Canada Quietly Pays $54 Million to remain in F-35 Consortium

The Canadian Press

Canada has quietly paid another $54 million toward the development of the F-35 stealth fighter jets, bringing its total investment in the controversial project to roughly half a billion dollars over the last 20 years.

The government is consulting with fighter-jet builders, including U.S. aerospace giant Boeing, before launching a formal competition early next year to decide on a replacement for the air force’s aging CF-18s.

Boeing remains on the fence about whether its Super Hornet will participate in the competition because of enduring questions about how the government will run it.

One concern is a new provision the government announced last year that aims to make it more difficult for companies that are deemed to be hurting the Canadian economy to win defence contracts.

The measure was announced at the height of Boeing’s bitter dispute with Canadian rival Bombardier, which has since been tossed out by a U.S. trade tribunal.

Boeing says it made its point with the challenge, and continues to work with the government with regards to other military contracts, but wants to see how the fighter-jet competition will be run before deciding whether to join.

Government Makes 2017 Payment to remain in F-35 Consortium

Lee Berthiaume, The Canadian Press

OTTAWA -- Canada has quietly paid another $30 million toward development of the F-35 -- money that could become insurance in the trade dispute between U.S. aerospace firm Boeing and Canadian rival Bombardier.

The annual payment was made to the U.S. military at the end of April, the Department of National Defence says, and will keep Canada at the table as one of nine partners in the fighter jet project for the next year.

Canada has paid US$373 million into the program since 1997, National Defence spokeswoman Jessica Lamirande said in an email.

Staying in the program has advantages, as partners can compete for billions of dollars worth of contracts associated with the building and maintaining F-35. They also get a discount when purchasing the plane.

That latter point wasn't considered much of a benefit when Canada paid its annual instalment last year, as the Liberals had promised during the 2015 election not to buy the stealth fighter.

The government instead went out of its way last July to highlight the potential benefits to Canada's aerospace industry when explaining why it had decided to stick with the program.

Those industrial benefits continue to accrue, Lamirande said, with Canadian companies having secured US$926 million in F-35-related contracts over the last 20 years -- including US$114 million in the last year alone.

But the trade dispute between Boeing, which builds Super Hornet fighter jets, the F-35's main competitor, and Montreal-based Bombardier casts the decision to stick with the stealth-fighter program in a new light.

Citing an urgent need for more fighter jets, the Liberal government announced last November plans to buy 18 "interim" Super Hornets until a competition could be held to replace Canada's entire CF-18 fleet.

But then last week, the government threatened to scrap the Super Hornet purchase after Boeing persuaded the U.S. Department of Commerce to launch an investigation against Bombardier.

Boeing alleges Bombardier sold its CSeries jets in the U.S. at an unfair discount thanks to subsidies from the Canadian government, while Bombardier says its planes never competed with Boeing.

Many defence analysts and former air force officers have questioned whether "interim" fighter jets are needed and instead want an immediate competition to replace all of the CF-18s.

But if more jets are truly needed on a short-term basis, the decision to stay at the F-35 table could be used to get a better deal on interim stealth fighters -- or even as a bargaining chip against Boeing.

"If the government is in fact serious about re-evaluating its dealings with Boeing, then this could be part of showing that," said defence analyst David Perry of the Canadian Global Affairs Institute.

"Because the F-35, at least in my mind, would be a possible alternative if the government remains committed to buying separate interim aircraft."

Three other alternatives exist -- the Saab Gripen, Eurofighter Typhoon and Dassault Rafale -- but all are made by European companies and the government has emphasized the need for a U.S. design.

Lockheed Martin, the company behind the F-35, has remained relatively quiet about the government's plan to buy interim Super Hornets, but is now chomping at the bit for a chance to fill any potential gap.

The U.S. company "would openly welcome discussions about interim fighter solutions," spokeswoman Cindy Tessier said, adding that Lockheed has partnered with Bombardier on another military project.

The government is providing little information as to what next steps it might take as the dispute between Boeing and Bombardier continues to play out.

Boeing, for its part, has emphasized its longstanding relationship with Canada, even as representatives from its defence division have scrambled to meet and smooth the edges with Canadian officials.

