National Fighter Procurement Secretariat Update

Speaking Notes for Michelle d'Auray
Deputy Minister of Public Works and Government Services

Press Conference
Parliament Hill, Ottawa, Ontario
December 12, 2012

Check against delivery

Thank you, Minister Ambrose and Minister MacKay.

As you mentioned, the Secretariat was put in place to implement the Government's Seven-Point Plan following the Auditor General's report. Today, we are reporting on key elements of the Plan through the release of six documents.

It is important to keep in mind that we have applied rigour and due diligence to all aspects of our work on the Seven-Point Plan.

The principles of due diligence, third party oversight and transparency have guided the work of the Secretariat since its establishment.

And these principles are reflected in the six documents being made public today by the National Fighter Procurement Secretariat.

The first document is the Terms of Reference for the evaluation of options to replace the CF-18. As both Ministers have indicated, the Secretariat is undertaking a robust and rigorous analysis along six pillars—threat analysis, mission needs, fighter capabilities, CF-18 estimated life expectancy, market analysis and mission risk assessment.

Our market analysis will be based on formal engagement with the aircraft manufacturers. All non-classified and non-commercially restricted information will be publicly released.

This work will be guided by a panel of independent reviewers. All bring their considerable experience and knowledge to the process that will assess the capabilities, costs and risks of each option.

Any effects on the Statement of Operational Requirement will be assessed once the work on the options analysis is complete. Industry Canada will then provide an assessment of the potential industrial benefits associated with each option.

The second document is the Secretariat's Status Report on the Seven-Point plan. This report provides an overview of the significant amount of work completed to date by the Secretariat, and outlines what work remains to be completed.

The three further documents released today directly relate to the acquisition, sustainment and operating cost estimates for a fleet of 65 F-35A's.

The KPMG Life Cycle Framework Report, which was commissioned by the Treasury Board Secretariat, provides independent advice and review of costs. It is a comprehensive, principle-based life cycle costing framework.

Next is the National Defence annual update, which has been verified by KPMG. It directly responds to the Auditor General's recommendation to refine costs and use a full life cycle costing framework. It clearly outlines assumptions and explains how the KPMG cost framework was applied to the report. In fact, once KPMG reviewed National Defence's Annual Update, they concluded it “did not identify any significant quantifiable differences in the Estimate resulting from DND's application of the Framework.”

The 42-year timeframe set out in the National Defence Annual Update is based on KPMG's complete life cycle framework.

It begins with the start of the Next Generation Fighter Capability Program in 2010 and ends in 2052 at the expected disposal date of the last F-35A. There are six years for development (2010 to 2016), seven years for acquisition (2017 to 2023), and 30 years of operation for each aircraft (2017 to 2052); planned disposal would occur between 2047 and 2052.

The total estimated cost of the 42-year program is $45 billion. I would note that the acquisition cost remains at $9 billion—which KPMG has validated.

The same framework applied to a 20-year period would amount to $25.8 billion—just above the estimated cost set out in the Auditor General's report.

Finally, the Industrial Participation report is being made public. It sets out how Canada's industrial participation is calculated. It includes contracts to date as well as identified and potential opportunities.

As of July 2012, 72 companies in Canada have secured $438M in US dollars in contracts.

Including the value of these contracts, and based upon the number of aircraft expected to be produced, opportunities for companies in Canada could be as high as $9.8B in US dollars. Canada remains a partner in the Joint Strike Fighter Program and will continue to do so until the Seven-Point Plan is complete as companies in Canada continue to benefit from participation in the JSF Program.

In closing, today the Secretariat is reporting on the progress of five elements of the Seven-Point Plan. Keeping in mind, the funding envelope allocated for the acquisition of the F-35 has been frozen since the Plan was first announced.

As the chair of the Governance committee that oversees the work of the Secretariat, I am confident that the information being made public today meets the highest tests of completeness, integrity and rigour. It provides the government the assurance that its direction, set out in the Seven-Point Plan, is being implemented so that it will have the information required to determine the next steps in the replacement of Canada's fighter capability.

Thank you.