KPMG report suggests the fleet of 65 stealth jets could carry a $40 billion price tag.
December 7, 2012
by The Canadian Press
OTTAWA—Ottawa was awash in speculation this week that the pricetag for the life-time cost of the oft-maligned F-35 fighter was about to take a huge jump.
A government sponsored report by the accounting firm KPMG is widely expected to show that the pricetag of owning 65 stealth fighters could stretch to $40 billion.
The figure is higher than $25 billion estimates last spring by the auditor general, who in a scathing report blasted the Harper government for low-balling the purchase.
Over the previous two years, the Conservatives insisted the all-in price for the multi-role, radar-evading jet was going to be up to $16 billion.
Defence sources said next week’s KPMG report is expected to present a range of figures for cost ownership, depending on the number of years the Royal Canadian Air Force intends to fly the plane.
The longer it’s in service, the higher the cost.
The report has been in the hands of the government for a week.
A spokeswoman for Public Works Minister Rona Ambrose said late Thursday that the government is committed to fufilling its seven point response to the auditor general’s report.
“The government has received the report from KPMG and is reviewing it,” Michelle Bakos said in an email. “The government will be providing a comprehensive public update before the House rises.”
One media report speculated that a cabinet committee had decided to scrap the F-35 purchase altogether and look at other alternatives, which has been flatly denied by several senior government officials.
One defence source, speaking on the condition of not being named, said the figure the government is watching closely is not the full life-cycle cost, but the pricetag per plane.
Prime Minister Stephen Harper and Defence Minister Peter MacKay are both on-the-record saying the government is willing to spend no more than $9 billion on purchasing aircraft.
The defence official says that is the “red line” and that maintenance and operating costs can be adjusted over the years, depending upon how much each aircraft is flown.
A series of delays and cost overruns have seen the estimated pricetag per jet climb from US $75 million to in the range US $133 million.
The F-35 program has long been a hot button issue in Ottawa with arguments over the cost contributing to a Liberal motion that defeated Harper’s minority government in 2011.
The advanced fighter is still largely in development mode and likely won’t be fully operational until 2019.
Because a number of countries are involved in the development and purchase, the actual pricetag fluctuates depending on the number of orders Lockheed Martin receives in any given year.
The KPMG report will analyze those numbers and throw in some of the variables unique to Canada’s planned purchase, including minor modifications such as the addition of a drogue chute for stopping on icy runways.
The analysis, which the Conservatives ordered in the aftermath of the auditor general’s report last spring, will also lay out projected maintenance and operational costs for the lifetime of the aircraft should Canada choose to proceed with it.
Public Works Minister Rona Ambrose has said that air force’s original statement of requirements has been set aside and the secretariat overseeing the CF-18 replacement will conduct a full options analysis.
That review is expected to examine in detail whether a stealth capability is necessary for the country’s needs.
It also means that the government will seek input from Lockheed Martin’s competitors about whether their aircraft might meet the country’s needs.
That analysis is expected to take several months.
The CF-18s already heading into their fourth decade of service are due to retired in 2020.
©The Canadian Press