter jets, the F-35's main competitor, and Montreal-based Bombardier casts the decision to stick with the stealth-fighter program in a new light.
Citing an urgent need for more fighter jets, the Liberal government announced last November its plan to buy 18 "interim" Super Hornets until a competition could be held to replace Canada's entire CF-18 fleet. Bombardier and Boeing
But then last week, the government threatened to scrap the Super Hornet purchase after Boeing persuaded the U.S. Department of Commerce to launch an investigation against Bombardier.
Boeing alleges Bombardier sold its CSeries jets in the U.S. at an unfair discount thanks to subsidies from the Canadian government, while Bombardier says its planes never competed with Boeing.
Many defence analysts and former air force officers have questioned whether "interim" fighter jets are needed and instead want an immediate competition to replace all of the CF-18s.
But if more jets are truly needed on a short-term basis, the decision to stay at the F-35 table could be used to get a better deal on interim stealth fighters — or even as a bargaining chip against Boeing.
"If the government is in fact serious about re-evaluating its dealings with Boeing, then this could be part of showing that," said defence analyst David Perry of the Canadian Global Affairs Institute.
"Because the F-35, at least in my mind, would be a possible alternative if the government remains committed to buying separate interim aircraft." A return to the F-35?
On 22 November 2016 Defence Minister Harjit Sajjan announced that the country would acquire 18 Boeing F/A-18E/F Super Hornets as an interim measure, to make up for waning capabilities in the aging CF-18 fleet. Sajjan described that continuing to fly the CF-18s past their lifespan dates "would be imprudent and irresponsible".[300]
Minister of Public Services and Procurement Judy Foote indicated that a full competition would be held for a replacement fighter and that process would likely take five years, given a full defence policy review that is underway and must be completed first.[300]
F-35 manufacturer Lockheed Martin responded to the Canadian announcement, "although disappointed with this decision, we remain confident the F-35 is the best solution to meet Canada's operational requirements at the most affordable price, and the F-35 has proven in all competitions to be lower in cost than fourth-generation competitors".[300]
Alan Williams, former head of procurement at the Department of National Defence, previously critical of the Conservative government's handling of the fighter replacement, responded to the Super Hornet announcement, saying it was "absurd" and "unnecessary", adding "I'm not sure whether the government really understands the business of defence procurement".[301] Also in November 2016 the government contributed a further C$36M to the F-35 development program, to maintain the country's status as a participant in the program, including access to F-35 contract work for Canadian companies..[302]
Industry Canada makes dues payment to remain an F-35 partner
Zachary Fryer-Biggs, Washington, DC - IHS Jane's Defence Weekly
30 May 2017
The Canadian government paid USD30 million in April to remain in the F-35 international consortium for another year, The Canadian Press reported on 26 May.
The report, citing confirmation from a Department of National Defence (DND) spokesperson, said that Canada had paid the annual dues expected of each of the nine countries that are part of the international production team for the Lockheed Martin F-35 programme.
In 2016 the Canadian government - which had recently transitioned as current Prime Minister Justin Trudeau swept into office leading a Liberal Party that promised to pull out of the programme - was late in delivering its payment.
F-35 exit strategy: Canada could pay about $313M to pull out of jet program, defence documents show
Republish
Reprint David Pugliese, Ottawa Citizen | August 23, 2016 6:53 PM ET More from David Pugliese, Ottawa Citizen
Darryl Dyck/The Canadian PressLockheed Martin's F-35A stealth jet makes its Canadian debut at the Abbotsford International Airshow on Aug. 11, 2016. Two of the jets were on display, but did not perform a flight demonstration.
Canada could withdraw from the F-35 stealth fighter jet program on short notice by paying a little more than $300 million U.S., according to an analysis prepared by the defence department soon after the Liberals won the federal election.
The government could leave after only 90 days’ notice, although it would still need to pay the remaining fees the previous Conservative government committed to the F-35 program, according to the Department of National Defence documents obtained by Postmedia.
The analysis was produced four days after the election.
Prime Minister Justin Trudeau came to power, pledging the Liberals would not buy the F-35, an aircraft he said was unnecessary for Canada’s needs and too expensive.
Although a Liberal government originally signed on to a research and development program for the plane, the Conservatives significantly expanded that commitment.
Related
In 2006, Canada agreed to participate as a partner at a cost of US$551 million, according to the DND analysis. That did not commit the government to buying the aircraft, although it provided inside data about the project and a chance for domestic aerospace firms to bid on F-35 work.
“Canada has not signed a contract and can pull out by providing a 90-day written notification to other participating nations,” the analysis prepared for Deputy Minister John Forster pointed out.
“Canada’s liability would be no greater than US$346.7 million” – the difference between what it had already contributed and what was remaining of the original US$551 million commitment.
Since the analysis was produced, the Liberal government has paid another US$33 million.
THE CANADIAN PRESS/Jason FransonA CF-18 Hornet on the runway at CFB Cold Lake Alberta, Oct. 21, 2014.
The analysis noted Ottawa had also signed a separate memorandum of understanding with F-35 builder Lockheed Martin.
Under that commitment, Lockheed Martin provided F-35 work to Canadian firms on the understanding the Canadian government would eventually buy 65 of the jets.
If Canada decided not to proceed with the purchase, Lockheed Martin would not be obliged to employ domestic firms, the DND analysis noted.
“There is a risk that some contacts would not be renewed,” it added.
The Liberal government is expected to decide within months how to replace Canada’s aging fleet of CF-18 aircraft.
Defence Minister Harjit Sajjan has talked about a fair and open competition for a new fighter jet. Despite Trudeau’s pledge that Canada will not buy the F-35, Lockheed Martin, with other aircraft firms, recently submitted information about their planes to the government.
“It looks like we’re being included so we look forward to competing on that basis,” Jack Crisler, one of Lockheed Martin’s senior F35 officials, recently told Postmedia.
The stealth fighter became a political nightmare for the Conservative government after it agreed to buy the planes. The F-35 has been plagued with technology problems and U.S. lawmakers have complained about its cost.
In 2012, Auditor General Michael Ferguson issued a report that concluded Canadian defence officials withheld key information from Parliament about the proposed purchase, underestimated costs and did not follow proper procurement rules.
In June, Lockheed Martin almost saw its hopes of selling planes to Canada evaporate. Ottawa was close to moving on an interim purchase of Super Hornet jets from Boeing and Trudeau claimed the F-35 “does not work and is far from working.”
In response, Lockheed Martin warned Canadian companies who had F-35 contracts would suffer. After that, plans for a Super Hornet interim deal seemed to disappear.
The U.S. Air Force says the F-35 is combat ready although critics say much work still needs to be done on the aircraft. Two F-35s recently visited Canada for the first time at the airshow in Abbotsford, B.C.
QHL Price at posting:
10.5¢ Sentiment: Buy Disclosure: Held
(20min delay)