The ballooning lifetime cost of the F-35 fighter and Ottawa's decision to shop around for alternatives is creating panic among Canadian companies betting on supply contracts for the Lockheed Martin plane, sources say.
"It's panic all over.…They are very concerned at this stage," a Defence Department source said.
"The numbers are a lot bigger than anybody could imagine," the source said, adding reports that Ottawa is preparing to back away from its 2010 choice of the F-35 and mull buying another plane are casting doubts on the future of Canada's involvement with the cutting-edge jet. "The messages are fuzzy enough [from Ottawa] that it looks like they are looking at backing off, delaying it."
As The Globe and Mail reported Friday, the Harper government is looking for alternatives to the controversial F-35 Lightning fighter jet in the most significant demonstration yet that it is prepared to walk away from its first choice for a new warplane. It is planning to release figures next week showing that the full lifetime costs of the F-35 have surpassed all previous forecasts and now exceed $40-billion.
Canadian companies are able to bid for work supplying the F-35 project because Canada has signed onto a memorandum of understanding with other countries that are pooling efforts to purchase the planes. While the Harper government is considering buying different jets, it has given no indication it is prepared to back out of the memorandum.
Spokespeople for Lockheed Martin refused to comment directly and released a statement that recalled the company's long association with the Canadian military.
"Lockheed Martin has been a partner with the Canadian Forces for more than 50 years. We continue to look forward to supporting the Government of Canada as they work to provide the Royal Canadian Air Force with a 5th Generation fighter capability for their future security needs," the company's statement said.
Maryse Harvey, a spokeswoman for the Aerospace Industries Association of Canada, said her group will not make remarks on the matter until the Harper government officially announces its plans. "We won't comment until an announcement is made," she said.
Defence Minister Peter MacKay said Ottawa will explain itself next week on what it is doing to replace Canada's aging CF-18 fighters. "There's been a lot of speculation over the last 24 hours … next week there'll be an open and transparent discussion about the next steps that are going to follow in the CF-18 replacement," the Defence Minister told reporters.
In an attempt to head off public skepticism that Ottawa's new "options analysis" is something less than a rigorous rethink of which jet is best, the government is enlisting four independent monitors to vet the process. They will include retired Lieutenant-General Charles Bouchard, who led the NATO mission in Libya, and University of Ottawa professor Philippe Lagassé, an outspoken critic of the jet procurement.
The Conservatives announced in July, 2010, they had decided to buy the F-35 without any competition, and for more than a year and a half, described the jet purchase as a $9-billion acquisition. But in April, 2012, Auditor-General Michael Ferguson revealed it would cost $25-billion for the first 20 years alone.
To demonstrate that they are restarting the procurement process from scratch, Canadian officials will collect information from other plane manufacturers, including U.S.-based Boeing, maker of the Super Hornet, and the consortium behind the Eurofighter Typhoon. They may also contact Sweden's Saab, manufacturer of the Gripen, and France's Dassault, maker of the Rafale.
Next week, the government will start this process by releasing National Defence's updated cost estimates for buying 65 F-35 fighters, and an independent review by KPMG of the forecast price for keeping the jets flying for their full lifespan. The planes are expected to last 36 years, and they should be costed as such, the Auditor-General suggested in his April report.
Sources say the full price of ownership for the F-35 would add up to more than $40-billion when all costs, including fuel and upgrades, are included – or more than $1-billion a year over the F-35s' lifespan.