The Lockheed Martin F-35 Lightning II Canadian procurement is a defence procurement project of the Canadian government to purchase Lockheed Martin F-35 Lightning II Joint Strike Fighters for the Royal Canadian Air Force (RCAF), a process started in 1997. The F-35 procurement has been a source of considerable controversy in public policy circles in Canada since the federal government announced its intention to purchase the aircraft in 2010. In April 2012, with the release of a highly critical Auditor General of Canada report on the failures of the government's F-35 program, the procurement was labelled a national "scandal" and "fiasco" by the media. In a December 2014 analysis of the procurement Ottawa Citizen writer Michael Den Tandt cited the Harper government's "ineptitude, piled upon ineptitude, and bureaucracy, and inertia, driving a lack of progress".
The F-35 was conceived by the United States Department of Defense as requiring participation from many countries, either contributing to the manufacturing of the aircraft or procuring it for their own armed forces. Canada, through the Department of National Defence (DND) and the departments of Public Works and Government Services Canada (PWGSC) and Industry Canada (IC), has been actively involved in the Joint Strike Fighter (JSF) project since 1997. Canada's initial participation required a US$10 million investment to be an "informed partner" during the evaluation process. Once Lockheed Martin was selected as the JSF's primary contractor, Canada elected to become a level-three participant (along with Norway, Denmark, Turkey, and Australia) in the project. An additional US$100 million from DND over 10 years and another $50 million from IC were dedicated in 2002.Williams, Alan S. Reinventing Canadian Defence Procurement: A View From the Inside. Kingston, Ontario, Canada: Breakout Education Network, Queen's University, 2006. .
On 16 July 2010, Prime Minister Stephen Harper's Conservative government announced that it intended to procure 65 F-35s to replace the existing 80 McDonnell Douglas CF-18 Hornets for C$9 billion (C$16 billion with all ancillary costs, such as maintenance, included) with deliveries planned for 2016. Former Minister of National Defence, Peter MacKay, argued that these ancillary cost estimates were grossly exaggerated because they included the pilots salaries, and fuel for the aircraft, which were never before factored into procurement costs. The stated intention was to sign a sole-sourced, untendered contract with Lockheed Martin. This, combined with the government's refusal to provide detailed costing of the procurement, became one of the major causes of the finding of contempt of Parliament and the subsequent defeat of the Conservative government through a non-confidence vote on 25 March 2011. The F-35 purchase was a major issue in the Canadian 2011 federal election, which resulted in a Conservative majority government."Liberals take aim at fighter jet contract." CBC, 15 July 2010.
On 19 October 2015, the Liberal Party of Canada under Justin Trudeau won a majority in part on a campaign promise to not buy the F-35, but instead "one of the many, lower-priced options that better match Canada's defence needs".
A formal competition was launched to select a new fighter, which included the F-35. On 28 March 2022, the government announced that the competition process had selected the F-35A and that negotiations would begin with Lockheed Martin to purchase 88 aircraft. By 20 December 2022, the Department of National Defence received approval to spend $7 billion on 16 F-35As and related equipment, including training systems, potential weapons and support infrastructure.
Level 3 industrial partner
Alan S. Williams of Queen's University, the former Assistant Deputy Minister of National Defence (Matériel) who signed the original industrial participation agreement, indicated he believes that the Government of Canada's rationale for joining the JSF project was not due to an urgent need to replace the Canadian Forces' CF-18 Hornet fleet; instead, it was driven primarily by economics. Through the government's investment in the JSF, Williams said that Canadian companies were allowed to compete for contracts within the JSF project; there were fears that being shut out from industrial participation in such a large program would severely damage Canada's aviation industry. Joining the JSF project also furthered Canadian Forces access to information regarding the F-35 as a possible contender when it eventually plans to replace the CF-18. Improved interoperability with major allies allowed the Canadian Forces to gain insight on leading edge practices in composites, manufacturing and logistics, and offered the ability to recoup some investment if the government did decide to purchase the F-35.
As a result of the Government of Canada's involvement in the JSF project, 144 contracts were awarded to Canadian companies, universities, and government facilities. Financially, the contracts were valued at US$490 million for the period 2002 to 2012, with an expected value of US$1.1 billion from current contracts in the period between 2013 and 2023, and a total potential estimated value of Canada's involvement in the JSF project from US$4.8 billion to US$6.8 billion. By 2013, the potential benefits to Canadian firms had risen to $9.9 billion.
History
Pre-2006
Canada began its investment in the F-35 program in 1997 under the Liberal government of Jean Chrétien, when the Department of National Defence (DND) committed $10M to join the "Concept Demonstration" phase of the Joint Strike Fighter program. In 2002 Canada invested another $150M to participate in the System Development and Demonstration phase which was scheduled for more than 10 years. In 2006 the Canadian government, along with its allies; the United States, the United Kingdom, the Netherlands, Denmark, Australia, Turkey, Italy and Norway signed a memorandum of understanding, at an anticipated cost of over half a billion dollars to Canada, for "Production, Sustainment and Follow-on Development" for the period 2007 to 2051.