The U.S. International Trade Commission, which heard arguments from both aerospace companies in a hearing last week, isn't expected to issue a ruling until June 12.

The U.S. Department of Commerce would then decide whether to penalize Bombardier.

Liberals pay $33 million to stay in F-35 program

By: Lee Berthiaume, The Canadian Press

OTTAWA — Canada has so far forked over more than $311 million to develop the F-35 — without any guarantee it will actually buy the multibillion-dollar stealth fighter.

The most recent instalment was made June 24, when the Liberal government quietly paid $32.9 million to the U.S. program office overseeing development of the warplane, despite having promised during last year's election campaign not to buy the F-35.

The contribution keeps Canada at the table as one of the nine partners in the project for the next year. Partners get a discount when purchasing the stealth fighter, and have access to billions of dollars in contracts associated with producing the plane.

Those potential industrial benefits are a big part of the reason why Canada continues to pay into the program, said Jordan Owens, a spokeswoman for Defence Minister Harjit Sajjan. The government says Canadian companies have secured US$812 million in contracts since Canada's first F-35 payment in 1997.

"New skills and technologies gained through access to the program have helped position Canadian industry to take advantage of other advanced aerospace and defence projects," Owens added in an email.

Being a partner, however, does not guarantee future work.

U.S. defence giant Lockheed Martin, which makes the F-35, warned last month that future work would be directed to other countries if Canada chooses not to buy the stealth fighter.

Remaining at the table makes sense if there is a chance Canada will buy the plane, said former Defence Department procurement chief Alan Williams.

"But if they've already made up their mind that they're going to buy something else, then it's a waste of money."

During the campaign, the Liberals promised not to buy the F-35 and to hold a competition to replace the existing fleet of aging CF-18 fighters. Experts say that has put the government in a bind, since there's a real chance the fighter would come out on top in an open and fair competition.

The government recently launched consultations with jet fighter manufacturers to address what Sajjan has described as a shortage of available CF-18s. But some worry the consultations are more about giving the Liberals political cover to buy a plane other than the F-35 without holding a competition.

Owens said no decisions have been made in replacing the CF-18s. The five companies involved in the consultations are to submit details about their aircraft by Friday.

The F-35 may be about to face even more delays

By: JEREMY BENDER, Business Insider

The oft-troubled F-35 may be on the verge of facing an even greater series of delays that could affect the supply chain of the aircraft and work agreements with jet-partner Great Britain.

At the root of the problem is the still-unresolved issue of the F-35’s ejection seat, which runs the risk of causing fatal whiplash in pilots under 200 pounds.

The issue is most pronounced with lighter-weight pilots, with those weighing under 136 pounds now barred from flying the aircraft for safety concerns related to the F-35’s Martin-Baker ejection seat, Defence News reports.

The problem with the ejection seats has been known since at least October 2015. But so far, fixes from Martin-Baker have focused on small issues without resolving the overall design flaw that could cause the fatal whiplash, according to two anonymous officials who spoke to Defence News.

In light of this, the F-35 program has begun to look at other manufacturers for its ejection seats. Chiefly, the program is looking at the United Technologies ACES 5 model.

“We believe it is prudent to look at what it would take to qualify the ACES 5 seat as a potential risk mitigation step if additional things happen as we go through the testing of the Martin-Baker seat,” Air Force Lt. Gen. Arnold Bunch told Defence News. “We believe it’s prudent to determine what it would cost, how much [effect it has on] the schedule, what the timeline would be, if something else happened and we wanted to go a different way.”

Should the F-35 project decide to replace the F-35’s ejection seats, costs of the program could increase and the aircraft could take longer to deliver. Martin-Baker is a British company, and its role in the construction of F-35 jets allows Britain to reap economic benefits from being a part of the F-35 program. Should the project decide to scrap Martin-Baker and use United Technologies, a US company, then the UK could demand a greater work share in other portions of the F-35.

(Martin-Baker) A test of the F-35 ejection seat.

This would likely drive up costs for the program, as the supply chain and logistics of the project would need to be significantly altered.

The risk of fatal whiplash was previously thought to be caused by a combination of the way in which the ejection seats rolled forwards combined with the weight of the F-35’s helmet.

