Question Period Note: Parliamentary Budget Officer Report On F-35 Life Cycle Cost

The PBO’s recent report shows that Canadians could have saved billions of dollars if we had committed to the F-35 aircraft earlier. Why did this procurement take so long?

• National Defence appreciates the important and independent work of the Parliamentary Budget Officer.
• This includes its recent report on the F-35 procurement.
• A modern fighter aircraft is critical to protecting North American airspace and meeting defence and security challenges abroad.
• We are already taking steps towards the acquisition of an initial tranche of 16 aircraft, with the first aircraft deliveries anticipated to begin in 2026.
• In parallel, we have begun the construction of the Fighter Squadron in Cold Lake and Bagotville to prepare for the arrival of these aircraft.
• We remain confident that these aircraft will deliver the capability the Royal Canadian Air Force needs, while providing economic benefits for Canada's aerospace and defence sector for decades to come.

If pressed on decision to open the procurement in 2017:

• In 2017, we launched an open and fair bidding process to replace the legacy fleet of CF-18 fighter aircraft.
• This open process allowed for transparency, while also being mindful of taxpayer money.
• In fact, the Future Fighter Capability Project represents the largest investment in the Royal Canadian Air Force in the past 30 years.
• In addition, Canada’s participation in the U.S.-led multinational Joint Strike Fighter Program has yielded approximately USD$3.5 billion in contracts for Canadian companies since 1997.
• This is a complex and high-cost procurement.
• We have taken the time to get it right and to ensure that our Canadian aerospace and defence industries are informed and well-positioned to participate.

If pressed on minor discrepancies in estimated costs:

• Any discrepancies are likely a result of economic factors such as inflation and foreign exchange rates.
• National Defence will remain transparent as we work to validate and update costs as the project continues to progress.
• For National Defence, it is important to hear different points of view, leverage lessons learned, and ensure value for money.
• We are also always open to exchanging advice with the PBO and parliamentarians to help inform public dialogue on important defence issues.

Parliamentary Budget Officer (PBO) Report

• On 2 November, the PBO published its report regarding an independent analysis of costs associated with the F-35 procurement. This encompassed costs analyses of the development, acquisition, operations, and sustainment, as well as disposal costs of the project.
• In its report, the PBO estimates acquisition costs to be $19.8 billion (this is the current phase of the project) and for the total life-cycle cost to total $73.9 billion.
• According to the report, the two most important factors that could increase the acquisition costs include inflation and foreign exchange.
• Canada’s historical contributions to the Joint Strike Fighter Program MOU (2006) was not included as part of PBO’s costing.

• In its background section, the PBO report mentions the initial procurement in 2010; noting that, at the time, the Government of Canada announced that it would buy 65 F-35 jets at a cost of $18 billion. This costing was subsequently analysed in follow-on reports published by the PBO (2011) and the Auditor General (2012).

  The Future Fighter Capability Project

• The Future Fighter Capability Project (FFCP) will successfully acquire and transition into service 88 advanced fighter aircraft along with the associated equipment, weapons, infrastructure, information technology, and sustainment, including training and software support.

• The process, led by Public Service and Procurement Canada, is overseen by an independent fairness monitor.
• Project Budget: $19B in acquisition funding was established in Strong, Secure, Engaged. This includes the aircraft, associated equipment, sustainment set-up and services, as well as the construction of Fighter Squadron Facilities in Cold Lake, AB, and Bagotville, QC.
• Procurement: Canada has committed to an initial tranche of 16 F-35A aircraft via the Production, Sustainment, and Follow-on Development Memorandum of Understanding (PSFD MOU).
• Delivery: The first aircraft will be delivered in 2026. The project will work with the F-35 Joint Program Office (JPO) through the project implementation phase to acquire additional F-35A fighter aircraft along with the associated equipment and services.
• Economic Benefits: Canada’s participation in the Joint Strike Fighter Program MOU has resulted in $3.5 billion USD in contracts awarded to Canadian companies since 1997.
  • Lockheed Martin and Pratt and Whitney have committed to provide economic benefits equal to the contract value over the life of the Joint Strike Fighter Program to be completed within 25 years in Canadian Content Value.
  • This may include contracts to Canadian companies for equipment, parts, and services for the global F-35 aircraft and engine production.

Quick Facts

• On November 2, 2023, the Parliamentary Budget Officer (PBO) published its study on The Life Cycle Cost of Canada’s F-35 Program- A Fiscal Analysis.
• As part of this study, the PBO conducted an independent life-cycle cost analysis of the announced F-35 procurement; its analysis of costs related to the acquisition phase ($19.8 billion) as well as total life-cycle costs ($73.9 billion) are largely aligned with those previously published by National Defence.
• Budget: $19 billion in acquisition funding was established in Strong, Secure, Engaged. This includes the aircraft, associated equipment, sustainment set-up and services, as well as the Fighter Squadron Facilities in Cold Lake, AB, and Bagotville, QC. The overall cost throughout the life cycle of the F-35 procurement is estimated at $70 billion.
• Delivery: The first aircraft will be delivered in 2026. The project will work with the F-35 Joint Program Office (JPO) through the project implementation phase to acquire additional F-35A fighter aircraft along with the associated equipment and services.
• Initial Pilot Training: The initial 12 aircraft will be located at the F-35A Pilot Training Center in Luke Air Force Base, Arizona, to enable the training of RCAF pilots while DND builds the necessary infrastructure to support aircraft delivery and commence operations in Canada.