‘But in terms of our numbers, I’ve been very clear’

By Aaron Wherry - Monday, April 16, 2012 at 8:30 AM - 0 Comments

Asked about the price of the F-35, the Prime Minister invokes one of his favourite adjectives.

“Other numbers cited, obviously have to do not just with the acquisition of the F-35 but operations of the F-35,” he said. ”There’s more than one number, there’s more than one cost depending on what you’re counting. These things have all been well known for some time. But in terms of our numbers, I’ve been very clear.”

So far as “what you’re counting,” see here, here, here, here and here to understand why the clarity of the Harper government’s accounting is now being questioned.

Colin Horgan keeps the focus on the lifecycle cost (that which the House of Commons demanded more than a year ago).

The PBO wrote in its report that a “rough” cost for the overhaul and upgrade for a single plane was “estimated at US$ 30.38 million +/- US$ 5 million per aircraft,” bringing the total overhaul costs over 30 years to that $3.9 billion. Going off the PBO’s analysis, calculating the costs of the program over 20 years rather than 30 would eliminate having to account for the second predicted overhaul of the fleet (which, according to the graph, would take a few years to complete).

With a 20-year projection, at least half the overhaul costs (those made at, or after, the 20-year mark) are discounted, along with whatever further costs incurred afterward up to (as the AG suggested) 36 years. So, the overall price comes down.

Unpacking Peter MacKay

By Aaron Wherry - Friday, April 13, 2012 at 10:48 AM - 0 Comments

Colin Horgan reviews how the public costing of the F-35 failed to meet the government’s own guidelines. Andrew Coyne explains how the Defence Minister’s explanations don’t match the Department of National Defence’s previous promises. And Laura Payton goes to the videotape.

At 9:50, MacKay refers to “signing the contract now” to bid on $12 billion in future contracts. As the government has recently made clear, and contrary to what Prime Minister Stephen Harper had said before, there is no contract.

Around 10:00, Evan asks what the in-service costs will be. MacKay says it’s difficult to nail down those costs, when we now know DND had internal estimates.

The editors of this magazine question the entire proposed purchase. Marc Garneau regrets making it personal. And the Liberals have launched a petition.

The F-35: Not just costly but obsolete

By From the editors - Friday, April 13, 2012 at 9:43 AM - 0 Comments

Chris Wattie/Reuters

In the bitter parliamentary dispute over the costs of the F-35 Joint Strike Fighter, which Canada has spent hundreds of millions helping to develop but may still not buy, there is an awful lot of “What did they know and when did they know it?” Predictably, as the Harper government’s position on the sole-source contracting has become less and less defensible, the debate is shifting to the bottom line: is the F-35 a good aircraft or not? It has become apparent that National Defence bureaucrats and Conservative ministers bet heavily on American military-industrial competence, and the voters may still forgive almost anything if Canada ends up with a cool Canadian-badged airplane that dominates the enemy in the battle theatre.

But this is the scary thing for the F-35’s defenders: to aviation nerds, the Joint Strike Fighter is looking more and more like an ugly mutt. Consider one important example of how our commitment to the JSF as a NATO partner has gone awry: the cutting-edge helmet-mounted display that was meant to help make up for the speed and manoeuvrability limitations of a single-engined stealth fighter. In the early days of JSF promotion, the user interface was touted as being at least as important to the project as the aerodynamic qualities of the airframe itself. Pilots would be sent into a fight with “360-degree situational awareness,” day or moonless night, giving them long seconds to defend themselves while opponents in more traditional aircraft were still figuring out which way was up.

Fast-forward to May 2010, when, according to the new auditor general’s report on F-35 procurement, the Public Works department began to question the need for a sole-source contract for new fighters. According to public-service rules, Public Works warned National Defence, there had to be an open competition for the contract unless it could be shown in advance that the F-35 was the only plane that met defence requirements. No problem, said National Defence; in literally one day it cooked up a list of those requirements, including one item that basically specified the F-35’s visionary 360-degree helmet display. The stated rationale for buying the F-35 thus depends quite heavily on this one piece of technology, even if one takes the word of F-35 proponents that it is a legitimate operational necessity.