During simulated low-speed ejections, the heavy forces at play during the acceleration or deceleration of the advanced fighter jet would snap the neck of lightweight dummies. The problem was initially thought to have been caused by the ejection seats rotating too far forward. This movement, combined with the force of ejecting from the aircraft, would snap the dummies’ necks.

However, Reuters reported in October 2015 that the risk from the ejection seats to even lighter pilots was still exceptionally small. Pilots weighing under 136 pounds had a one-in-50,000 chance of hurting their neck, while pilots weighing 146 to 165 pounds had a one-in-200,000 chance.

Sajjan: F-35 consortium agreement never seen as commitment to buy

By TIM NAUMETZ, The Hill Times 

A 2002 agreement Canada signed with the U.S. and seven other countries for development of the F-35 stealth warplane was never viewed by the partners as “a commitment to buy the F-35,” Defence Minister Harjit Sajjan’s office told The Hill Times.

Meanwhile, a leading expert on military affairs said the Liberal government could make good on its 2015 election promise to exclude the F-35 stealth attack plane as it wrestles with the need to replace Canada’s aging CF-18 fighter jets, but the decision would inevitably anger “a lot of powerful people in the Pentagon.”

In the wake of reports the government may be considering a sole-source acquisition of new fighter planes to replace at last part of Canada’s fleet of roughly 80 1980s-vintage CF-18 Hornets, University of British Columbia professor Michael Byers told The Hill Times Prime Minister Justin Trudeau (Papineau, Que.) and his cabinet could either hold a competition, as Mr. Trudeau promised in the election campaign, or acquire more modern versions of the Boeing CF-18 without inviting other bids.

“Doing a fleet extension of Canada’s existing planes, Canada would buy a number of the latest model of the same plane,” Mr. Byers said, in reference to the fact Canada initially acquired the U.S. Boeing Corp. aircraft, under a previous Liberal government, coincidentally led by Justin Trudeau’s father, then prime minister Pierre Trudeau, in 1982.

“It would be like, let’s say you had a taxi fleet of Toyota Priuses that were all from 2010 and you decided to buy a sizeable number of 2016s, you’re buying the latest model of the same equipment, which means that your mechanics and your pilots don’t need to undergo the same degree of re-training,” Mr. Byers said in an interview this week.

Under his scenario, either through a sole-sourced contract with Boeing or a competition to replace part of the aging fleet whose life span was extended by the previous government to 2025 the year before the federal election, the Liberal government could still have an option in later years to acquire a smaller number of the new generation F-35 aircraft, sophisticated to the point some avionic experts refer to it as a “flying computer.”

Development delays, however, have been extensive.

U.S. Air Force news releases this month reported one of its major bases has yet to declare F-35As, the same model plane Canada was set to buy, fully combat operational.

Hill Air Force Base, Utah, also reported its wheel-shop technicians found a hydraulic tire-changing machine Lockheed Martin had supplied in 2015, along with the base’s first batch of F-35 planes, was designed to require four technicians to lift one wheel onto the changer.

The shop adapted its legacy changer to fit the heavy F-35 wheel.

Furthermore, the Eglin Air Force Base in Florida reported on May 24 that its technicians saved $84,000 by using locally manufactured parts and tools rather than those available from Lockheed Martin.

Mr. Byers noted Australia has already beefed up its similarly aging F-18 Hornet fighter jet fleet by acquiring Boeing F-18 “Super Hornets,” a more modern version of the original F-18, while waiting for the delayed Lockheed Martin F-35 to reach full operationally ready levels, as well as production levels that provide economy of scale prices Lockheed Martin promised as the plane was in early development and testing stages.

Canada in 2002 signed on with a consortium of eight other countries after the U.S. launched the Pentagon-led Joint Strike Fighter Program.

The previous year, the Pentagon conducted a prototype competition that defence giant Lockheed Martin Corp. won over Boeing Corp., for development and production of the so-called next generation of fighter jet warplanes.

