Flak for PM, bombs for DND
Auditor-general rips department over F-35 process
“Either he knew and it was unconscionable — or he didn’t know and it was incompetence.” It was the kind of barb Stephen Harper used to toss at Paul Martin at the height of the sponsorship scandal, when he was leader of the Official Opposition.
Following the release Tuesday of the Auditor-general’s damning report on the process to replace Canada’s fighter jets, it was the Prime Minister who was being charged with incompetence by the new opposition leader, Thomas Mulcair. That will sting, but such is the circle of political life.
The NDP leader called the F-35 purchase “a litany of poor public administration, bad decision-making and a lack of accountability.”
He said the key question was how the Prime Minister allowed parliamentarians to be intentionally misled.
Mr. Harper maintained a flimsy defence, saying the F-35 has not yet been purchased and that the government will ensure more rigorous supervision of the Department of National Defence is put in place.
But there was none of the bluster that has been typical of jousts over the F-35s, where ministers have accused the opposition of being unpatriotic or hypocritical for calling for an open competition. Also absent were claims that the F-35 was chosen as part of a “competitive, rigorous process,” as the Defence Minister, Peter Mackay, alleged when he announced Canada’s plan to buy 65 planes in June 2010.
Instead, there was the devastating admission that DND has effectively been demoted.
''National Defence decided the F-35 was the aircraft it wanted ... and was determined to get it, regardless''
We now have a department of procurement professionals in DND who cannot be trusted to do their jobs, according to the Auditor-general and the Prime Minister.
Public Works will take the lead on the F-35 project going forward, with a secretariat in the department reporting to a committee of deputy ministers. This clearly casts doubts on DND’S ability to manage any future procurement project, but the opposition didn’t go there and neither did new the AuditorGeneral, Michael Ferguson, in his press conference.
His only recommendation was that DND come clean with its cost estimates. The government should “put in place a process that leads to the right decision,” he said.
Mr. Ferguson is no longer the unilingual villain whose nomination the Liberals opposed. His report has allowed the opposition parties to tarnish the Tories’ reputation for competence. The saving grace for the Conservatives is that Gordon O’connor and Mr. Mackay, the defence ministers on whose watch these procedural abuses occurred, were made to look like stooges, rather than complicit.
The report presents a Strangelovian vision of a Defence Department that viewed government contracting rules, Treasury Board guidelines and the oversight of Parliament as irritants to be trampled upon or ignored.
Mr. Ferguson concluded that National Defence did not exercise due diligence in managing the process to replace the aging CF18 jets — and neglected to fully inform ministers and parliamentarians about the full costs and risks involved in the government’s commitment to buy the F-35 Lightning 11 aircraft as a replacement.
“Problems relating to development of the F-35 were not fully communicated to decision-makers and risks presented to decision-makers did not reflect the problems the JSF (Joint Strike Fighter) Program was experiencing at the time. Full life-cycle costs were under-stated in the estimates provided to support the gov- ernment’s decision to buy the F-35,” the report, to be tabled in the House of Commons Tuesday, concluded.
While the politicians showed hubris, the real sins of commission fell on the department. Mr. Ferguson said that officials from National Defence who participated in decisionmaking committees of the JSF program were informed of the cost overruns and delays facing the F-35.
“Yet in briefing materials from 2006 through 2010 that we have reviewed, neither the Minister nor decision-makers in National Defence and central agencies were kept informed of these problems and the associated risks of relying on the F-35 to replace the CF-18.”
Mr. Ferguson is clear he believes National Defence decided the F-35 was the aircraft it wanted very early in the process and was determined to get it, regardless of cost or con- tracting regulations. He states his audit does not question the capacity of the plane —“We did not audit the merits of the F-35 aircraft” — but is concerned about the “significant weaknesses in the decision-making process” used by DND.
The Department of Public Works, which acts as the government’s procurement authority, is implicated for its decision to endorse the purchase of the F-35 without an open competition or the documentation required to permit the CF-18 replacement be sole sourced. The government announced its decision to buy the F-35s in July 2010. Yet Public Works did not receive National Defence’s statement of operational requirements, which laid out why the F-35 was the only plane capable of performing the contract, until one month later.
But the report made clear that the Department of National Defence made its choice by the time Canada signed a memorandum of understanding with Lockheed Martin, the manufacturer of the F35, in November 2006. (The project was already nine years old at that stage and Canadian companies had already benefited from Canada’s participation. The report suggested that by signing the 2006 MOU, Canada was committed irrevocably to the F-35).
Mr. Ferguson cited a June 2006, operational requirement document from National Defence as evidence that it had already dismissed the prospect of buying any of the four other candidate aircraft that were being assessed. “It concluded a strong preference for the F-35, stating: ‘It is not only the aircraft that best meets Canadian Forces’ requirements, with the longest life expectancy, but also is the most affordable’.”
These conclusions were approved by the Chief of the Air Staff and the Assistant Deputy Minister (Materiel) and formed part of the basis upon which National Defence recommended to the Minister — at that time, Mr. O’connor — that the 2006 memorandum of understanding be signed. At the time, ministers were told, correctly, that signing the MOU did not commit Canada to buy the F-35. But they were not told that retaining industrial benefits for Canadian companies depended on buying the F-35. “Also, while ministers were told that the 2006 MOU did not prevent Canada from having a competition in the future, they were not told of the practical limitations of doing so.”
Even as problems began to emerge with the F-35, officials at National Defence continued to re-assure their political masters that all was well. In 2008, the department again looked at three contender aircraft and concluded, without providing documentation, that the F-35 offered “best value” because it provided “exceptional capability at the lowest cost.”
While its capability remains unknown due to development problems, we now know that the costs have ballooned. A Reuters report Monday, based on a Pentagon document, sug
gests the average cost per plane will be more than Us$130-million — nearly double the amount National Defence has claimed.
One of the Auditor-general’s most damning criticisms was over the consistent failure to accurately estimate the life-cycle costs of the F-35. In the May 2008 Canada First Defence Strategy document, the department said it would acquire 65 aircraft for $9-billion. A budget of $16-billion was established to operate and maintain the fleet over 20 years.
Yet, the Auditor-general suggests this is an extremely conservative number that ignores that the full life of the F-35 is estimated to be 36 years. National Defence has also made no allowance for replacement aircraft — the A-G suggested Canada may need to buy an additional 14 planes to replace those lost to attrition — nor for system or weapons upgrades. Mr. Ferguson was particularly critical of National Defence’s response to a report by the Par- liamentary Budget Officer in March 2011, which ignored nearly $1-billion in costs for operating, personnel and training costs. “At the time of its response, National Defence knew the costs were likely to increase but did not so inform parliamentarians.”
Despite the voluminous evidence to the contrary, National Defence maintains it showed appropriate due diligence throughout. You can almost hear the argument — “How can we be guilty of pushing through a contract when no contract has been signed?”
But that smacks of the scene from Dr. Strangelove where the nuclear-armed B-52 bombers are heading for Soviet airspace and can’t be recalled because their radio transmitters have been blocked. As George C. Scott’s character, General Bud Turgidson, opined: “I don’t think it’s quite fair to condemn a whole process because of a single slip-up.”