Report Release: The Plane That Ate the Canadian Military

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Report Release: The Plane That Ate the Canadian Military

already well good morning everyone my name is Bruce Campbell and the executive director of the Canadian Centre for Policy Alternatives with me as Stephen staples who’s the president of the rideau Institute and this morning we’re here to release the report the plane that ate the Canadian military and of course of the report’s author professor Michael buyers is also here and he will speak to it Michael buyers is the Canada Research Chair in global politics and international law he’s the author of many books and reports including a report on the f-35 recently published in the Canadian foreign policy journal this is the latest in a series of military procurement reports that the rideau institute and the CCPA have have sponsored and they cover the gamut from arctic patrol ships at close combat vehicles to submarines and helicopters so Monsieur buyers vapa so say comment an initial on and lay me like a top dog upon Dava Castillo often say I’m going to hand it over now to Professor buyers thank you Bruce Bonjour artists super pronto de castilla la francaise may come Bruce explicate presentation on on Glee and this report is based upon a report that was released by the Department of National Defense in august of last year august 2013 the next generation fighter capability annual update and all of my analysis is based on that report extrapolating from numbers provided by the Department of National Defense and it’s off oops okay yeah it’s off sorry I will start again this report that I am releasing today is based upon a report that was released by the Department of National Defense in august 2013 the next generation fighter capability annual update and the numbers that I have generated are based on numbers produced by dnd I’m extrapolating from them and filling in some of the gaps but I am NOT going beyond the parameters of the the work done by dnd in that report I’m simply filling in and extrapolating based on their approach and I discovered two things in digging into the D&D update that are of particular concern and that is that the Harper government has consistently based its assessment of the operating costs of f-35s on the operating cost of cf-18s in other words all of the projections that we’ve had from the Harper government including from the Department of National Defense last summer all their projections of the operating costs of f-35s are based on the operating costs of our existing fleet of a different aircraft and that cf-18 number is wrong with respect to f-35s in fact it’s significantly wrong with respect to f-35s and the actual operating costs of f-35s used in my report for this analysis is derived from numbers produced by the US government and you can see the citations in the report and the difference between the Harper government’s number and the actual number based upon US government numbers amounts to and this is the most interesting initial step a difference of 11 billion dollars f-35s have a much higher operating costs than cfa teams for a host of reasons including the fact that there is a lot more uncertain developmental technology in f-35s as compared to the cf-18s and the US Air Force and Lockheed Martin the US government are discovering that there is this substantial price difference and so if you take into account those us numbers alone with regards to operating costs the actual life cycle cost of a fleet of f-35s goes from the DMV number of 45 billion

dollars to 56 billion dollars a significant oversight on the part of the Harper government there are other actual costs that I discovered that have not been included in the government numbers and you’ll see these in annex 1 of the report the cost of foreseeable weapons expenditures to arm the f-35s add on another 218 million dollars modifying Canada’s midair refueling fleet add on another 42 sorry 420 million dollars etc etc once you add those other actual costs identified by D and D in other documents but not included in the update last summer you add on another billion dollars and you get to 57 billion that’s actual cost so there we have it 12 billion dollars that the government has not been telling the Canadian taxpayer about the second part of my report again building upon the work in the dnd update is to take into account what are called cost risks and uncertainty and these are things and you will find them in annex two of my report these are things like small changes in the exchange rate between the Canadian and US dollars so if you have a two percent I’m sorry a if you have an 85 cent dollar as opposed to a 92 central all of a sudden you have to add eight hundred million dollars on to the acquisition cost of a fleet of f-35s a change of just seven cents in the exchange rate and you get that kind of increased number two percent increase in the rate of inflation adds a billion dollars simply onto the acquisition cost of the aircraft and through this portion of my report looking at small changes in readily identifiable cost risks the exchange rate the inflation rate what’s called the the rate of learning and production efficiency with regards to the building of f-35s possible reductions in the overall number of f-35s ordered around the world a change in the numbers of flying hours for the fleet Department National Defense foresees that a fleet of f-35 eyes would fly significantly fewer hours than our existing fleet of cf-18s this is based on the assumption that more training will be done on simulators but the actual fact is that with regards to the f-35s Lockheed Martin attempted to do a lot of its testing work on the aircraft through computer simulation and discovered that it didn’t work that once they started flying actual aircraft with actual test pilots that a lot of unforeseen problems arose so you add this all up in under a moderate risk scenario a moderate risk scenario an 85 cent dollar a two percent increase in inflation what happens to the numbers you go up to 90 billion dollars for the lifecycle cost of a fleet of f-35s change the risk parameters just slightly just slightly go to a four percent increase in inflation and look what happens you go to 126 billion dollars and again these are not radical changes in inflation and exchange rate in learning and productivity factors relatively small changes can drive those numbers up to a very significant degree and compare that 126 billion or even that 90 billion dollars to what the Government of Canada to what the Harper government was telling Canadians just for years ago in 2010 sixteen billion dollars versus 90 billion or a hundred and twenty six billion dollars now this is all even more important because we know that right now a report is sitting on Prime Minister Harper’s desk it’s a report produced by the Royal Canadian Air Force in response to a request that he made in 2012 after a damning report from the Auditor General of Canada he told the Air Force to go back and assess not just the f-35 but to assess the competitor aircraft and we know that that analysis done by the Royal Canadian Air Force includes an analysis of risk so I urge you to read my report to look at these numbers to realize that my analysis is based upon early work done by dnd last summer there’s nothing extraordinary here this is simple cautious full analysis look at these numbers and you have an idea as to what is likely in that report sitting on Stephen Harper’s desk the report that he is so far

