Canada's auditor general, Michael Ferguson, has shown how the Department of National Defence lowballed the costs by billions of dollars on a plan to purchase and operate 65 F-35 fighter jets.
In June 2008, department officials initially estimated a $9-billion price tag to buy the jets from Lockheed Martin. According to Ferguson's report, the government calculated another $16 billion at the time to sustain the program over 20 years, adding up to $25 billion.
But in July 2008, the government established a budget of just $16 billion to buy the jets and keep them operating for 20 years. Prime Minister Stephen Harper has frequently cited the $16-billion figure, even though the parliamentary budget officer, Kevin Page, put the price at $29 billion in a 2011 report.
In a response to Page's estimate, the Department of National Defence then claimed that the total 20-year cost would be $14.7 billion, according to a table in Ferguson's report.
The auditor general declared that costs were not "fully presented in relation to the life of the aircraft".
"The estimated life expectancy of the F-35 is about 8,000 flying hours, or about 36 years based on predicted usage," Ferguson wrote. "National Defence plans to operate the fleet for at least that long. It is able to estimate costs over 36 years. We recognize that long-term estimates are highly sensitive to assumptions about future costs as well as to currency exchange rates. However, in presenting costs to government decision makers and to Parliament, National Defence estimated life-cycle costs over 20 years. This practice understates operating, personnel, and sustainment costs, as well as some capital costs, because the time period is shorter than the aircraft’s estimated life expectancy."
In addition, the government did not account for the cost of replacement aircraft, upgrades, and weaponry.
"Third, many costs are not yet reliably known or cannot yet be estimated," Ferguson stated in the report. "These include the basic unit recurring flyaway cost of the aircraft, the cost of Canadian required modifications, and the cost of sustainment. In addition, National Defence is still developing its planning assumptions for operating the fleet. This involves hundreds of interrelated decisions about such matters as how pilot and technician training will be delivered, what physical infrastructure is required and what portion is directly attributable to the F-35, how maintenance and repair activities will be supported, and what they will cost."
Follow Charlie Smith on Twitter at twitter.com/csmithstraight.