Final Industry Engagement Request - Price Questionnaire

1.0 Purpose

The purpose of the Industry Engagement Request (IER) is to support the Department of National Defence's evaluation of options to sustain a Canadian Armed Forces fighter capability well into the 21st century; a key element of the Government's Seven-Point Plan. The evaluation of options, which is anchored in the principles of openness, due diligence and third party oversight, will review and assess all available fighter aircraft and will result in a comprehensive report with the best available information on the capabilities, costs and risks of each option, to support a decision on next steps for a replacement aircraft for Canada's fleet of CF-18s.

A key element of this evaluation of options is a market analysis; it is a standard tool that is used to determine market price and availability. Information received through this Industry Engagement Request will also be supplemented with information already in the public domain and available to the Government. The market analysis is being led by the National Fighter Procurement Secretariat (NFPS) in collaboration with the Department of National Defence, the Canadian Armed Forces (DND/CAF), Public Works and Government Services Canada (PWGSC) and Industry Canada (IC).

On March 1, 2013, companies were provided with a Capability, Production and Supportability Questionnaire in order to obtain information on the capabilities of each fighter aircraft. This second questionnaire is seeking information on rough order magnitude (ROM) cost estimates on several key cost components of your respective aircraft, including acquisition, sustainment, operating and disposal costs.

Guided by Government of Canada policies and international best practices, KPMG designed a Framework to inform the development of full life cycle cost estimates for the Next Generation Fighter Capability program. In DND's 2012 Annual Update, the KPMG Framework was applied to cost estimates for the F-35 to a greater degree of precision in direct response to the Auditor General's recommendation in his Spring 2012 Report that cost estimates for the F-35 be further refined.

This Price Questionnaire is consistent with the KPMG Framework which recognizes the need to base cost estimates on the information available and the purpose for which it will be used. Consistent with this approach, the questionnaire seeks cost information on the basis of the five broad categories required to develop life-cycle cost estimates, while respecting the high level costing information normally obtained during a market analysis. This will provide rough order of magnitude cost data which is representative and broadly comparable. The information will allow the Government of Canada to assess all available aircraft with early indications of costs, as appropriate at this stage of the process.

2.0 Process

There will be no short listing or pre-qualification of suppliers for the purposes of undertaking any future work as a result of the IER. The IER is neither a call for tenders nor a Request for Proposal (RFP). No agreement or contract will be entered into with any person or entity based on the IER. The issuance of the IER is not to be considered in any way a commitment by the Government of Canada or as authority to undertake any work, which could be charged to Canada.

3.0 Requested Information

It is important to note that all of the protocols outlined in Sections 4.0 – 8.0 of the Capability, Production and Supportability Questionnaire, such as those regarding the treatment of responses, also apply to the Price Questionnaire.

If companies believe that the information requested is not immediately releasable or is sensitive, you are requested to proceed with the necessary release processes that would allow the information to be shared with the Government of Canada. Companies should identify sensitive information at the earliest possible opportunity in the IER process. In addition, any obstacles to releasing information should be brought up as early as possible during the proposed communication period and one-on-one meetings.

4.0 Closing Date

Responses to the Price Questionnaire will be accepted at any time until the date indicated on the Cover letter of this IER. The NFPS reserves the right to accept late responses at its sole discretion. Responses are to be submitted to the Executive Director of the National Fighter Procurement Secretariat:

Rachel Wernick
Executive Director
National Fighter Procurement Secretariat
Public Works and Government Services Canada
Place du Portage, Phase 3, 9C2
Gatineau, Quebec
K1A 0S5
Canada

Price Questionnaire

Planning Assumptions

A number of program parameters and assumptions are required to develop rough order magnitude cost estimates for each of the available fighter aircraft. It is important to note that the planning assumptions outlined below are not final and are not indicative of any Government decision on the replacement of Canada's fleet of CF-18s. Rather, the variables provided below are baseline planning assumptions and parameters that help ensure consistency among the price and cost estimates provided by each of the respondents. In the absence of certain planning assumptions, it would not be possible for respondents to produce price and cost estimates for each aircraft fleet.

Respondents are asked to use the following parameters and assumptions to help derive rough order magnitude price estimates for each of their fighter aircraft, as configured in their response in Section B of the Capability, Production and Supportability Questionnaire. Respondents are encouraged to provide any information that would highlight the price or cost estimates of their respective aircraft and include information on what is and is not included in the price estimates.