refusing to make public why is he refusing to make public well perhaps because it has numbers like this so again I will simply close by saying that my analysis here is not particularly um unusual certainly not exaggerated based on work done by the Department of National Defence coming to conclusions that are likely the same or similar to the conclusions arrived in by the Royal Canadian Air Force in their latest report and I call upon Prime Minister Stephen Harper to make the Air Force report public so that that document can be compared with my document so that canadian taxpayers have a true understanding of the implications of a decision to purchase f-35s and the final thing i will say and this is an explanation for the title of my report the plane that ate the canadian military if the f-35s were purchased for canada and if they ended up costing 90 billion dollars over their life cycle or one hundred and twenty six billion dollars over their light psychol those costs would destroy the Canadian military there would be no money left for anything else no money for ships no money for fixed-wing search and rescue aircraft no money for the army no money for training so this is an important decision facing the Prime Minister the concerns not just the actual impact on taxpayers but also the impact on the men and women who serve thank you very much merci beaucoup buyers but that haha said oh dude pakistan SE AAP na loob yamada no second is also a set especially reset kal me reserve a nautical stars sqe cuz mama I’ve extra bonito dia se llama chiquita tenders posse you supposed to go sqt kennedy the red and yet i was with you too suppose if the fair and analyse come sir oh cause the transparent house limit a pass cleanly lena Miroku talise some public power luminous tell the the first national a la la’ rapport the late a pass a madden lashon’s the faire mal research to donate Linda model comes o Allah we listen to a co a mere apprentice is young the new mill dues to the renewable a new process the daniel is a lately schwa disappear on develop my associate SQ like an insane ok thank you may we ask jess kasama mo llora por su Lee Leila scale a they could des opinion Lupo flood we lef was canadia rest Sulu labu road only Bureau the the Prime Minister so lonely projection confetti see support disastrous up where did recent moves employee d3 la défense national pourquoi Allah pouvez-vous imagine a maybe pouvez-vous imagine a leaf a dude comes up the song avensis million-dollar idea a purpose to please Sulu government Canadian ki VA pasa en su military an idea a como ask the military Canadian pee pee poo no true Katherine a media dolla Baku Pele’s otro lado treasures Lena via laser yo puse of dash a la bien sûr saba imposingly decision impossible so leaf was canadia assassin under the maple set resin port on the south wall because a pastor mark accion de de they could impose a suit to lay Canadian slc in question stole a venir de foreskin idea esker nuvvu langue de force Canada

