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Associate Defence Minister Julian Fantino speaks to reporters after delivering a speech on the procurement of the F-35 Joint Strike Fighter in Ottawa, on March 16, 2012.Adrian Wyld

The Harper government is introducing hefty new oversight controls for its plans to buy next-generation fighters in the wake of a spending watchdog's damning report on the mistakes Ottawa has made so far in acquiring F-35 jets.

The government is cutting the Defence Department out of the procurement process and even more squarely placing it in the hands of the Department of Public Works.

But it appears no heads will roll over the fiasco.

Federal officials, speaking on background, couldn't name one person at the Department of National Defence who will lose their job or be reassigned as a result of the problems identified by the Auditor-General.

The federal government is vowing, however, that it will only buy the F-35s if the costs don't exceed the $9-billion budget allocated for the project.

"Canada has not signed a contract to purchase any aircraft. As we have stated, Canada has set a budget to purchase fighter aircraft to replace the CF-18 and will acquire the F-35 only if and when we can operate within that budget," Associate Defence Minister Julian Fantino said.

The Conservatives unveiled a new procedure for purchasing the planes after Auditor-General Michael Ferguson delivered a harsh review of Ottawa's record to date.

The criticism has the Tories scrambling to rescue the Harper government's reputation for fiscal probity. It was a previous Auditor-General's report after all, on the federal sponsorship scandal, that damaged the former Liberal government's credibility on financial stewardship.

"Canada will not purchase new aircraft until further due diligence, oversight, and transparency is applied to the process of replacing the Canadian Forces' aging CF-18 fleet," Public Works Minister Rona Ambrose said in a statement Tuesday morning.

Mr. Ferguson's first report as federal Auditor-General criticized departments, including National Defence, for neglecting to manage the big-ticket acquisition rigorously enough – and for failing to follow rules for major procurements.

"This comprehensive response ... re-affirms our Government's ongoing commitment to supporting our brave men and women of the Canadian Forces and exercising responsible stewardship of taxpayers' hard-earned dollars," Defence Minister Peter MacKay said in a statement.

Ottawa will add a new layer of scrutiny to the massive $9-billion procurement, setting up a secretariat led by the Department of Public Works to monitor and manage the process – one that will be overseen by a committee of deputy ministers.

"The secretariat will play the lead coordinating role as the government moves to replace Canada's CF-18 fleet," the Conservatives said in a statement.

The new strategy is similar to how the government handled the process of selecting winners for its massive round of public shipbuilding last fall.

The development of the F-35 Lightning fighter bomber has been riddled by cost overruns and technical problems – much of it out of Canada's hands because the project is being run by the United States government. The Conservative government has insisted the planes will cost $75-million each but the Pentagon estimates the price tag will be $135-million.

The federal government also committed Tuesday to providing Parliament with annual updates on the progress of the procurement. Canada hasn't signed a contract yet and isn't expected to take delivery of planes for as many as five years.

"These updates will be tabled within a maximum of 60 days from receipt of annual costing forecasts from the Joint Strike Fighter program office, beginning in 2012," the government announced.

The Conservatives are also announce they're freezing the acquisition costs of the procurement, capping it at $9-billion.

Before it buys the planes, the government said, Treasury Board will commission an independent review of "acquisition and sustainment project assumptions, and potential costs for the F-35, which will be made public."

The government vowed to evaluate all options for the procurement of Canada's next-generation fighter – raising doubts about its commitment to the F-35.

Sources have cautioned, however, against interpreting this to mean that the Conservative government is actively considering purchasing a different jet.

"The F-35 train is still on the track," one government source told The Globe and Mail this week.

Rather, sources said, this would mean exploring whether to shift the F-35 purchase schedule so that it occurs more squarely in the lowest-cost production years – and considering how to make the existing fleet of CF-18 jets fly longer.

In recent weeks, the Harper government has deliberately wavered on Canada's commitment to the F-35 – a move that aims to put distance between itself and an increasingly expensive military procurement.

The Conservatives say they're not currently re-evaluating the F-35 purchase, but are eager to maintain enough wiggle room so that they're not wedded to the plane if the procurement goes awry.

This messaging continued Tuesday with Mr. Fantino's vow that a contract would be signed "if and when" Ottawa could assure the project didn't exceed its budget.