2006–2009 The Canadian air force concluded the F-35 was the most cost effective plane to meet its needs. However, only one JSF test model existed at that time and there was no way to actually prove the JSF had the lowest cost per aircraft or that it would be the cheapest to fly. Announcing a "strong preference" for the F-35 according to the Auditor General.
Canada signed a Memorandum of Understanding for the next phase of JSF development under a Conservative government, expected to cost US$551 million through 2051. Canada emphasized that the commitment does not mean Canada would purchase the plane. Canada also had to accept F-35 procurement rules, according to the auditor general, who claimed ministers were not fully informed of this aspect.
On 12 May 2008, the Canada First Defence Strategy called for replacing the CF-18 fleet, beginning in 2017. The DND asked the Conservative government for permission to buy the F-35, but permission was denied.
2010
Early 2010 The Pentagon notifies Canada that the U.S. is "reassessing its cost projections" because of expected delays in development, according to the auditor general.
Conservative Defence Minister Peter MacKay told the Commons that Canada would buy the F-35. Ninety minutes later, he said he misspoke and announced there will be an open competition with all aircraft considered. Six weeks later, ignoring what he previously said, MacKay announced that Canada will purchase 65 F-35s. The cost was estimated by the government as $9 billion. Deliveries were to begin in 2016.
On 16 July 2010, the government announced plans to acquire 65 F-35s, calling it the only fifth-generation design that can meet Canada's needs and ensure interoperability with NATO allies. The DND estimated a $9-billion acquisition cost. Opposition parties queried the F-35's sole-sourcing. The auditor general later concluded: "in the lead-up to this announcement, required documents were prepared and key steps were taken out of sequence. Key decisions were made without required approvals or supporting documentation." Public Works officials received a more formal statement of operational requirements from the DND as required to justify procuring the F-35 without a competition.
Late 2010 The Montreal Gazette reported in September 2010 that the Canadian Forces had planned to hold a competition in 2010, award a contract in 2012, and for the new fighter to become operational between 2018 and 2023, when the sole sourced contract was announced.
On 6 October 2010, retired Assistant Deputy Minister of National Defence (Matériel) Alan Williams testified before the House of Commons Defence Committee regarding the F-35, which the Canadian media had referring to as a Flying Credit Card – with no prefixed spending limit.Paul Wallis, op-ed, "The F35 fighter jet should be called 'the flying credit card'," 25 March 2010, Digital Journal.Don Martin, "Harper faces dogfight over jet deal " 7 October 2010, National Post. Williams was the ADM who signed the original industrial participation contract for the F-35 project on behalf of the government. In his testimony, Williams indicated that the lack of a competition was likely to squander billions of dollars in taxes and lost business opportunities: "Procurement demands not only the highest degree of integrity, but also the appearance of the highest degree of integrity. Undertaking sole-source deals leaves the procurement process more vulnerable to fraud, bribery and behind the scene deal making and leaves the federal government more susceptible to such charges." Williams labelled Minister of National Defence Peter MacKay's logic in defending the F-35 as "flawed ... [it] insults our intelligence". Prime Minister Stephen Harper responded to Williams' testimony, attacking his integrity and accused him of changing his mind. Williams in turn responded to Harper: "That's a lie ... I've never ever changed my opinion about sole-sourcing. I have no idea to what he's referring to. I take great offence to that."
On 14 October 2010, the Canadian Centre for Policy Alternatives issued a report on the proposed F-35 buy entitled Pilot Error – Why the F-35 Lightning II stealth fighter is wrong for Canada. CCPA research associate, Rideau Institute president, and co-founder of Ceasefire Canada, Steven Staples stated: "Canada does not need the F-35, either for North American/domestic roles or for expeditionary roles. The Canadian government should not proceed ... [it] has put Lockheed Martin in an extremely strong bargaining position in future negotiations over maintenance costs." On government claims of Canadian aerospace jobs from the purchase, Staples wrote: "such claims are dubious at best ... [the contract has] none of the spelled out 'offsets' that are typically built into such procurement projects." Staples concluded that Canada should: curtail the expeditionary role for Canadian aircraft; stretch the life of the existing CF-18s by restricting them to North American/domestic air surveillance and control; investigate the acquisition of unarmed long-endurance pilotless aircraft to undertake surveillance/reconnaissance missions and eventually air control duties; and use any savings via these measures to more effectively contribute to security.
On 26 October 2010, Sheila Fraser, Auditor General of Canada, identified "troubling" systemic problems, rigged competitions and cost overruns in defence procurement programs and indicated that the F-35 may cost far more than the budgeted numbers. Following Fraser's report Liberal leader Michael Ignatieff stated that if elected a Liberal government would cancel the sole-sourced deal and hold a formal competition to replace the CF-18.