National Defence Committee on Dec. 2nd, 2010

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Are 54 Canadian companies currently involved in the F-35 process? is that correct?

[Tom Burbage]

Yes, that's correct.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Does that number have the potential to grow?

[Tom Burbage]

Yes, it does. As the additional opportunities come online, it will grow, and I don't count in that number, as Madam Gallant said, the next several tiers of companies that are getting flow-down work from those contracts.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Absolutely.

[Tom Burbage]

So in terms of numbers of companies, the numbers would grow.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Is it your belief that there is more potential for Canadian aerospace companies for contracts, work, and jobs with a traditional IRB one-for-one arrangement? Or is there more potential for Canadian companies, contracts and jobs as a partner within the MOU?

[Tom Burbage]

It's our belief that the best-value model we're putting in place on the F-35 is a new model and it is quite different from the offset or IRB model of the past.

The IRB model of the past is contingent on contract award. There's a period of performance that the contractor has to implement industrial benefits. Those benefits are not often direct to the airplane or not direct to even the aerospace industry, and they're short-lived: when the obligation is fulfilled, it's done.

In this case, it's early, and it continues on beyond procurement of the airplanes as long as we're building F-35s, so I think it's quite different. It's a different risk equation, because it's not guaranteed up front. But there's a huge reward to it because it's much longer term and much higher value.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Very good.

You talked about the cost curve, the projections, and the fact that Canada has planned to purchase the plane at one of the lowest points of the cost curve. Does the cost curve go up at some point?

[Tom Burbage]

This is why cost is a tricky subject. When you look at costs in terms of real dollars and you take inflation out of it--constant-year dollars, 2010 economics--then you get a time-phased and continuously reducing curve.

If you look at the effects of inflation and calculate that same cost in then-year dollars, there's a point at which the cost curve gets flat. You're building the same quantity every year, year on year, you've learned how to build the airplane, and your suppliers are at the peak of their performance. Then you have a tail-up that occurs, which is inflationary, whatever the inflation increases are out in time.

You have to be specific as to whether you're talking about future-year dollars, current-year dollars, or constant-year dollars in the past. All three get very much jumbled up in the cost discussion on this program.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Very good.

In your presentation, Mr. Burbage, you talked about your company's commitment to affordability. Could you just elaborate on that and explain what that is?

[Tom Burbage]

This program is founded on the potential for achieving economies of scale. In other words, if a lot of users buy a large number of airplanes, we can drive the cost of this airplane down below what you're paying for a much less capable airplane today. That's really the only way you can achieve the costs we're talking about.

It's not that we found a magic way to make the airplane; it's that you have the economies of scale. In order for you to get the economies of scale, the airplane has to be viewed as affordable in the eyes of the buyers. That forces us to be focused on driving the cost of the airplane down to as low as it can be.

We're confident that if you look at it side by side with airplanes of today's generation, we'll be at or below the cost of those, and we'll have next-generation technology.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Excellent.

From your understanding, Mr. Burbage, could you explain the differences between the current CF-18 fighter jet and the F-35? What are the key differences and the value added that the F-35 brings in comparison?

[Tom Burbage]

The CF-18 was bought primarily because of the cold and the icy runways and the short runways you have, I assume, and the ability to use a tailhook. It has common characteristics with the navy for those reasons, and it is what we term a fourth-generation airplane.

We happened to build one of those, called the F-16, and it competes with the newer version of the F-18 around the world. The F-18C is built more on the principles of superior aerodynamics and less on the principles of superior avionics.

Today's airplanes have equivalent performance. In other words, from an aeronautical perspective, we can fly as fast and pull as many Gs, but the difference is that we're a stealthy airplane, and when you put weapons inside the airplane, we maintain those same performance characteristics with a combat load. If you take an F-18 or a CF-18 and you put a combat load on it, it loses much of that performance capability. That is one advantage.

[The Chair, Conservative, Maxime Bernier]

Thank you very much.

I will give the floor to Mr. LeBlanc.

[Dominic LeBlanc, Liberal, Beauséjour, NB]

I'll give my turn to Mr. Wilfert. He can continue his incisive questioning, and I'll come back after.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Mr. Chairman, I apologize. I had to leave for a bit of time for a delegation.

I have a question, Mr. Chairman, and again I'm seeking information. Recent reports have shown that there have been problems with cracks developing in some of the number 496 bulkheads used in the F-35B models after approximately 1,500 hours of air flight testing. These same reports suggest the specific bulkheads in question are very similar to the number 472 bulkheads used in the F-35A, which the Canadian government currently plans on buying.

