5th Generation Fighter Conundrum
Jan 15, 2011

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A war of words continues to surround what would be Canada’s most expensive war-fighting machine: the Lockheed-Martin F-35 Lightning II, a.k.a. the Joint Strike Fighter (JSF)

Rising rhetoric on both sides of the debate points to the decision to sole-source the replacement of Canada’s CF-18 fighter planes as a factor in the next federal election despite the fact that the Liberals were the ones that signed Canada to the program on 2 Feb 2002. Although a litany of problems have emerged with the JSF in its home market as well as in several other countries, the Conservative Government is determined to stay the course on having it replace the current CF-18 Hornet as Canada’s frontline fighter, with first delivery expected in 2016. Moreover, Defence Minister Peter MacKay remains confident that the price will not rise before the $9-billion purchase contract is signed, possibly next year.

Seldom mentioned is the unusual situation of this program being a government-to-government arrangement. Countries are not contracting directly with Lockheed Martin, as many reports would lead you to believe; rather, the MoU is directly with the U.S. Government. In 1994, Boeing, Lockheed Martin, McDonnell Douglas, and Northrop Grumman had each received 15-month Concept Definition and Design Research contracts from the U.S. government. After program reviews and RFPs, the Concept Demonstration Phase was awarded to two consortia – one led by Lockheed Martin and the other by Boeing Aerospace. In October 2001, the Lockheed Martin team was finally selected by the U.S. government to build the JSF.

In a teleconference call from Fort Worth, Texas, where Minister MacKay visited the F-35 assembly line, he dismissed the growing clamour to open up the fighter program to competitive bids as “partisan and disingenuous.” It would be akin to “hitting restart,” and would cost Canada its “preferred” place in the program. “We are firm in pursuing this course of action in purchasing this aircraft, which will accrue maximum benefits to the air force, the aerospace industry, and to Canada,” he confirmed.

The actual cost of the next generation fighter has been hard to pin down, and cost uncertainty has been an issue for other prospective JSF customers. The government’s stated capital outlay is “up to $9 billion” for the 65 aircraft, an average of roughly $138 million. Dan Ross, Assistant Deputy Minister (Materiel) at DND, told the House of Commons Standing Committee on National Defence that the cost of the aircraft themselves would be $70-75 million and the other half of that overall cost would cover logistics, simulators, spares, weapons, etc. However, that cost range represents an average of $76.9 million at the low end and $84.6 million at the top end. Atop that is an estimated $250-300 million a year for fleet sustainment, but Mr. Ross said Canada could contain that cost by pooling spares with its allies. Even so, the overall JSF program cost to Canada has been estimated at as much as $21 billion.

The U.S. plans to buy 2,443 aircraft at an estimated cost of some $323 billion, making it the most expensive military program in that country’s history too. The U.S. Air Force has said that the average cost could range from $89 million to as much as $200 million, depending on the variant, with the vertical take-off and landing (VTOL) model at the top end of the spectrum.

Defense Secretary Robert Gates has become publicly frustrated with the program, going so far as to fire the Pentagon’s JSF project manager. Mr. Gates said soaring costs could affect the number of aircraft the Pentagon would eventually buy. “The culture of endless money that has taken hold must be replaced by a culture of restraint,” he said recently, putting the F-35B VTOL variant on “probation” for two years.

Richard Aboulafia, vice-president of analysis at the globally-respected Teal Group Corporation, an aerospace and defense consultancy based in Alexandria, Virginia, echoes the Secretary’s concerns. “The incredibly unfortunate phrase ‘too big to fail’ applies to this aircraft more than any other defense program,” he warns.

Meanwhile Denmark and Norway, two of the original JSF partners whose economies have been battered by the last global recession, evidently are reconsidering their options. So, too, is Britain, where Prime Minister David Cameron has suggested that its order could be cut to as few as 40 aircraft from the intended 138, and that initial delivery could be postponed for several years. The Netherlands recently stated that its costs would be at least $121 million per aircraft, a 20% jump in one year, and Defence Minister Hans Hillen told his Parliament that he has “great ­difficulty” with that. Even Israel, which receives billions in annual military aid from the U.S., is worried about cost escalation and has indicated that it might buy fewer aircraft than originally announced.

A slimmer-than expected order book generally drives up the price to remaining customers, and Dan Ross told the committee that the eventual price to Canada would represent “the cost of production per aircraft, as it comes off an assembly line.” He also told the MPs that the “myriad of numbers” about costs to the U.S. Department of Defense reflects total program cost, including research and development, tooling and testing. “Canada does not pay for those costs,” he said, adding later that as the global JSF market for “upwards of 3,000 to 5,000 aircraft . . . is firmed up and becomes more and more efficient,” Canada hopes that prices might actually drop.

