The Harper government is going to overhaul the way it buys next-generation fighters in the face of a spending watchdog's damning report due Tuesday on the mistakes Ottawa has made so far in acquiring F-35 jets.
The Conservatives will unveil a new procedure for purchasing the planes – including stricter oversight – after Auditor-General Michael Ferguson delivers a harsh review of Ottawa's record to date, sources say.
On Tuesday morning, Mr. Ferguson's first report as federal Auditor-General is expected to criticize departments, including National Defence, for neglecting to manage the big-ticket acquisition rigorously enough – and for failing to follow rules for major procurements.
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.
In response, 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 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 will also commit 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.
The Conservatives will also announce they're freezing the acquisition costs of the procurement, capping it at $9-billion.
The government will vow to evaluate all options for the procurement of Canada's next-generation fighter – raising doubts about its commitment to the F-35.
But sources cautioned 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 said.
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.
Associate Defence Minister Julian Fantino has speculated Canada might buy fewer than the 65 fighters that the military says is the "minimum acceptable fleet." He's also raised the possibility of backing out of the purchase altogether.
The 2012 budget, for instance, said only that Ottawa would buy an "affordable" replacement for the current CF-18 fighter fleet.
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.
"In two months if there is a skyrocketing cost increase – say we get to $200-million a plane – it would be wrong of the government not to start taking a good look," one source said.