In 2010, the former Conservative government announced Canada would exercise its option of acquiring a fleet of the costly planes—a total of 65 F-35 fighters with no timeline yet set for the actual purchase—but the Conservatives put the acquisition on hold in 2012 after a raging controversy over costs that had been withheld from Parliament prior to the 2011 federal election.

Former prime minister Stephen Harper (Calgary Heritage, Alta.) and his Conservatives concluded an analysis of options from among a range of fighter jet makers in 2014, including Lockheed Martin, but Parliament has received no update on the estimated cost of acquiring and operating a fleet of 65 F-35s since the last government report that year.

The 2014 update estimated a cost of $45.8 billion for acquisition, maintenance and sustainment over the fleet’s 35-year lifecycle, and the estimated price tag has since risen by at least $3 billion for acquisition and operating costs alone, due to the Canadian dollar’s lower value in exchange with the U.S. dollar.

Liberal Defence Minister Harjit Sajjan last week did not rule out the possibility that the government is set to begin replacing the declining CF-18 fleet without competitive bidding.

“The CF-18 will be extended to 2025,” Mr. Sajjan (Vancouver South, B.C.) told the House of Commons on June 7.

“We do need replacements, they should have been replaced a long time ago, we have to start the process soon because our fighters have been flying for some time, they should have been replaced,” Mr. Sajjan said.
Canada intends to pay instalment to F-35 consortium

In response to the speculation about sole-sourcing, a Lockheed Martin official raised a requirement that the Canadian aerospace industry would be able to bid on future aircraft sustainment and contracts only if Canada acquires some of the planes.

Mr. Sajjan responded Tuesday by pointing out that none of the original members of the Joint Strike Fighter Consortium are required to buy any F-35s, and Canada’s participation in the development of the plane through the consortium has led to $743 million in contacts for the Canadian aerospace industry.

“Canada remains a member of the Joint Strike Fighter program and has not notified the JSF Office about any changes to our participation,” Mr. Sajjan’s press secretary, Jordan Owens, said on behalf of Mr. Sajjan in response to questions from The Hill Times.

Ms. Owens said the government still owes an instalment to the consortium, but intends to pay it.

“To date, our participation in the JSF MOU (Joint Strike Fighter Memorandum of Understanding) has allowed companies in Canada to secure US $743 million in contracts,” the email from Ms. Owens said.

“New skills and technologies gained through access to the JSF Program have helped position Canadian industry to take advantage of other advanced aerospace and defence projects; it has always been clear that participation in the JSF MOU is not a commitment to buy the F-35.”

Canada currently has four Canadian Forces personnel assigned to the Joint Strike Fighter Office near Washington, D.C.

The Liberal campaign promise to hold a competition while excluding consideration of Lockheed Martin has come under severe criticism, including from Alan Williams, the former Department of National Defence procurement chief who was with DND when Canada joined the F-35 Joint Strike Fighter Program in 2002.

Mr. Byers said the Liberals, now having delayed a decision for seven months, could have delivered on their campaign promise by either sole-sourcing a CF-18 fleet extension with Boeing or releasing a competitive request for proposals whose maximum cost and desired type of fighter jet, along with required regional industrial benefits, would have ruled out the F-35.

The DND statement of operating requirements for the new plane could have established a maximum unit price, lower than the costly single-engine F-35, or a need for two engines, which the legacy Hornets as well as the modern version of the Boeing fighters have.

“There was nothing inherently difficult with the Liberal position in the campaign, but obviously it would require certainly annoying Lockheed Martin and by extension a lot of powerful people in the Pentagon,” Mr. Byers said.

He said the Liberals still have the option of sole-sourcing the Boeing plane, with no competition from any other bidders.

“That is my understanding, you are able to do a sole-source procurement, we do sole-source procurement for lots of things,” Mr. Byers said, referring to Conservative government procurement of long-range jet transport planes from Boeing, as well as short-haul cargo aircraft from Lockheed Martin.

“You can do this, and obviously it’s easier politically to do that when you’re simply acquiring the same model of equipment, that same type of equipment, in effect the same but a newer model,” Mr. Byers said. “It (the Super Hornet) is not a totally new plane, it’s based on the same air frame and a lot of the avionics are based on 30 years of experience and technological development at Boeing.”

