Canada has failed to disclose the full costs of buying controversial stealth fighters, a new independent report says, warning that the true price tag is at least $10-billion higher for a total of $56-billion.
Under the worst-case scenario, the report by University of British Columbia academic Michael Byers predicts, the full lifetime bill for F-35 Lightning jets would hit $126-billion – about $81-billion higher than Ottawa's working estimate of $45.8-billion.
The analysis, titled The Plane that Ate the Canadian Military, drew a swift rejoinder from F-35 maker Lockheed Martin Tuesday. It said there are gross inaccuracies in Mr. Byers's work and the calculations are based on "out-of-date" cost information.
"That's not in line with any economic estimate that anyone has going forward," Steve O'Bryan, Lockheed's vice-president for F-35 business development, said of the report.
Mr. Byers, who holds Canada Research Chair in Global Politics and International Law at UBC, said Ottawa is lowballing the cost of purchasing and operating 65 F-35 jets over three decades.
In the report for the Canadian Centre for Policy Alternatives and the Rideau Institute, he said the full bill for buying, operating and maintaining the planes is at least $56-billion and not the $45.8-billion the government has already acknowledged because its bleeding-edge technology is still under development.
"The Harper government has also failed to acknowledge the considerable cost risks and uncertainty associated with a fleet of F-35s – risks that are amplified by the developmental character and the unusually high operating and sustainment costs of these particular aircraft," Mr. Byers said.
He warned that the F-35 could end up gobbling up significant portions of the military's budget over the next three decades.
"An additional $81-billion in unplanned cost could destroy the Canadian military, which would be forced to carry most of that cost through reduced expenditures on other equipment, maintenance, infrastructure, salaries and training. Even the 'moderate' [case] scenario, which carries an additional $45-billion in unplanned cost, would have profoundly negative, across-the-board impacts on the men and women who serve."
Two years ago, Ottawa vowed to start from scratch after it received a damning audit of its plans for the sole-sourced purchase of F-35 fighter jets, promising to scour the world market for rival jets.
Today, however, Ottawa is considering two main options for its plans to commit $45-billion to controversial new fighter jets – and both point back to the Lockheed Martin F-35 as the clear front-runner, sources said.
Government and outside sources said the process is nearing completion, and the government is facing two main options: continue with its sole-source plans to buy a fleet of 65 F-35 Lighting IIs, or launch a competition that, based on technical and financial data obtained by the government, would lead to the selection of the same aircraft.
In 2012, KPMG produced an estimate for Ottawa that forecast the 30-year cost of owning and operating 65 F-35s would total $45.8-billion and Mr. O'Bryan cited that study when asked for the estimates he considered accurate for Canada.
The Conservative government attacked Mr. Byers personally Tuesday, noting he ran for the NDP in a previous election campaign.
"We will not take advice from failed NDP candidate Michael Byers," said Alyson Queen, director of communications for Public Works Minister Diane Finley. "Real independent third-party experts, with access to the real facts, are working to ensure that the reports being prepared by DND are rigorous and impartial."
But Mr. Byers said the KPMG estimate embraced by the government relies on operating-cost estimates derived from current CF-18 jets.
He said it's more accurate to use projected operating costs for the F-35, which raise the total life cycle estimate to $56-billion from more than $45-billion.
He also warns of a worst-cast scenario where a number of factors turn against Canada: The Canadian dollar weakens considerably against the U.S. dollar, the rate of inflation jumps and fuel prices skyrocket, all leading to a total price tag as high as $126-billion.
Editor's note: An earlier online version of this story incorrectly stated the increase in the jets' true price tag. This online version has been corrected.