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Checking Peter MacKay’s math

By Aaron Wherry - Wednesday, April 11, 2012 at 11:26 AM - 0 Comments

Terry Milewski quibbles.

Jacques Bourbeau sees the same problems. Continue…

New and old math

By Aaron Wherry - Tuesday, April 10, 2012 at 6:42 PM - 0 Comments

The Defence Minister explains the difference between $25 billion and $15 billion.

“The $10-billion that he has described as not being disclosed was what you pay our current pilots, the gas that you put in the current fleet of CF-18s … if you went out and bought a new mini-van and it was going to cost you $20,000 you wouldn’t calculate the gas, the washer fluid, the oil and give yourself a salary to drive it for the next 15 to 20 years.”

“Now that’s part of the new calculation now,” he said.

The “new calculation” reflects an estimate that the Department of National Defence calculated two years ago. And a calculation that seems to match Treasury Board guidelines. But, again, the Auditor General’s concerns about costing for the F-35 extend beyond that to the “life-cycle costing.”

We have a number of observations regarding the life-cycle costing for the F-35. First, costs have not been fully presented in relation to the life of the aircraft. The estimated life expectancy of the F-35 is about 8,000 flying hours, or about 36 years based on predicted usage. National Defence plans to operate the fleet for at least that long. It is able to estimate costs over 36 years. We recognize that long-term estimates are highly sensitive to assumptions about future costs as well as to currency exchange rates. However, in presenting costs to government decision makers and to Parliament, National Defence estimated life-cycle costs over 20 years. This practice understates operating, personnel, and sustainment costs, as well as some capital costs, because the time period is shorter than the aircraft’s estimated life expectancy. The JSF Program Office provided National Defence with projected sustainment costs over 36 years.

This, again, is what Alan Williams considers the “known distortion.”

What the House of Commons demanded

By Aaron Wherry - Tuesday, April 10, 2012 at 3:48 PM - 0 Comments

When the Harper government was found in contempt of Parliament a year ago, its breach had much to do with an order to produce documents that was moved by the finance committee. Much of the debate over that order and the Speaker’s ruling on that order concerned the cost of corporate tax cuts and the Harper government’s various crime bills. But within that the finance committee’s demand was a clause that dealt specifically with the F-35.

The committee also orders that the Government of Canada provide the committee with electronic copies of the following … All documents that outline acquisition costs, lifecycle costs, and operational requirements associated with the F-35 program and prior programs (CF-18). Such documents include but are not limited to the Selected Acquisition Report (SAR) and the report of the US Department of Defence’s Joint Estimating Team (JET) both relating to the F-35;

As the CBC noted last night, the phrase “lifecycle costs” would seem to be important.

The measure of the F-35

By Aaron Wherry - Tuesday, April 10, 2012 at 8:30 AM - 0 Comments

Alan Williams, the former assistant deputy minister with National Defence, points with concern to the department’s use of a 20-year timeline for the F-35.

“That’s a known distortion,” Williams said. “If you have as your intent to be as open as possible, you don’t do that.”

There is no question that government and military intends the F-35 or whichever other aircraft replaces Canada’s aging fleet of CF-18s to remain the country’s main aerial fighter until the middle of the century. ”It has to go for at least 30 years, which is our typical expectation,” Royal Canadian Air Force commander Lt.-Gen. Andre Deschamps told a parliamentary committee on Sept. 15, 2010.

Williams says it’s not unusual to exclude expenses like personnel and fuel from projections, but Andrew Coyne contrasts Peter MacKay’s explanation with the Treasury Board guidelines.

… it is directly contrary to longstanding Treasury Board directives, which stress throughout that the costs of any acquisition must include “all relevant costs over the useful life of the acquisition, not solely the initial or basic contractual cost” (Contracting Policy, 2006). Among the costs deemed “relevant” are those related to “planning, acquisition, operating and disposal,” including forecast “modifications, conversions, repairs, and replacement.”