The NDP has been insisting on an open competition to replace the CF-18 Hornets, with cost and capability among the required parameters.
“Either of those aircrafts might have pros and cons, but the only way to make that evaluation is to have an open and transparent competition,” said NDP MP Erin Weir.

“One of the things I find striking is that the federal government has not even put forward what those parameters would be for a competition,” said Mr. Weir (Regina-Lewvan, Sask.)

“We challenge the government, they say there haven’t been any decisions, there’s still a possibility of an open competition, but in seven months they haven’t taken any steps towards initiating such a competition,” Mr. Weir said in an interview.

“Certainly I would agree that one of those first steps is to lay out parameters of what the government is looking for, in terms of our defence requirements.”

tnaumetz@hilltimes.com
The Hill Times

Liberals Miss Membership Payment to Stay in F-35 Consortium

By: Murray Brewster, CBC News 

The Trudeau government has missed the deadline for a multimillion-dollar payment that keeps Canada in the club of nations involved in the F-35 stealth fighter program, CBC News has learned.

The $32-million membership fee was due on May 31, but a spokeswoman for Defence Minister Harjit Sajjan confirmed late Monday that the U.S. project office overseeing development of the highly complex jet has not received the instalment.

But Jordan Owens cautioned not to read too much into the oversight and that Canada is still on the hook for the cash.

"We will honour our financial commitments," she said, responding for the minister who was in transit from a defence conference in Singapore.

Related:
F-35 fighter jet purchase by Liberals may still be in the mix
Sajjan refuses to rule out F-35 from fighter jet replacement competition
Canada's F-35 decision anxiously awaited, says U.S. deputy secretary of defence

It's unclear when the instalment will be made and whether there are any penalties associated with a late payment.

The policy issue is an uncomfortable conversation for the Liberals.

Earlier this year, the fact that Canada was still paying to be part of the F-35 buyers' club raised questions about their campaign pledge to purchase something else other than the stealth fighter. Prime Minister Justin Trudeau said it "no longer makes sense" to buy the Lockheed Martin fighter because Canada would not participate in any first strike missions.

The annual payment also gives the federal government the right to buy F-35s at a discount price and gives Canadian companies access to supply contracts for the construction and maintenance of the high-tech jet.

The missed payment does not signal Canada's withdrawal from the agreement, Owens said.
Sole-sourcing a new jet

But it does shine a further spotlight on the contradictions in the Liberal policy and comes one day after published reports stated that cabinet was mulling over the sole-source purchase of an unknown number of Super Hornets, the Boeing-built rival to the F-35.

"I was shocked," said Alan Williams, a former procurement manager at the Department of National Defence, and one of the most strident critics of the Harper government's plan to acquire the F-35 without a competition. "I don't think anyone would have expected that kind of behaviour."

Williams was one of the defence insiders most impressed with the Liberal promise of open competition and transparency in last fall's election.

He said that if the government does a sole-source deal with Boeing, it makes the Liberals no better than the government they replaced.

"There is no legal justification to sole-source this," said Williams, who noted that the use of the national security criteria would not apply.

The move would possibly open the door to a legal — or even trade — challenge by competitors, he said.

"I'm not sure companies want to take the government to court on this kind of thing, but, you know, there is no legal justification for doing this," he said.

Owens denied cabinet has discussed a sole-source deal.
Capability gap or no capability gap?

But it was less than clear where the government was headed Monday when John McKay, the parliamentary secretary for defence, said the Liberals must do something about CF-18s that are getting old and need to be retired.

​"There is a developing capability gap that needs to be managed," he said. "We have obligations to NATO. We have obligations to Norad."

Up until the last couple of weeks, the line from both the Liberals and their Conservative predecessors was that the 1980s vintage CF-18s, which have been upgraded, are still good to keep flying into the 2020s.

Indeed, a year before being defeated, the Harper government ordered a further life-extension to the fighters — worth hundreds of millions of dollars — so they could stay airborne until 2025.

In light of that, Conservative defence critic James Bezan said the so-called capability gap is fiction.

"I think it's imaginary on their part and they're trying to use that as the narrative," he said. "There isn't this need to actually go out there and select immediately."

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