Respondents are asked to provide estimates in Canadian Dollars (CAD). The Bank of Canada provides historical information on annual and average monthly exchange rates. For the purposes of the market analysis, respondents are asked to use the following foreign exchange rates when developing price and cost estimates for their fleet of aircraft:

$1 Canadian Dollar = 0.995 US Dollar
$1 Canadian Dollar = 0.760 Euro
$1 Canadian Dollar = 6.478 Swedish Krona

For the purposes of the market analysis, the exchange rates have been averaged over a six month period to standardize for minor fluctuations (November 1, 2012 – April 30, 2013) and are shown at three decimal places.

This information can be accessed from the Bank of Canada's website.

1. Acquisition Price

Respondents are asked to provide the rough order magnitude unit recurring flyaway price of 65 fighter aircraft as configured in your responses to Section B of the Capability, Production and Supportability Questionnaire. The unit recurring flyaway cost includes the costs for the aircraft to be flyable and operational in all three mission configurations in the Capability, Production and Supportability Questionnaire over the first time horizon (i.e. 2020-2030).

For the purposes of this exercise, please assume that all 65 aircraft will be delivered in 2020. Please provide responses as follows:

In Constant Year (CY) 2013 CAD; and
In nominal CAD.

Respondents are asked to indicate any inflation assumptions that are being applied to each estimate and the rationale for using those rates.

Companies can also provide price estimates for an estimated delivery of 65 aircraft in 2013, although this information should be in addition to the estimated price of delivering a fleet in 2020.

Respondents are asked to exclude the cost of weapons, as these items will not be procured through the aircraft manufacturers.

2. Sustainment Costs

Canada requires a replacement fighter capability for a period of at least 30 years (2020-2050). For the purposes of developing cost estimates based on the same assumptions, respondents are asked to provide cost estimates over an aircraft life cycle of 30 years from the date of fleet delivery in 2020.

Sustainment generally refers to the cost to maintain and repair the aircraft and includes consumables, repairables, depot level maintenance, associated labour costs and contractor support. Respondents are asked to provide sustainment cost estimates for 65 fighter aircraft on the assumption that the fleet will be flown for 11,700 hours per year (15 hours per aircraft, per month) for 30 years, beginning in 2020. Respondents are asked to provide estimates in CY 2013 CAD and nominal CAD and are asked to use the foreign exchange rates outlined in the section entitled “Planning Assumptions”, if required. Please indicate any inflation assumptions or adjustments that have been applied to the estimate.

Respondents should include sustainment costs associated with mission equipment required for the aircraft to be flyable and operational in all three mission configurations, as outlined in the Capability, Production and Supportability Questionnaire.

3. Operating Cost

Respondents are asked to develop rough order magnitude operating cost estimates for each aircraft, based on 11,700 flying hours per year and other planning assumptions, such as personnel costs. DND will provide companies, through the Secretariat, with the necessary information and assumptions required to develop operating cost estimates for the respective aircraft fleets.

Respondents are asked to provide cost estimates using the following platform fuel burn rates, in pounds per hour:

10,000 feet above sea level;
20,000 feet above sea level; and
30,000 feet above sea level.

For each of the questions above, respondents are asked to assume that the aircraft will fly at 450 knots (true air speed) at 50% mission fuel, International Standard Atmosphere (ISA) and day at level flight and will be combat-load configured (aircraft must be configured for each of the Basic Mission Configurations in the Capability, Production and Supportability Questionnaire).

4. Disposal Cost

DND will provide companies, through the Secretariat, with rough order magnitude cost estimates to dispose of each fleet of 65 aircraft in 2050. These estimates should be included in your total cost estimate.

5. Attrition Cost

Respondents are asked to provide the expected rate and pattern of aircraft attrition, as well as the cost of replacing aircraft due to attrition. The costs are to be denominated in CAD and presented in CY 2013 and nominal dollars.

Price Estimate Data and Methodology

Please describe the general methodology and the assumptions you had to make for deriving price and cost estimates. For example, are they based on previous sales or historical sustainment costs for the aircraft? Also, please describe if the estimates or methodology has been independently validated by a third party.