Specifically, an “acquisition decision that is based on the lowest purchase price but that ignores potential operations and maintenance (O&M) costs may result in higher overall costs,” it notes in Guide to Management of Materiel. Among the suggested considerations, in assessing operations costs: “Are all training costs included? Are the costs of fuel and lubricants included? Are all repair costs included?”

The Globe tests Mr. MacKay’s explanations against what the experts say. An American analyst tells the Canadian Press it’s time to ask questions about the F-35′s capabilities.

Idea alert

By Aaron Wherry - Monday, April 9, 2012 at 11:43 AM - 0 Comments

Problem: The Department of National Defence says it needs 65 warplanes, but $9 billion may not be enough to purchase 65 warplanes of the F-35 variety. Luckily, Colin Horgan has a $3.5-billion back-up plan.

Assuming that money is available, the government could use that $3.54 billion to hold a  separate, open and fair competition for another, different fighter jet. The second plane could act as an interim buffer to tide Canada over between the decommissioning of the CF-18s and the delivery of the F-35s.

Against the other international alternatives, the winner of that competition would likely be the F-18 Super Hornet – a plane suitable to Canada’s needs in the Arctic (it’s a twin engine, for one). The Air Force is already equipped to handle the F-18, and with its contract from Boeing, Canada could theoretically obtain a traditional industrial regional benefits package – another thing the F-35 program lacks.

About that documentation

By Aaron Wherry - Monday, April 9, 2012 at 10:47 AM - 0 Comments

One last point on the Defence Minister’s comments this weekend. Nearer the end of the interview, Kevin Newman asked Mr. MacKay about the “supporting documents” for the military’s analysis. Mr. MacKay reassured Mr. Newman.

There are certainly supporting documents. We’ll have Public Accounts look at that now. They’ll be officials before Public Accounts to talk about the supporting documents. There are documents that go back a number of years, as I said this is a 15-year procurement that began in 1997 under the previous Liberal government. And so there will an opportunity to look at all those documents. The key here, in my view, is to continue forward in a way that is going to ensure that we don’t face operational gaps. That the CF-18′s will be replaced with an aircraft that will meet the needs of our country and, most particularly, of the airforce.

In his report, the Auditor General makes several references to documentation (emphasis mine). Continue…

About that timeline

By Aaron Wherry - Monday, April 9, 2012 at 9:30 AM - 0 Comments

In his interview with CTV, Peter MacKay also noted the “discrepancy” between the 36-year timeline of the Parliamentary Budget Officer and* the Auditor General and the 20-year plan put forward by the Department of National Defence. In his report, the Auditor General stressed that a 36-year timeline was more accurate.

We have a number of observations regarding the life-cycle costing for the F-35. First, costs have not been fully presented in relation to the life of the aircraft. The estimated life expectancy of the F-35 is about 8,000 flying hours, or about 36 years based on predicted usage. National Defence plans to operate the fleet for at least that long. It is able to estimate costs over 36 years. We recognize that long-term estimates are highly sensitive to assumptions about future costs as well as to currency exchange rates. However, in presenting costs to government decision makers and to Parliament, National Defence estimated life-cycle costs over 20 years. This practice understates operating, personnel, and sustainment costs, as well as some capital costs, because the time period is shorter than the aircraft’s estimated life expectancy. The JSF Program Office provided National Defence with projected sustainment costs over 36 years.

*An astute reader points out that the Parliamentary Budget Officer used a 30-year timeline.

Better know $25 billion

By Aaron Wherry - Monday, April 9, 2012 at 8:31 AM - 0 Comments

In an interview with CTV’s Question Period, Peter MacKay explains the $25-billion estimate that National Defence prepared for the F-35 in June 2010.

