Technical Briefing Remarks on Methodology

National Fighter Procurement Secretariat

May 31, 2013

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The Government of Canada launched the Seven-Point Plan in response to the Auditor General’s Report on Replacing Canada’s Fighter Jets to restore public confidence in the process to replace the CF-18 fleet.

Last December, we reported on all of the work that has been accomplished in implementing the Seven-Point Plan. I’d like to begin by updating you on the progress we have made since then and draw your attention to the slide provided on the screen.

Regarding the first and second points of the Seven-Point Plan, the acquisition funding for the replacement of the CF-18 remains frozen and the Secretariat continues to implement the Seven-Point Plan.

On the third point, we released the first Annual Update on the cost estimates for the F-35 last December. The 2012 Annual Update was independently verified by KPMG, a leading expert in the field.

The American data from the Joint Strike Fighter Program office was provided to the United States Congress on May 23. We will be meeting with United States officials to receive and clarify the Canadian-specific data. Consistent with the Seven-Point Plan commitment to provide an update within a maximum of 60 days, National Defence’s 2013 Annual Update to Parliament on the cost of the F-35 will be ready over the summer and tabled at the earliest opportunity.

The focus of the briefing today will be on the evaluation of options – the fourth point of the Seven-Point Plan.

We recently extended the date for submission of responses to the Capability, Production and Supportability Questionnaire to May 27 in order to address necessary security clearances with respect to certain classified elements. And, we sent a final Price Questionnaire and draft Industrial Benefits Questionnaire to companies on May 22. These questionnaires can be found on the Secretariat’s website.

On the fifth point of the Seven-Point Plan, Raymond Chabot Grant Thornton has been awarded a competitive contract to conduct an independent review of the 2013 Annual Update.

Regarding the sixth point of the Seven-Point Plan, we have also competitively contracted Samson & Associates to provide lessons learned that could improve acquisitions of a similar nature going forward.

Finally, for the seventh point in the Seven-Point Plan, we are releasing today the latest report on Industrial Participation in the Joint Strike Fighter Program. The report indicates that Canadian companies have secured $488 million (USD) in contracts to date, an increase of $50 million (USD) since the last report in December 2012. It also indicates that the total value of identified opportunities could be up to $9.75 billion (USD).

We will continue to provide updates on opportunities for Canadian companies relating to the Joint Strike Fighter Program as new figures become available.

As I mentioned, the focus of our briefing today will be to provide you with more details on the progress of our work on the evaluation of options – the fourth point in the Seven-Point Plan.

Evaluation of Options

When the Government launched the Seven-Point Plan examining all options to replace the CF-18 fleet, it hit reset on the process.

The Seven-Point Plan is aimed at both restoring public confidence in the process, and ensuring that the Air Force has the tools it needs to complete the missions outlined in the Canada First Defence Strategy.

The evaluation of options is a thorough assessment of available aircraft against these missions. The objective is to perform a risk-based analysis of options to replace the CF-18, derived from a valid threat analysis, mission needs, and available fighter capabilities.

This work will inform conclusions that the Deputy Minister Governance Committee will provide to Ministers to inform a decision on the way forward.

This work is guided by our core principles of due diligence, third party oversight and transparency.

We are exercising due diligence by ensuring that the work is thorough and by upholding the highest standard for the integrity of the process.

We have also established a panel of independent reviewers to provide third party oversight, and to ensure that the work is both rigorous and impartial, and that the results are comprehensive and understandable.

The Panel has been meeting regularly and has provided valuable advice and guidance every step of the way. The Panel members are:

• Keith Coulter, former head of the Communications Security Establishment and former Commander of a CF-18 squadron;
• Philippe Lagassé, professor of Public and International Affairs at the University of Ottawa;
• James Mitchell, former Assistant Secretary to the Treasury Board and to Cabinet; and
• Rod Monette, a former Comptroller General of Canada.

Summaries of Panel meetings are available on the Secretariat’s website. You will also find a quote from the Panel members in your press kit that speaks to the process.

Finally, this entire exercise has been guided by an unprecedented level of transparency both with companies involved and the public.

In keeping with this commitment, we are here today to give you an update on the work to date to evaluate options.

