Canada’s companies will remain involved in F-35 project: Harper
March 28, 2012, Seoul, South Korea - While his government isn't giving any guarantees Canada will buy the F-35, Prime Minister Stephen Harper said Canada will remain involved in the stealth fighter project to ensure Canadian companies can continue participating.
"We have received literally hundreds of millions of dollars in contracts for the Canadian aerospace industry. This is not a trivial matter," Harper said at the conclusion of a major summit on nuclear security in Seoul on Tuesday.
"We haven't yet signed a contract, as you know. We retain that flexibility. But we are committed to continuing our aerospace sector's participation in the development of the F-35."
Sixty-six Canadian companies have so far acquired $435 million worth of contracts related to the F-35 since Canada became a partner in the multibillion-dollar project in 1997.
Tim Page, president of the Canadian Association of Defence and Security Industries, welcomed Harper's "reaffirmation'' of support for the F-35 development program. While some companies have done "pretty well'' so far, he said, the real money will start pouring in when mass production begins.
"It's still early to determine exactly how well Canada will do, in part because the project is still at the developmental phase,'' he said. "A number of Canadian companies stand to do extremely well.''
The Montreal-based aerospace firm Pratt and Whitney produces the F-35's engine, for example, while Composites Atlantic Limited of Lunenburg, N.S. is producing fuselage panels.
What will really determine how much Canadian aerospace companies benefit, Page said, is how many of the planes are ultimately ordered and built.
"The opportunity for Canadian industry is directly related to the number of F-35 model aircraft produced,'' he said.
Canada has contributed twice so far to the F-35 program. In 1997, Canada paid $10 million US for the plane's initial "Concept Demonstration Phase,'' then another $150 million US in 2002 for the "System Development and Demonstration Phase.'' An additional $78 million has been given to Canadian industries involved in the F-35 project.
The current, and most expensive phase is the "Production, Sustainment and Follow-on Development Phase,'' to which Canada committed $551 million US in 2006. This final phase of development reaches out to 2051, and will be Canada's final monetary commitment to the F-35 development project, aside from any orders Canada places.
The federal government has so far invested $278 million in the project, according to the Department of National Defence.
The total budget for developing the F-35 is $21.9 billion US, of which the United States will contribute some $16.8 billion US according to program documents. The other eight participating nations are contributing different amounts to the project.
The United Kingdom is contributing $952 million US, and Italy $904 million US. Australia and Turkey are contributing $690 million US each. The Netherlands will invest $586 million US, while Denmark and Norway are contributing $33 million US each.
Only companies from these nine participating countries are eligible to build components for the F-35.
When it announced that Canada would be purchasing 65 F-35s in July 2010 for $9 billion plus $7 billion for 20 years maintenance, the federal government said Canadian industry would have access to about $12 billion in potential work.
Persistent cost overruns and development delays, however, led the government in recent weeks to significantly soften its commitment to acquiring the stealth fighter to replace Canada's aging fleet of CF-18s.
By committing to seeing the fighter through to full development – it's still not clear when that will be – the government is hoping Canadian industry will have access to contracts to that point, and possibly even into the full production phase, even if Canada doesn't end up purchasing the plane.
Alan Williams, a retired assistant deputy minister for materiel, said Harper's comment that Canada will remain involved in the development project is a "no-brainer.''
"The fact is that's why I signed the agreement in 2002: to allow industry to participate,'' he said. "Why do anything to jeopardize industry's ability to be successful?''
However, he said, it is unsettling that more Canadian companies have not become involved, since 65 Canadian companies already had contracts back in 2005.
Canadian industry would certainly benefit more, Williams said, if Canada used a conventional competitive process to select its next fighter jet. Under this system, firms that bid on contracts must guarantee industrial regional benefits equal to the value of the contract.
"If you actually compete, any compliant bidder will have to guarantee contracts (for Canadian industry) equal to or greater than value of the contract (for planes),'' he said. "If the contract turns out to be $20 to $25 billon, that is value the winning bidder will have to commit to Canadian industry.''