Thank you, Mr. Chair. I'm delighted to be back.
First I'd like to talk about the operational requirements for a moment or two. Let’s remember we are acquiring a fighter for the next 30 or 40 years. I would ask whether you would want your son or daughter or future granddaughter in yesterday’s technology or in the most effective and secure aircraft in the future. That's essentially what we're talking about with the fifth-generation fighter. We are talking about new technologies that change the game. It's about stealth, the ability to prevent the bad guy from seeing you and thereby potentially reaching out and killing you.
Would you want the enemy to see your son or daughter pilot 100 miles out, or would you rather they fly unseen into a mission, accomplish the mission, and be back out before anyone even knows they've been there? That's assuming, of course, they haven't dropped a bomb or something and then everyone would know they'd been there.
Stealth means protection and survivability. It's also important to note that this degree of stealth needs to be built in, and it can't be added to an existing platform.
Fifth-generation technology is also about sensor fusion and interoperability, the ability of the aircraft to see and sense all around it and be in constant secure communication with its friends. The system then presents all that information in a simplified logical manner to the pilots, so they can immediately focus on the important elements and not be swamped and distracted by millions and millions of bits of non-essential information.
Secondly, let me address some of the recent statements made about the joint strike fighter program. While no one can deny that the cost of the design and development phase of the JSF program has grown significantly, not unlike most complex military equipment, nowhere is it acknowledged that these costs have been paid for by the United States government at no additional cost to Canada. That’s important because it did not increase our costs in any way.
If I could turn now to some of the issues circulating regarding the competitive process and the costs of Canada’s participation in the joint strike fighter program, claims have been made that Canada could achieve a 20% savings on the purchase of a new fighter. That's quite extraordinary, as there is absolutely no basis for such claims.
Let’s state the obvious: you must have more than one viable supplier to have a competition, and there is only one fifth-generation fighter available. The F-22 Raptor is not a multi-mission aircraft, it is very expensive, and it is not for sale or export by the U.S. government. Nor is it practical for Canada to acquire and operate the new Russian stealth fighter. Even if it met our technical requirements, clearly we would have no interoperability with our key allies.
Thus there are no other fifth-generation fighter programs under way in the western countries. Our CF-18s will largely be retired due to structural fatigue over the next 10 to 15 years. That leaves us with the F-35 as the only operationally viable fifth-generation fighter solution.
The issue, therefore, is if we are getting the best possible price without being able to conduct the more traditional competitive request for proposal process. The answer is clearly yes, as there is no possible way you could obtain a cheaper price. There are only two ways to buy a joint strike fighter: by exercising your option as a partner under the memorandum of understanding or through the United States foreign military sales program on a government-to-government basis. The U.S. government does not participate in RFP competitions; it will simply give you a sale price to foreign military sales.
Acquiring these jets under the MOU would result in an $850 million to $900 million cost avoidance from foreign military sales fees. A competitive process with the F-35 being selected--far from resulting in a 20% cost savings, as some have suggested--would, at a very minimum, result in an 8% to 10% cost increase because we'd have to pay that $850 million to $900 million.
In terms of the joint strike fighter MOU, we have to be clear that in order to run a competition, Canada would be forced to withdraw from the MOU. I would point out that that is because the MOU precludes that countries have agreed not to apply the normal IRB process. A Canadian competition would have to entail the normal IRB process, and you cannot do that within the MOU.
If we withdrew from the MOU, we would lose key benefits. We would be subject to penalties, the industrial guarantees we already have would be negated as those contracts run out, and Canada’s industrial plans with our partners would be suspended.
Let me make a couple more observations about the costs of the aircraft. First of all, Canada is buying the conventional take off and landing variant--the least costly variant--for which the current estimate is in the low to mid $70 million per aircraft. And we are buying at the cheapest price point on the production curve.
Second, this program affords Canada access to incredible economies of scale. Upwards of 3,000 to 5,000 aircraft will be produced.
Third, while it is possible that some partners could reduce the number of aircraft they are purchasing, we expect that any reduction in partner buys will be offset by sales to non-partners, such as already witnessed in Israel. I just note that a few minutes ago the U.K. confirmed that it will continue to buy 138 joint strike fighters.
Fourth, while the government has announced up to $9 billion for the capital program, the $9 billion covers much more than the cost of $5 billion to $5.5 billion for 65 aircraft. It also includes logistics, simulators, spares, weapons, infrastructure, and program management contingency, etc. And all of these items would be purchased regardless of which aircraft we chose.
Finally, the price that Canada will pay is the cost of production per aircraft, as it comes off an assembly line with a Canadian flag on the tail. Many analysts have cited a myriad of numbers that the U.S. government will pay, but you must remember that these numbers reflect the total program cost to the United States government, which is compelled to report to Congress. That includes all the tooling costs, testing, and research and development, etc. Canada does not pay for those costs.
As for joint strike fighter life cycle costs, remember that the current fleet of CF-18s costs money today to keep it running. The money we anticipate paying for the in-service costs of the F-35 will be of the same magnitude. Training a pilot is training a pilot, a litre of fuel is a litre of fuel, and runway repairs are runway repairs.
As a partner in the joint strike fighter program, we have access to all known costs associated with sustaining the fleet. As I said at my last visit, we estimate the cost of sustaining the fleet to be approximately $250 million to $300 million per year, but we believe the story will be better. For example, we are looking at pooling our spares with our other international partners. That would mean a 50% reduction in the number of spare parts that we would have to initially buy to create that initial pool of logistic spares.
So far from not knowing the costs of sustaining, we probably know far more about sustaining the F-35 than we have known about sustaining any previous new fleet, and we hope to achieve real savings.
Let me summarize, in conclusion, the major benefits of the joint strike fighter program. First of all, it's the only aircraft in the western world that meets the operational requirements of the CF. It affords Canada and Canadian industry unprecedented access to technology, including detailed cost data. 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. The Government of Canada will receive millions of dollars in royalty cheques from sales to non-partners. Indeed, we welcome the recent announcement by Israel to purchase F-35s because it will generate a royalty cheque to Canada. It will work to keep the purchase price low for us, as well as generating real work for Canadian industry.
And on the subject of industry, Canadian industry is guaranteed access to the largest military cooperative program in the world--in fact, ever--with benefits being realized every day across this country. To date, Canadian companies have been awarded more than $850 million in contracts. Opportunities identified in the industrial participation plans with the three major company groups are estimated to be worth, in the long term, $12 billion U.S. And this only takes into consideration the existing orders of 3,173 aircraft for the partner nations. It does not include the estimated 2,000 additional aircraft for export sales.
To conclude, one thing I have come to appreciate in the job of ADM Materiel is that many of the defence procurements are far more complex than they appear on the surface. We're not buying cars here. There is no magical way to create a more competitive situation or to predict what a different process would or would not save. To generalize, to oversimplify, is to do a disservice to the men and women who put their lives on the line every day for Canada.
Ladies and gentlemen, and Mr. Chairman, thank you very much for your attention.