“Well I’m glad you’ve raised this issue, in fact I think it was Craig Oliver that first put this on the air in recent days; the 10 billion dollar gap or difference in estimation is accounted for by the way in which we pay pilots, we maintain the aircraft, that is to say that that 10 million dollar difference is money that we are paying right now. So there’s a different interpretation in the all up costs at arriving at 25 billion. We have included that figure in estimates and information provided to the auditor General. And that information goes back to the year 2010. Those figures are there for all to see. But it is a different calculation than an acquisition. We have always said that 9 billion dollars is the cost of the aircraft. There’s an additional 5.7 billion then for maintenance that is weapons, onboard equipment etc. But the 10 billion dollars is money that we’re paying right now Kevin. That is money that goes to pay the pilots of the F18 program, and fuel, oil, upkeep of the existing fleet.”

It is probably worth reviewing again how the cost of the F-35 has been explained over the last two years. Continue…

The cuts begin

By Aaron Wherry - Wednesday, April 4, 2012 at 11:17 AM - 0 Comments

National Defence is set to eliminate more than a thousand jobs.

At this point the jobs of 1,119 employees at DND have been identified but more are expected later. The jobs being eliminated range from clerks and secretaries to food services and kitchen staff. Other jobs being cut include radiation safety personnel, weapons technicians, ammunition technicians, English language teachers, heavy truck mechanics, laboratory assistants, drivers and dental hygienists.

Civilians working for the Canadian Army are being hit hardest, with 585 of those jobs being eliminated. Other significant reductions are being made at Defence Research and Establishment Canada, the research branch which works on new technology to protect the troops in the field, as well as other positions in science and research fields. That group has identified 234 jobs to be cut.

The Citizen has mapped the cuts. The Globe says the job losses will be heaviest in Quebec.

The F-35s and other military procurement tales of horror

By John Geddes - Tuesday, April 3, 2012 at 6:27 PM - 0 Comments

It would be difficult to imagine a more thoroughly botched military procurement program than the F-35 fiasco that has been taken apart today in a report from Michael Ferguson, the Auditor General of Canada.

Hard to imagine, that is, unless you consider the military’s purchases of new Cyclone helicopters, which soared in price from a planned $3.1 billion in 2003 to an actual $5.7 billion five years later, and Chinook helicopters, the cost of which leapt from just over $2 billion to nearly $5 billion between 2006 and 2003. Ferguson’s predecessor, former AG Sheila Fraser, slammed the Defence department in a fall 2010 report for disguising the true eventual price of those buys.

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The F-35 jet cost controversy: now we're getting somewhere

By John Geddes - Thursday, March 17, 2011 at 8:49 PM - 116 Comments

Dan Ross Deputy Minister of Defence holds news conference on the acquisition of the F-35 Joint Strike Fighter, in Ottawa (THE CANADIAN PRESS/Fred Chartrand)

The increasingly heated debate over what it will cost Canada to buy the new F-35 fighter jet has, from the outset, bogged down on one point—the unwavering contention of the federal government that Canada will pay way less per jet than the U.S.

This just seems, on the face of it, difficult to believe. The F-35 story features  many other variables, vagaries, arcane disputes—all accompanied by acronyms and jargon of the sort that military procurement always generates in such unwelcome plentitude.

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What's a life worth?

By Michael Friscolanti - Monday, January 10, 2011 at 9:40 AM - 7 Comments

Compensation for an innocent’s death ‘is very appropriate’ in Afghanistan; A Canadian Forces vehicle | Rahmat Gul/AP, Master Corporal James Ross/Canadian Forces

From a strictly legal standpoint, the Canadian military is not responsible for Afghan civilians caught in the crossfire of war. Like every nation with boots on the ground, Canada signed an agreement with Afghanistan’s government that waives any liability for so-called “collateral damage,” including property destruction, injury, and even death. Simply put, the deal ensures that if soldiers in the heat of combat accidentally destroy a farmer’s field—or mistake that same farmer for a Taliban insurgent, and open fire—Ottawa is safe from lawsuits.

But that doesn’t mean the army ignores the innocent (and inevitable) victims of Canadian missions. Instead of “compensation,” a term that implies a certain acceptance of blame, the Forces provides ex-gratia awards—a one-time, no-strings-attached payment made “out of kindness,” not obligation. JAG lawyers in Kandahar can approve such claims up to $2,000 (anything higher requires a signature from the deputy minister of defence), and according to the latest figures, the handouts are growing larger and more common.