We have directly engaged five companies on their aircraft: Boeing, Dassault, Eurofighter, Saab and Lockheed Martin.

We are seeking information on capability, price and potential economic benefits to Canadian industry through three questionnaires.

We are engaging companies regularly to ensure that we provide them every opportunity to put forward their information for the evaluation of options.

On May 3^rd, we provided a detailed brief to companies on the methodology that will be used to evaluate their fighter aircraft.

Let me draw your attention to the documents in your press kits that were used to brief industry when we met with them: the assessment methodology presentation; and related explanatory notes.

This information was posted on the Secretariat’s website in time for this briefing.

Since we briefed the companies, four have sent the requested information to the Secretariat. We have been informed by Saab – one of the five identified companies – that it has decided for business reasons not to participate in the market analysis.

The Secretariat recognizes that participation by companies in the market analysis is voluntary. Companies have had every opportunity throughout the process to comment on every aspect of the market analysis. Not participating in the market analysis, in no way precludes a company from participating in any potential future competitive process.

Assessment Methodology

The methodology will examine the benefits and risks associated with each fighter aircraft in accomplishing the six (6) missions outlined in the Canada First Defence Strategy.

We know from our own internal analysis of these missions, and from studies conducted by Defence Research and Development Canada, that we will need a manned fighter aircraft well into the 21^st century, mainly for its ability to protect Canadian airspace.

A fighter aircraft provides Canada the flexibility to rapidly deploy anywhere domestically, including the North and, to contribute to expeditionary coalition operations.

We also know that while the current capabilities of the CF-18 fleet are sufficient for the near term, they will erode over time.

Therefore, maintaining relative levels of capability into the future will demand a higher performing replacement fighter compared to the CF-18 fleet, or mission risks will increase.

What this ultimately means is that Canada will need a replacement fighter – one that can respond to new and evolving threats.

As part of our evaluation of options, we are conducting an in-depth assessment of available aircraft of participating companies.

The assessment will be conducted over two timeframes: 2020 to 2030; and 2030 and beyond, and will be based on a threat assessment.

The Capability, Production and Supportability Questionnaire sent to companies asked them to describe the capabilities of their aircraft, their production schedule, as well as their sustainment requirements and growth potential.

The process will begin with an assessment of the aircraft systems and technical capabilities, based on the information provided.

The results of this technical assessment will then be analyzed for their tactical contribution to the measures of effectiveness in relation to the missions outlined in the Canada First Defence Strategy.

In addition, an operational assessment will be conducted on each aircraft’s contribution to aerospace capabilities.

Finally, an assessment of procurement, sustainment and growth capabilities of each aircraft will be performed.

Operational and military strategic risks will be assessed by a team of senior Air Force leaders into an overall mission risk assessment.

Assessment Process

Our next big milestone will be a series of face-to-face follow-up meetings with companies in June to provide them with an opportunity to present the content of their responses. These follow-up meetings will also allow us to seek clarifications.

The assessment of these responses will draw on a wide range of subject matter expertise and operational experience and the Secretariat will provide oversight to ensure a consistent application of the methodology.

Furthermore, significant issues raised during the process, as well as the results of the assessments, will be brought to the attention of the Independent Panel for review and the entire process will be documented.

To be clear, these assessments will not result in a “pass” or “fail”. No aircraft will be screened out as a result of this assessment process. All options will remain on the table.

The result will be a Summary Report that will be made public while respecting commercial sensitivities and classified information restrictions.

Next Steps

In terms of next steps, and consistent with the approach taken on the Capability, Production and Supportability Questionnaire, we will be briefing companies on the Pricing and Industrial Benefits Questionnaires later today. We are targeting early July to receive responses on these Questionnaires.

You are encouraged to visit the Secretariat’s website which is regularly updated with content, for example, you will find the summaries of discussion of all Deputy Minister Governance Committee meetings.

Concluding Remarks

To sum up, I would like to reiterate that the Government of Canada is committed to a transparent and rigorous process to replace its CF-18 fleet.

No decision will be taken until the Seven-Point Plan is complete.

Thanks again everyone for your attendance. We would be happy to take your questions.