At Lockheed Martin, are you concerned at all about the possibility that some F-35A fighters may experience similar problems? If so, what steps would the company need to take to ensure structural durability?

[Tom Burbage]

That's a good question. First of all, none of that happened in flight. We have six test articles that we'll never fly. They go through very extensive ground testing. We put them in fixtures, and we cycle them through two lifetimes of use. That's 16,000 hours.

As we go through that cycle, we look for cracks. By the way, we like to find cracks. If we don't find any cracks and the airplane looks perfectly normal, you are probably going to find cracks later on when it's actually in flight. So we do that test very specifically to find these areas in the airframe that may be slightly undersized for the loads they're going to experience.

We found one. It was in the frame of the STOVL airplane, as you mentioned. That frame in the STOVL jet is made of aluminum. That frame in the air force jet is made of titanium, so it's a whole different metal, with different crack propagation and a different stress pattern and everything else. However, we did stop the air force testing until we could go back and do a full analysis of the air force frame and compare it with the Marine Corps frame. This is not a big deal. It's often trumpeted as being a big deal, but these are the kinds of things that you find in tests and that you fix to make sure you don't have any of these shortfalls when the airplane finally gets into the hands of the operator downstream.

We are working very closely right now with Héroux-Devtek, which is the manufacturer of those frames, to get a solution in place. The frames that are on the airplane will be repaired and returned to service. Then we'll be back in testing just after the first of the year. For those that are not built yet, it is a very simple software change to a tape that cuts a new frame. All the airplanes in the future will have the changes in them.

So we want to find these things and we want to find them now. We don't want to find them later. We don't want to have airplanes that are going to experience the cracks later.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Thank you.

I have one other question, Mr. Chairman.

I thank you for your answer. Obviously when these things come up, we need the answers.

What operational capabilities can the Canadian air force expect from its initial F-35 aircraft when they begin arriving—if they go ahead with the purchase—on Canadian air bases in 2016? Will these aircraft be able to fully support CAF-prescribed data or air-to-air or air-to-ground mission sets? If not, what can we expect until the full mission capabilities are available, equivalent to those offered by competing aircraft today? Are there any additional costs the Canadian government could expect to incur to fund these enhanced capabilities?

[Tom Burbage]

We introduce our software capability in what we call blocks. In 2014, the United States Marine Corps will go to operational capability with what we call a block II airplane. That block II airplane is fully capable of going into combat and is an operationally acceptable airplane for any air force, navy, or marine corps that wants to fly it.

At that point in time, the next block of software will be in flight tests. As soon as it completes flight tests, the software is dropped back to the other airplane, which instantly becomes a block III aircraft. There are no hardware changes: there's no mod and no retrofit associated with that. Canada's airplanes come in 2016. We will be completing flight tests in early 2016, and your airplanes will either have that software capability in them or they'll get it very shortly after they get here.

By the way, the reason the Marine Corps is taking that airplane to IOC is that it's so much better than the airplanes they're operating today.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Thank you.

[The Chair, Conservative, Maxime Bernier]

Mr. LeBlanc, please.

[Dominic LeBlanc, Liberal, Beauséjour, NB]

Thank you, Mr. Chairman.

Mr. Burbage, there's been a lot of discussion around the competition held in 2001, at which your company was selected as the prime contractor and the Canadian government as partner in the development stage of the MOU.

When your company was competing in the 2001 competition, could you tell us what Canada's role was in that competition? Was Canada a robust partner in identifying requirements? Did Canada participate actively in that selection process that took place when you were selected in 2001?

[Tom Burbage]

Okay. The phase of the program that began the real competition was in 1994. All of the U.S. prime contractors were part of that; that was a concept definition phase, a study phase, a technology development phase. In 1997, the down selection was made. The competing contractors then were a team of McDonnell Douglas and British Aerospace, Boeing as another team, and Lockheed Martin another.

That competition down-selected from three to two. Then Lockheed Martin and Boeing continued on to actually build flying demonstrators and do a fly-off, so to speak. It's captured very well in a Canadian documentary called The Battle of the X-Planes.

At that point in time, Canada was a participating observer, which meant there was really nothing to do but watch. But it was one of the countries participating in the evolution of the technology investment. In fact, we actually have contracts from the earlier phase with some Canadian companies that I'm not counting, because we didn't go on a contract until 2001. For example, Honeywell Canada was involved in work as far back as 1997-98, when we were still developing the technology for the airplane. But Canada was an observer.

[Dominic LeBlanc, Liberal, Beauséjour, NB]

So we didn't actually select the winner. We didn't participate in the selection of the winner. That was a process driven by the U.S.