The Harper government is refusing to open up the $16-billion purchase of 65 new fighter jets to a competition because of the potential negative reaction in the United States and other allied countries, internal documents show.
The purchase of F-35 Lightning II fighter jets is one of the biggest military projects in Canadian history, almost equal in size to the entire 2006 plan to acquire more than 2,000 trucks, 21 transport planes, 16 heavy helicopters and three ships for the Canadian Forces.
The fighter contract is the subject of a heated lobbying campaign in Ottawa, as rival companies try to force the government to open up the purchase to a tendering process instead of giving it out sole-sourced to Lockheed-Martin.
The controversy is expected to grow as new federal documents show that the total value of the program comes to $16-billion once 20 years of maintenance are factored in, up from the $9-billion cost for the planes that came out earlier this week.
According to secret cabinet documents obtained by The Globe and Mail, officials are well aware that any move to open up the process to a competition could push the manufacturers of rival jets, such as the Boeing Super Hornet and the Eurofighter Typhoon, to lower their prices.
In addition, the government is expecting a "negative reaction" to the fact that the contract is set to be awarded without a competition.
But as the process is going through a series of cabinet committees, federal documents show that ministers are being urged to go along with an existing memorandum of understanding with U.S.-based manufacturer Lockheed-Martin.
One of the government's major arguments is that a competition could hurt Canada's reputation among the other countries that have been involved in Lockheed-Martin's massive Joint Strike Fighter (JSF) program since the 1990s.
The U.S. military is planning to buy more than 2,000 jets, and other countries such as Australia and the United Kingdom are also involved in the project. If Canada does not buy F-35s, officials say, it will be straying from the path followed by its "major allies" well into the middle of the century.
"Competitive process would send signal to US/partners that we are not fully committed to JSF," stated the Canadian government, which has been involved since 1997.
The government added that the F-35 is deemed to be the only aircraft to meet Ottawa's requirements, as spelled out in the 2008 "Canada First" defence policy. The F-35 would be the first jet in the Canadian Forces with radar-evading stealth capabilities, with the 65 new fighters replacing the current fleet of 80 CF-18s starting in 2017.
Finally, the government has obtained assurances that its position on a sole-sourced contract cannot be legally challenged by rival manufacturers.
"Public Works legal opinion confirms suitability of invoking an exemption in Government Contracting Regulations because only one aircraft meets the [Canadian Forces']operational requirements," a federal document states.
A number of senior government officials are staunch supporters of the F-35, given that Lockheed-Martin won the contract in the United States in 2001 to develop the so-called "fifth generation" of fighter jets, beating out a rival bid from Boeing.
In that context, officials said, the potential bids from Boeing and Eurofighter would be based on inferior "fourth generation" aircraft.
Canada has invested $160-million so far in the project, with Canadian firms receiving $350-million in contracts.
"Canada must commit to the JSF program to realize benefits," the government said, pointing to a potential for $12-billion in future work.
But competing aircraft manufacturers say they want to participate in a competition, and that the government will get a better deal – and more regional industrial benefits spread out across Canada – if it opens up a tendering process.
"Competition guarantees the best value for Canada," Boeing stated in a presentation to Conservative ministers last fall.
Officials at National Defence and Public Works refused Thursday to discuss the complete price tag for the new fighter jets, saying it "would be premature to discuss the details of a procurement, including cost figures and timelines."
However, documents show that the cost of the acquisition is $8.99-billion, "along with sustainment services for 20 years valued at $6.93-billion." In addition, the government is predicting that the operating costs to fly the stealth fighters over two decades will reach $9.6-billion.
According to the Canadian government, the funding for the new F-35 jets is already budgeted, and will end up costing only $890-million between now and 2014-15, with the rest of the acquisition cost of $8-billion to be paid in subsequent years.