Mr. Ross was understandably bullish, echoing Minister MacKay’s enthusiastic testimony before the committee a month earlier. It was the “only aircraft in the western world” that met Canada’s operational requirements while affording Canadian companies “unprecedented” access to new technologies, Mr. Ross said. “It provides us with the most cost-effective approach to long-term sustainment and follow-on development because we’re doing it jointly with eight partners.” An additional benefit was the potential for Canada to receive “millions of dollars in royalty cheques” from F-35 buyers which were not JSF ­program partners, such as Israel.

Then there is the “fifth generation” element. Minister MacKay and other senior DND staff contend that the JSF, due to its stealth characteristics, “eye of God” sensor suite and interoperability, is the only candidate that fits the description. “As a fifth-generation aircraft, it is the only plane that can fill the requirement laid out in the Canada First Defence Strategy,” the minister told the Commons committee. It would be “more reliable, more survivable and more effective than anything else available” and “will allow us to be seamlessly interoperable with our […] allies long into the future.”

The Chief of the Air Staff, LGen André Deschamps, who has more than 7,500 hours of flight time, ranging from Lockheed CF-104 Starfighters to NATO’s Boeing E-3A AWACS platform, was just as unequivocal with the committee. He pointed out that the twin-engine Lockheed-Martin/ Boeing F-22 Raptor, the only other fifth-generation platform currently available, was strictly an air superiority platform and, most important, was not sold by the U.S. even to its most trusted allies. Nor, for obvious reasons, were the putative Russian or Chinese 5th-generation aircraft an option.

“It is important to be clear that a fourth-generation aircraft cannot be upgraded to a fifth-generation,” Deschamps continued. “The F-35 Lightning II represents the revolutionary difference from previous generations of fighters in terms of capabilities, and it brings unique advantages. […] It provides lower risk and improves survivability for the pilot, as well as enhanced intelligence, surveillance, and reconnaissance capabilities, all of which have significant relevance across the Government of Canada’s defence priorities of national, continental, and international operations.” Rather than “an unnecessary luxury,” it was “the right tool at the best value to properly do the job that Canada and Canadians want their air force to carry out.”

Kory Mathews, vice-president of the FA/18F and EA-18G Super Hornet programs at Boeing Corporation, dismisses the fifth vs fourth generation debate as mainly a marketing ploy. “A better discussion would be around very specific requirements and what weapon system best meets those requirements at the best price,” he told the committee. “There is a difference between known guaranteed pricing and projected pricing.” He put the current price of a “full-up, go-to-war” Super Hornet at approximately $52.3 million. And although he did not mention it, other Boeing officials have told FrontLine that it would take only a few hours for a current CF-18 pilot to transition successfully to the Super Hornet at a considerable savings in training costs.
Meanwhile, Prime Minister Stephen Harper and other members of his cabinet continue to play the employment card in what has become an extremely high-stakes poker game against critics.

Liberal Leader Michael Ignatieff has repeated several times that the Liberals would scrap the JSF proposal and hold an open competition if they manage to win an election. Boeing is understandably keen for that to happen, as are other manufacturers that want Ottawa to consider their aircraft: the Dassault Rafale, the Eurofighter Typhoon, and the Saab Gripen.

“We need to clean up this whole process,” Mr. Ignatieff said after Auditor General Sheila Fraser warned last fall that the rising costs of the Boeing CH-147D Chinook and the Liberal-contracted Sikorsky CH-148 Cyclone, should be a “wake-up call” for Parliament and taxpayers.

Another shoe is about to drop, in the shape of an F-35 review by Parliamentary Budget Officer Kevin Page, who isn’t shy about confronting the government. “We are monitoring developments (and) working with colleagues in the U.S. and the U.K.,” he confirms. That review is expected soon.

When Mr. Ignatieff and New Democratic Party Leader Jack Layton alleged Conservative mismanagement of the F-35 program, Harper countered with accusations that the Opposition “coalition” was playing politics not only with the lives ot military personnel but also employees of Canadian aerospace companies which stand to benefit from whichever aircraft Canada chooses. Industry Minister Tony Clement agrees, saying that scrapping the JSF agreement with the U.S. government would jeopardize billions of dollars in industrial opportunities for Canadian companies and that “pointless” politicking was “exactly the opposite” of what industry needs. “Canada’s participation in the Joint Strike Fighter program is yielding high-quality opportunities for companies and producing strong economic results across the country, with even more to come,” he adds.

While early assessments projected the value of Canadian work at just under 4 billion (later revised to $5 billion), those were predicated on an 80-aircraft buy. The Conservatives subsequently inflated the potential to $8 billion without any explanation and Clement’s department has ballooned that out by as much as 50%, also without an explanation.

Former astronaut Marc Garneau, a Montreal MP since 200 and the Liberal industry critic, points out that the U.S. is equally keen to keep jobs at home, a prospect made all the more likely by the absence of any clear contractual statement about Industrial Regional Benefits for its northern neighbour.

