National Defence Committee on Oct. 19th, 2010

[Geoff Regan, Liberal, Halifax West, NS]

When you last appeared on September 15 you mentioned that, “the partners, including Canada, had direct input into the operational requirements document”.

You were talking, of course, about the competition between Boeing and Lockheed Martin at that time. Is there in fact a document that enumerated Canada's requirements and priorities that was given to Lockheed Martin and Boeing so that they could incorporate these types of requirements into their prototypes?

[Dan Ross]

We commented on the United States Air Force, the United States' SORD--statement of requirement document--in detail. I'm not aware whether we have a record of formal submissions that we gave to the joint project office. We could perhaps find out. But it wasn't our statement of requirements.

[Geoff Regan, Liberal, Halifax West, NS]

The question is, if there is something that indicates what Canada's requirements were, can it be shared with this committee so that Canadians can have some idea what the requirements were and whether they in fact were communicated and taken into consideration in this process?

[Dan Ross]

I will undertake to try to find out.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much.

Also, when you were last here on the September 15 you said that when Lockheed Martin was chosen to design the joint strike fighter it wasn't a fait accompli that Canada or any of the partners would acquire the aircraft. It wasn't a fait accompli.

This would seem to contradict the government's assertions on this point that a previous Liberal government's participation in the project meant that they had already decided to purchase it. You also say that your department only felt comfortable enough to purchase this aircraft “in the last year or so”.

Could you clarify this?

[Dan Ross]

The competition between the F-35 Lockheed Martin and the F-36 Boeing, as I mentioned earlier in my remarks, in the view of previous ADMs, really was the competition to select the next-generation, fifth-generation, fighter for the western world, because no one else could afford to do so.

The United States and the other eight countries participated in that, and the United States was attentive to the needs and interests and operational requirements of its partners. It had to be because they would not have continued to participate if they hadn't been attentive to it.

You're right. At that time we had not made any specific decision to replace our F-18s. We were managing their fatigue life to take that fleet to approximately 2015 to 2020, which is the current situation. We didn't need to make a decision at that moment on actually going to government and seeking approval to replace them and buy joint strike fighters. But it was prudent to participate early so you would have access to the information—access to highly classified information—and to allow Canadian companies access to high-technology opportunities early, as they have done extremely successfully.

Then the options were open to us, to subsequent governments. If the joint strike fighter program run by Lockheed Martin was successful, as it has been, and fully met the requirements of partner countries, the government would have the choice at that time to acquire them.

Clearly, we brought those options to government on several occasions. We made it crystal clear on the last occasion that we wanted to continue to participate up to $551 million over the 40 years, but it did not, absolutely, at the day of question, entail a commitment to buy, and we would come back to government with a recommendation.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

As may have been apparent from my first question, and I'm not a regular member of this committee--in fact, I'm not accustomed to receiving speaking notes in advance of the meeting. For that I compliment you and thank you. I don't know if that happens regularly here, but it's a nice thing to see happen.

In your speaking notes you say “in order to run a competition, Canada would be forced to withdraw from the MoU.” But on February 15, you said that the MOU “does not prevent you from entering into another process.”

Which statement is the right one? Where in the 2006 MOU is it stated that a competition would force Canada to withdraw from the MOU? Which article states that?

[Dan Ross]

The article that it's related to is 7.6, which says that member countries will not apply industrial regional benefits or offsets, and if they choose to, they have to withdraw from the MOU.

[Geoff Regan, Liberal, Halifax West, NS]

But you said on the 15th that the MOU doesn't prevent you from entering into another process.

[Dan Ross]

You could still have another process, but if you chose to buy joint strike fighters outside of that, you'd have to go for military sales.

[Geoff Regan, Liberal, Halifax West, NS]

You said that the conventional take off and landing variant of the F-35 unit price estimate is currently around $72 million.

[Dan Ross]

Between seventy and seventy-five.

[Geoff Regan, Liberal, Halifax West, NS]

The low to mid seventies per aircraft.

Can you share with us any documentation that justifies these numbers?

[Dan Ross]

That comes from documentation from the U.S. government, from the joint project office. We would have to check whether we have the authority to release that document.