have eczema in PST keep more modern sava de la ley f Frank who asked on oovoo lon military Canadian avec in a grand coupla more dick amor de faire up affair to lamest on defer the decision that Devil c’est avec les f TransLink setting this isn’t of what the foreskin idea tell more special is a so good miss you we miss you they’s effort Lansing is the South Koreans the Australians now have all announced that they’re buying the f-35 and they haven’t come up with numbers that are anything close to to your projections their media haven’t seen goodnight haven’t seemed to be able to dig up anything close to that why are your number so high in their numbers although my numbers are not high compared to numbers in the United States if you go into for instance the Government Accountability Office reports on the f-35 you will find that my numbers are entirely consistent with the analysis done by government experts in the United States okay I’m not talking about think tanks government exports in the GAO coming up with these kinds of numbers now I’m not going to make any apologies for the Australian or the South Korean military or media in terms of perhaps not producing numbers this high what I can say is that the Australian purchase of f-35s is still lower than their original anticipated total of f-35s they’re only buying 72 instead of the 100 originally projected so when Lockheed Martin puts out the story that yes Australia is carrying this project forward well there’s another side to that story Australia is purchasing less f-35s then it had originally planned to do and you can look at this in different ways and the point to take home out of this is that there still remains enormous uncertainty we don’t know how many f-35 will be ordered in the end and as a result we do not know what the per plane cost will be we do not know when the development phase will end or if it will end because there are still major developmental problems particularly with regards to software code so we don’t know when the the cost will be reduced as a result of getting to the the end of that developmental phase so we do not know what the plans will actually cost we need to plan for these uncertainties so for instance when I look at the dnd update i find that the only contingency plan with regards to acquisition price is to buy fewer plants and yet dnd tells us that 30 so that’s 65 is the absolute minimal number for an operational fleet I get worried when i look at the only contingency plan in the dnd update with regards to operating costs is to fly fewer hours I get very concerned because they’re already planning to fly significantly fewer hours than they fly for the cf-18 so you know we have to plan for uncertainty and in any government looking at this will come to the exact same conclusion that Auditor General sheila fraser came to in 2010 and I I simply want a quote I hope no one is assessing this as low risk she’s speaking about the F 35 procurement these are planes that are still in the development phase that are massively delayed with huge uncertainties and the Canadian government is approaching this as something that involves the very low end of risk and it’s irresponsible to treat this as a low-risk project given that it is a developmental aircraft with an awful lot of uncertainty and therefore the upper level risk numbers need to be in the picture as well then in the u.s they be for all three models of the f-35 just the f-35a and in addition to that kind of a side question to all of that is I mean you’ve come up with your numbers you’ve filled in the gaps as you as you’ve said based on whatever your assumptions were and whatever numbers you’ve seen yeah I guess you’re asking us to look at those projections and compare them against KPMG I mean did KPMG not do a proper job I don’t KPMG assumed that the operating costs of f-35s would be the same as cf-18s and in counterpoint to that I’m not only quoting from US government reports I also quote from Laurie haan haan MP who told the i believe it was canadian press that the operating costs of the cf-18s where I believe it was nineteen thousand dollars per hour which gives us a fix

