Canadian aerospace firms can bid on $9.85B in production contracts, down from $12B.
May 4, 2012
by The Canadian Press
OTTAWA: Industry Canada is dampening expectations of how much the aerospace industry could reap from the troubled F-35 program, chopping more than US$2 billion off the Harper government’s estimate.
A senior official told a House of Commons committee that Canadian companies can bid on as much as US$9.85 billion in production contracts for US-built stealth fighter.
“This is the estimated slice of the pie, if you like, for Canada,” said Simon Kennedy, an associate deputy minister.
He was responding to questions from the public accounts committee amid concern the windfall has been overstated.
The Conservatives have long trumpeted the estimated US$12 billion the country expects to gain in contracts for Canadian aerospace firms. Industry access to the program was often cited as a reason for not considering alternative aircraft.
Almost 75% of the revised figure is expected be gobbled up by the 70 companies that have already signed agreements with manufacturer Lockheed Martin, as long as their contracts are renewed throughout the nearly five decades the fighter is expected to be in production and operation, Kennedy said.
“We think Canadian companies have done very well to date,” he said, referring to the US$435 million in production and research agreements already on the books.
Canada’s auditor general, who issued a scathing report on the F-35 procurement, has been concerned the database used to establish the government’s estimate was run by the prime contractor. Defence Department projections for industrial benefits have been all over the map in the last six years, ranging from US$5.2 billion to US$14.7 billion.
Michael Ferguson’s report also noted that prior to signing on to the program, senior decision-makers were warned “that industrial benefits could not be guaranteed under the (joint strike fighter) program.”
New Democrat MP David Christopherson underscored that point. “It is not exclusive bidding by us. There is a competition,” he said.
The auditor general also said the rationale to cabinet for the numbers was unclear.
“We found briefing materials prepared by departments for decision-makers and ministers did not explain the basis for the projections, or the consequent limitations involved in on those projections for decision-makers,” said Ferguson’s April 3 report, which set off a political fire storm.
“Moreover, in the majority of cases, only the most optimistic scenario was put forward, rather than a range of potential benefits that reflected inherent uncertainties in the projections.”
©The Canadian Press