[The Chair, Conservative, Maxime Bernier]

Thank you very much.

Mr. Bachand, you have the floor.

[Claude Bachand, Bloc, Saint-Jean, QC]

Thank you, Mr. Chairman.

Mr. Ross, I'm pleased to see that you're going to table the specifications for the aircraft that you selected. I imagine that this will be in compliance with the specifications that you requested, of course.

However, we are being asked to make a leap of faith and I have a great deal of difficulty accepting that, because I often say that we're here to defend the interests of taxpayers. I put a question to Gen. Deschamps the other day because I'd read articles on the simulations. During certain simulations, the Typhoon could beat the F-35 whereas we've been hearing from the beginning that the F-35 is unbeatable. I also know that in some cases the Boeing can beat the F-35. The general told me that that information was classified.

Are you in favour of having this information classified?

[Dan Ross]

I'm not familiar with any simulations. I'm somewhat surprised that fourth generation aircraft, which can't detect fifth generation aircraft, would be successful, but I have not seen those simulations, sir.

[Claude Bachand, Bloc, Saint-Jean, QC]

That's the problem. We're asked to make a leap of faith here. We're told that we can't see them. Moreover, I am told that the documents that could be given to me would be virtually useless. Thank you very much. I was given documents, they are in front of me. I can see the height, length and size of the plane. I can find all that out by using a measuring tape. I don't like that attitude.

What we are seeking to find out as MPs, essentially, is whether or not we're getting our money's worth. If details are being hidden from us supposedly because of some secret classification, I don't like that. I hope that other witnesses who will appear before us, the representatives from Boeing or Eurofighter, will explain their simulations to us. That might force Lockheed Martin to reveal its own. If Boeing and Eurofighter tell us that in their simulation they are capable of beating the F-35 in various scenarios, I hope that Lockheed Martin will show us its own scenarios demonstrating that they beat them in other situations. I think it's important for us to know that.

Moreover, in your opinion, would there be costs involved if we were to withdraw from the MOU? The minister seemed to be saying that if we withdrew from the MOU, it would probably cost us an awful lot of money. In your opinion, would there be costs if we decided to withdraw from the MOU?

[Dan Ross]

Yes, sir.

The costs of withdrawing are severalfold. There are two cases. In one case you would withdraw and still want to procure the F-35. That would have to be done under foreign military sales, with the foreign military sales fees associated with that. The other cost is if you withdrew and didn't want to buy the F-35, for which you would have to compensate your partner countries for recoupment of the R and D. For example, we have committed to our partners to contribute $550 million over the entire length of the joint strike fighter program. They have programmed our contribution into the development costs, the set-up costs, tooling, etc., and we have agreed to provide that contribution. If you withdraw, there are actually some contractual pieces in there. We would have to negotiate a certain cost that we'd still have to pay. It would not be automatic or free, in that you could not just pull away and say, too bad, to your eight friends and walk away with our money.

I can't give you a figure for what that cost would be. It would not be insignificant. And I can't quote you the actual article in the MOU, but it's in the MOU.

[Claude Bachand, Bloc, Saint-Jean, QC]

I have one here in English, which I will quote. This is section 19.4.3 which reads as follows:

...in no event, however, will a withdrawing Participant's total financial contribution, including Contract termination costs, exceed that Participant's total share of the Financial Cost Ceilings for financial contributions as established in Section V....

In Section 5,—what you are saying is true—the government has committed to earmarking $550 million for this program.

[Dan Ross]

Sir, all they're saying is that your cost of withdrawing would never be more than 100% of your agreed contribution. But that's normal in contractual agreements.

[Claude Bachand, Bloc, Saint-Jean, QC]

However, what happens if we withdraw before we spend the $550 million? Would there be penalties other than those you mentioned, namely would we have to put money into the hat because we benefited from the R&D, and by withdrawing others could divide that amount among themselves and that would bring about costs? In your opinion, if we did not pay out the $550 million and decided to stop the project, would there be other costs involved?

[Dan Ross]

No, because the $550 million will already been spent.

[Claude Bachand, Bloc, Saint-Jean, QC]

Has that money already been spent?

[Dan Ross]

Yes, but it will be finished in 40 years.