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How many? (II)

By Aaron Wherry - Thursday, December 2, 2010 at 7:48 PM - 13 Comments

For the fourth consecutive day, Lawrence Cannon was pressed during QP to say how many children have been detained and transferred by the Canadian Forces in Afghanistan. For the fourth consecutive day, this did not result in an answer.

Afterward I emailed Mr. Cannon’s office with the following.

According to the Canadian Forces records released in September, 439 individuals were detained by the CF in Afghanistan between 2002 and 2008. Two-hundred and eighty-three of those individuals were transferred. Two questions: How many of those detained were juveniles? How many of those transferred were juveniles?

That was eventually forwarded to the Department of National Defence, which responds as follows. I’ve bolded the portion that seems most particularly applicable to the questions at hand. Continue…

Newsmakers

By macleans.ca - Friday, November 5, 2010 at 8:00 AM - 0 Comments

It just isn’t Brett Favre’s year
Despite being hobbled by two fractures in his foot, the Minnesota Vikings quarterback started in his 292nd consecutive NFL game. It was a bittersweet affair for fans, who saw Favre throw a costly interception, draw two penalties and leave the game with an eight-stitch cut to his chin in a loss to the New England Patriots. Then there are his alleged follies off the field: the married QB reportedly sent texts and lewd photos to TV personality Jenn Sterger.

The Parti is hungry
There are a few constants in life in Quebec: good food, cold winters, and infighting within the Parti Québécois. But knowing this can’t allay the worries of Pauline Marois, who after three years at the helm of the sovereignist party is facing restive ranks. A group of 50 young sovereignists recently signed an open letter criticizing her. That came on the heels of a Radio-Canada interview in which Jacques Parizeau chided Marois and complimented Bloc leader (and one-time PQ leadership hopeful) Gilles Duceppe for his “remarkable clarity” on the sovereignty issue. It seems the party that eats its leaders—Marois is the sixth in 10 years—is licking its chops once again.

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Talking F-35s with a former head of the air force

By John Geddes - Friday, October 29, 2010 at 11:40 AM - 0 Comments

Lieutenant-General Angus Watt retired about a year ago as chief of air staff in the Canadian
Forces. That gives him a particular vantage point on the government’s plan to spend about $16 billion to buy and maintain 65 F-35 fighter jets—close enough to know the details, but a bit detached from the ferocious debate that’s erupted over the sole-sourced procurement.

Not surprisingly, Watt is a big fan of the Lockheed Martin jet, also known as the Joint Strike Fighter. He’s a sharp critic, though, of the job the federal government is doing selling the deal to the Canadian public. This is an edited version of his conversation with me earlier this week about the controversial F-35 project.

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The Auditor General's report and Canada's curious F-35 deal

By John Geddes - Tuesday, October 26, 2010 at 6:44 PM - 0 Comments

Auditor General Sheila Fraser’s coruscating report on the slippery way the Department of National Defence handled its recent multi-billion-dollar helicopter purchases is setting off alarm bells about how DND might be managing its even more costly jet fighter buy.

Fraser’s findings from her audit of the $11-billion helicopter deals couldn’t be more disturbing. She said DND officials held back crucial information about the likely escalation in the cost of 28 Cyclone and 15 Chinook choppers, which led to Treasury Board approving the purchases based on off-the-shelf cost estimates that were ridiculously optimistic.

And Fraser drew a rough parallel between the helicopter fiasco and the planned procurement, announced last June July, of 65 F-35 fighter jets for an estimated $9 billion, plus another perhaps $7 billion in maintenance costs. “I hope no one is assessing [the F-35 procurement] as low risk,” she said today.