compared to the numbers for the actual f-35 generated by Lockheed Martin so I’m comparing Laurie hon np’s number with lockheed martin’s number okay I’m not spinning this there is a more than ten thousand dollars per hour difference in operating costs between those two that’s the kind of analysis i’m doing i’m not making anything up here but on the effort on the ABC models on the ABC models yes i take that into account it’s it’s all in my research yes there is a distinction and so I’m very very careful to parse this out this involves months of work mine here and i invite you to dig deep into my numbers to dig deep into my safe citations it’s all one hundred percent solid I assure you well I thank you for the plug you’ve got it in here was the hill times that got the quote from glory hon a 19 ahhhhh but which was important anyway so as the ten percent inflation rate constant for instance yeah i I don’t I don’t use a ten percent inflation rate what I do is I take the dnd updates number for a one percent increase in inflation so that’s one percent increase over the life cycle so that one percent more than the current inflation rate spread over the next 30 years dnd gives me that number right now I think a one percent increase in inflation is a very conservative number given what we know of current inflation rates versus historic inflation rates so in my moderate scenario i use a two percent increase in my serious narrow i use a four percent increase but that still only takes us up to about six percent inflation right and I you know I’m old enough to remember ten percent plus inflation rates are same thing on the exchange rate if the dnd update uses 91 cents per dollar Canadian per US dollar that’s not going to stay the same I remember when I moved back to Canada from the United States ten years ago that we were at a 60 set US dollar we get massive fluctuations take for instance another variable which is the cost of aviation fuel costing aviation fuel has risen by forty percent in the last ten years right and we know that it’s likely to go higher because of diminishing accessibility to conventional oil right so that has to be factored in D&D gives me a number for a ten percent increase in the cost of aviation fuel so I say well what happens if it goes out fifty percent from its kerosene isn’t it uh yeah that’s it yeah the goes from my roughly eighty cents in your scenario up to three dollars that’s quite soon no I don’t go up to three dollars I I go the highest I go is a doubling of the number given in the dnd update the current number okay I do mention in this update and in my report and this is important that when i do my scenarios i’m looking at an accumulation of small changes but you could get very quickly to the same number with just one large change and so I do give an example of three dollars per liter with three dollars per liter this just goes off the chart right if i were to put in large changes to these variables I’d be standing in front of you talking about 200 billion 300 billion I haven’t done that this is very conservative my analysis i’m looking at totally foreseeable changes and i still generate large numbers which is why canadian taxpayers need to be worried and let me also say this because i know that otherwise someone will ask i have not done the same analysis with regards to the competitor aircraft i don’t have the kind of resources and staff that the Department of National Defense does but I am pretty confident that the numbers would be smaller for a couple reasons one is that we already know that the f-35 has unusually high operating and sustainment costs okay compared to the other aircraft but more importantly the f-35 is still in the developmental phase it’s still not a finished aircraft and that increases the risk even more so I would hope that the report that is sitting on the Prime Minister’s desk from the Royal Canadian Air Force does this kind of analysis with regards to all the alternative aircraft so that we get the full final numbers for comparison reasons that’s what I hope is there I’ve just done the f-35 because i only had the numbers for the f-35 because that is the only thing that was in the dnd update report your speaking of that’s the result of the industry analysis yeah the the the options analysis yeah it’s called the options analysis it’s done by the National next generation fighter capability sorry the next generation fighter office Secretariat and the report itself is written by the Royal

Canadian Air Force with the oversight of an independent review committee and and this is the report that we were promised two years ago after the auditor-general exposed that there had been some misleading numbers presented to to Parliament haha it was a lady Huntly SQ of quaker google mr up a caricature vacation just a perm a measure quo we paske li li numeros oh I see so SI los más o tema a la sala viendo defect who lays a vr he’s unpleasant mora don lee foss canadian sontreasure je l’ai CF d sweet sera de mission a bientot the cf-18 fleet is due for retirement in 2020 and and we not only need to get the numbers right in terms of actual cost in terms of risk to know whether this is a feasible plan I don’t think the f-35 is financially feasible and we need to look at the alternatives because we need replacements and and I am a supporter of recapitalizing Canada’s fighter jet fleet I want a decision relatively quickly and I want it to be decision based upon a full analysis which includes cost risk and uncertainty I hope that the that that the report produced by the Royal Canadian Air Force and currently in the Prime Minister’s Office will give us some clear basis for a decision but we won’t know that unless it’s made public himala do sistema de aquellas cosas revenue dct ozone suppose your cerebellum evola navigate koivu guru banana vivanno indecision ava Lee portions Alexia a County DVD but I’d the Nepal via should be bak KO kasi Japan sparkin Isabella turn the dev 10 proposed Kamsa ileana in rapport flood we are luminous tell the difference national the only be road the premier minister so don’t live to Moscow important new never palyed topaz clearly the least of your Pleasant more do the foreskin against entrees RJ a la città met nan de Ferran decision support after indecision do de choisir un avion potete really super hornets suppressed memory young cooley cf-18 trade modern is a potato dish was your left ran sank mana bisa pom-pom decision would have worn competition luva mccomas asa toot sweet we need to have action on this the the cf-18s only have a few more years of available service we’re using some of them right now in Eastern Europe we need some capacity like this and because of a decade or more of delays on the part of success of Canadian governments were in a real box now the the choice that successive governments was aiming for the f-35 is proving unfeasible financially technologically and we need a replacement and the Prime Minister needs to decide we need to get moving on this file there is no more time for delay thank you very much mail see