It’s a worrisome prospect for Canadian Auto Workers President Ken Lewenza, who warns that Ottawa’s handling of the procurement could cost more jobs than it creates. “The government has failed to require the U.S. manufacturer . . . to invest an amount equivalent to the estimated $16 billion contract in Canada,” he said after testifying before the Commons committee. “Instead, the government says it has identified up to $12 billion in contracts that companies can bid on. And who will decide the winners of those contracts? Lockheed Martin, using our tax dollars. Which would you rather have: the chance to bid on $12 billion in contracts, or guarantees of $16 billion in contracts? Canadian workers should not be asked to just sit back and hope that Lockheed-Martin will send contracts to Canada out of the goodness of its heart. Those dollars should require guaranteed investment and jobs in Canada of equivalent value.”

The bottom line for Alan Williams, who preceded Mr. Ross as ADM(Mat), is that the main objective for any procurement should be to meet the military’s needs. “Without an open competition based upon a public Statement of Requirements linked to the anticipated role of the military, there is no assurance this objective will be met,” he told FrontLine. “Second, if people want to debate the industrial benefits, there is no doubt that Canadian industry will benefit more from a competition than through this sole source acquisition.”

Mr. Williams points out that to be compliant with Canadian defence industrial policy, all bidders in an open competition would have to guarantee IRBs of equal or greater value that the value of the life-cycle contract. “For this procurement, the value will be at least $16 billion and probably much higher. As such, at least $16 billion will be guaranteed to Canadian industry. This is significantly more than the amount forecast under the sole-source approach.”

There was a recent and significant contribution to the debate with the release by Winslow Wheeler – director of the Straus Military Reform Project at the Center For Defense Information in Washington – of copies of written testimony submitted to the Commons Standing Committee on National Defence in December.

Unable to appear in person and “extremely reluctant” to offer advice to Canada “on such a controversial and expensive purchase,” Mr. Wheeler, who spent 30 years on Capitol Hill, including working for the power Senate Budget Committee, posed three questions: What will the F-35 cost Canada? What would Canada get? Was there a good reason to wait?

“The answers to the first two questions are unknown to Canada,” he said. “Those answers are also unknown to the United States. Some will argue that Secretary of Defense Gates is exercising the right precaution by suspending F-36B production and proceeding with the F-35A and C. He is not; just like the Canadians, he is proposing that the government start purchasing the F-35A and C now, and find out what the actual cost and performance for the aircraft is later. We know what the result will be; we have done the same thing many times in the past, and our defenses have suffered for it.”

As for whether there is a good reason for Canada to wait, Mr. Wheeler said being in a hurry has consequences. “Like your proposed purchase… before all testing is completed and all costs are known, the United States has been rushing to ‘buy’ before we ‘fly’ for decades. It has been a disastrous practice, especially for our Air Force.” Base appropriations had increased while the number of active and reserve squadrons had shrunk.

“This decay in our equipment inventory is a direct result of new aircraft cost growth above the rate of growth in the U.S. Air Force budget. A major factor in that unrestrained growth is our penchant for committing to new programs before we know what they will actually cost – and before we know how well, or poorly, they will perform. We have been making decisions on the basis of poorly supported ‘buy-in’ promises for cost, schedule, and performance. The only way out of this syndrome is to better understand the future consequences of our contemporary decisions: A challenge that faces Canada on the F-35 in a direct and meaningful sense.”

Mr. Wheeler acknowledges the 2017 end-of-service timeframe for the CF-18s, and says most of Canada’s allies face a similar situation while being offered “inducements” to modernize. “However, others are beginning to take a more cautious approach. More aware than any of the possible downsides of F-35 procurement, the U.S. Navy is keeping alive its F-18 production line, and some there may be beginning to look at alternatives to the naval variant of the F-35. In the U.S. Air Force, officials are assessing the cost of prolonging F-16 service, and some are even talking more seriously about purchasing new models of the F-16 and F-15…

“I have observed the defense establishment in the United States behave as foolishly as you are being urged to now. The result for us has been an aging, shrinking force at drastically increasing cost. There is good reason not to rush.”

How all this might play out with Canadian voters – an election doesn’t have to be called until October 2012 but there are always rumblings these days in Ottawa – is unclear, but the Liberals’ latest television spots have focused on the JSF.

A mid-November EKOS Research Associates poll asked 1,815 respondents whether they opposed or supported a $16-billion JSF purchase. Given the 4.6 point margin of error in samples that size, the results were fairly even although slightly skewed to the negative side. Some 34% were “strongly” opposed and 20% were “somewhat” opposed, compared with 20% who “strongly” supported the government’s decision and 26% who were “somewhat” supportive. However, when asked for their political affiliation or leaning, the strong supporters were found to be mainly Conservatives.
Ken Pole is a Contributing Editor at FrontLine Defence magazine.
© Frontline Defence 2011