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Joint Strike Fighter costs are soaring

By John Geddes - Wednesday, October 13, 2010 at 8:00 AM - 0 Comments

Tom Reynolds/Lockheed Martin

The suspension of test flights of Lockheed Martin’s new F-35 fighter jet early this month sounded like bad news for Canada. The federal government announced its plan last spring to buy 65 of the so-called Joint Strike Fighters, giving Ottawa a multi-billion-dollar vested interest in seeing the radar-evading airplane cruise smoothly to market. Yet the discovery of a fuel pump software problem—just the latest setback in the troubled F-35 program—apparently can’t translate into a price bump for Canada. “The Americans basically have been covering the cost overruns in the system design and development phase themselves,” Michael Slack, the Department of National Defence’s manager for the F-35 project, told Maclean’s.

The notion that Ottawa is in a position to shrug as Washington sweats over F-35 costs is arguably the most unexpected aspect of this controversial military procurement deal. The U.S. government has seen the projected cost of each F-35 it plans to buy soar from $50 million a few years ago to at least $92 million this fall, and well above $100 million by some recent estimates. U.S. Defense Secretary Robert Gates has been aggressively managing the file lately in a bid to counter negative publicity. By contrast, his Canadian counterpart, Defence Minister Peter MacKay, has been sanguine throughout it all, saying Canada will pay a comparative bargain price of about $70 million per jet.

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If you went down to the woods

By Nicholas Köhler - Thursday, July 8, 2010 at 8:00 AM - 0 Comments

LUKE SHARRETT/AFP/Getty Images

Of all the excitement that accompanied the arrival of the G8 leaders to the lake-strewn cottage country around Huntsville, Ont., nothing, for romance or intrigue, could match the military men hidden in the wilderness around Deerhurst Resort, the golf destination that hosted the affair. Not even the lingerie, complete with riot shield and rifle, on display at Petticoats, a Main Street store that sells women’s intimates. And no doubt some of the yarns spun around the camouflaged soldiers are true.

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The secret life of Colonel Russell Williams

By Martin Patriquin, Anne Kingston, Cathy Gulli, Michael Friscolanti with Kate Lunau, Tom Henheffer, Philippe Gohier, John Geddes, Patricia Treble and Michael Barclay - Tuesday, February 16, 2010 at 1:08 PM - 124 Comments

In the early 1990s, years before Col. Russell Williams was an accused double murderer, he was a young, eager lieutenant stationed at the Canadian Forces flying school in Portage la Prairie, Man. A rookie instructor in the old CT-134 Musketeers, Williams was an obvious standout, quiet but intense. “He was super,” says Greg McQuaid, a retired major who was chief flight instructor at the time. “I wrote the personnel evaluation reports that got him promoted to captain. He was smart, hard-working and skilled. He could be so focused that sometimes it was like he could look right through you.”

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Champagne wishes

By Steve Maich - Thursday, July 2, 2009 at 9:20 AM - 119 Comments

The experts will tell you that most frauds start small—maybe a few hundred bucks pocketed here, a little accounting fudge there—and get gradually bigger over time as the thief warms to the task, and gains confidence. That’s the way it almost always goes.

But Paul Champagne was not your typical fraudster. For one thing, Champagne had no particular expertise in finance. He was a computer engineer, brought in to manage maintenance contracts at Canada’s Department of National Defence in 1992. He was a technical authority, who could tell the bureaucrats how to buy, operate and maintain their computer systems more efficiently, and to save the taxpayer money in the process. For most of his time at DND, he wasn’t even an employee, but an outside contractor. And, up until the day he was fired in 2003, most of his colleagues thought he was doing a great job. Even when he was fired, it was for exceeding his authority in approving contracts that were beyond his position. Continue…

This land is my land

By Michael Friscolanti - Tuesday, June 23, 2009 at 3:20 PM - 1,010 Comments

Frank Meyers lives on Meyers Creek Road. That’s what happens when your family farms the same plot of land for 2½ centuries. They name the street after you. “This is heritage property,” says the 81-year-old, pointing at his freshly plowed fields in Quinte West, Ont. “This is the property that was given to my forefathers when they fought for the British army against the Americans. This land was designated for us.”

Today, the Meyers land is designated for something else: a new headquarters for Joint Task Force 2, the Canadian military’s top-secret special operations squad.

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