Budget officer says DND underestimated the cost of Australian Hornets

Little more than a week after the first two of a planned 18 Boeing F/A-18 Hornets purchased from Australia for the Royal Canadian Air Force (RCAF) arrived at Cold Lake, Alta., there are questions about the potential cost of the government’s interim fighter capability project (IFCP).

The first F/A-18A Hornet from Australia arrives at 4 Wing Cold Lake, Alta., on Feb. 16, 2019. The Parliamentary Budget Officer now says Canada’s deal for 18 used jets will cost much more than originally estimated. Able Seaman Darren McDonald Photo
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The questions were raised Feb. 28 by Parliamentary Budget Officer (PBO) Yves Giroux, who said in a report that the total cost of the acquisition had ballooned by nearly 22 per cent since the government signed a purchase agreement with Australia in November 2018 – to as much as $1.1 billion from DND’s original projected $895.5 million.

Both cost estimates include $12.5 million in development costs, but the PBO said the acquisition cost had risen to $311.5 million from DND’s $298.5 million, which did not include a $50-million contingency. The PBO puts the cost of operations, sustainment and eventual disposal at $767.5 million compared with DND’s $584.5 million.

Giroux said his office used the same basic numbers as DND but its own analysis yielded different results. “There’s no fundamental reason why we should come up with a different number,” he said, speculating that DND had “budgeted optimistic numbers.”

DND said in a statement that the PBO’s estimate included combat upgrades the department is still trying to work out. “While we are confident that our methodology is sound, we will continue to work with the PBO, the Auditor General of Canada, and other outside entities as part of our commitment to responsible use of taxpayer dollars,” DND said.

Defence Minister Harjit Sajjan told reporters outside the House of Commons that his department had “contingencies that we do put into place for all the procurement that we do.” While those evidently were factored into the IFCP, he insisted that DND’s numbers are “the costing for the actual interim.”

When pressed to explain the discrepancy, Sajjan suggested that the need to “Canadianize them” as well as “the additional aircraft we have got for spare parts as well” could have been a factor.

He dismissed as “absolutely ridiculous” the Conservative Opposition’s claim that the government was hiding numbers. “These are large projects and, at the end of the day, we are going through appropriate process that takes into account . . . the needs of the Canadian Armed Forces.” He acknowledged that the maintenance and operational elements of the project needed “some more work . . . because we are going to be upgrading the defensive and offensive capabilities.”

Sajjan also said it was “very rich of the Conservatives” to be talking about the cost of new aircraft when they had “got zero” during their 10 years as the former government, while trying to acquire 65 F-35 Lightning II stealth aircraft from Lockheed Martin. “Their costing was so off, I believe it was double what the Auditor General’s report had.”

In November 2018, Auditor General Michael Ferguson also highlighted the need for “modifications and upgrades to allow them to fly until 2032.” However, he added at the time, “purchasing interim aircraft does not bring National Defence closer to consistently meeting the new operational requirement introduced in 2016” in the government’s latest defence policy document.

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The first two single-seat F/A-18As were flown to Cold Lake by Royal Australian Air Force (RAAF) crews Feb. 16 from Nellis Air Force Base in Nevada, where they had been participating in the latest Exercise Red Flag, a two-week United States Air Force advanced allied combat training exercise.

Although they are the same model as the RCAF fleet and DND expects them to be integrated “quickly” (an average of six months), the former RAAF aircraft do require modifications and technical work to have the same configuration.

Two more are scheduled to be flown in later this year or in early 2020, with eight to follow in 2020-2021 and the final six by the end of 2021. Once declared operational, they will join the current squadrons at Cold Lake and Bagotville, Que. An option for up to seven non-flyable aircraft, to be used as assembled spares or training aids, is also part of the package.

Each had averaged 6,000 flying hours in RAAF service. Once incorporated into the RCAF fleet, each is expected to accumulate approximately 160 flying hours annually, in line with the legacy Hornets. They would be phased out of RCAF operations in 2032-2033, affording some operational overlap with their eventual replacements.

A Request for Proposals for the new fighters is expected to be issued by the government this spring, with a view to contract award in 2021-2022 and deliveries starting in 2025.

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