Wednesday, 21 August 2013


To be fair, the F-35 was the obvious choice for a CF-18 replacement when the aircraft was first proposed. It was not unreasonable for the Department of National Defence and the government to make their plans with the F-35 in mind as the program was specifically designed to produce an affordable new generation aircraft for countries like Canada. Unfortunately that program has not been a success. The resulting fighter has turned out to be more expensive then planned while at the same time under performing technically.

Equally unfortunately the government and our defence procurement establishment have not been flexible enough to accommodate these new realities. In an attempt to deal with the criticism that a rigid preference for the F-35 has engendered the government has taken to releasing a yearly update on the process of procuring a new fighter.

The Next Generation Fighter Capability Annual Update 2013 Report"is an interesting, if misleading document. A close study reveals a number of under reported details.

The summary leaves the reader with the belief that a complex and expensive project is more or less on target to fulfill its goals in an affordable fashion. Quotes like “Overall, the estimated acquisition contingency has been reduced from $602 million in 2012 to $342 million in 2013. The overall acquisition contingency was adjusted downwards in order for the overall acquisition estimate to remain within the $9B ceiling” (1) suggest that all is in order. However a full reading of the paper reveals different story.

The paper contains a number of useful definitions. (2) It is important, for example, to know the difference between US and Canadian terms. In Canadian terms acquisition costs are defined as,” one-time costs associated with bringing a new or replacement equipment into service. For the replacement of the CF-18 fleet, the acquisition cost estimate includes: the cost of aircraft and engines, ancillary equipment, initial spares and set-up of maintenance support, set-up of mission software reprogramming capability, project management, directly related infrastructure modifications, and initial training.” This is important because the program is divided into five different parts (Development costs, Acquisition costs, Sustainment costs, Operating costs, and Disposal costs) but only Acquisition costs have a capped budget (3) “total acquisition cost cannot exceed $9 billion”.

That would include infrastructure which currently includes,” Canada conducts day-to-day fighter operations out of two Main Operating Bases located at 3 Wing Bagotville, Quebec and, 4 Wing Cold Lake, Alberta with each of these bases supporting one tactical fighter squadron. In addition, 4 Wing Cold Lake supports an operational training unit for CF-18 pilot training. Five forward operating locations and four deployed operating bases are also in place with dedicated infrastructure and services to support domestic fighter operations” The report also concludes that “At this point, it has been assumed that this force structure will not change.” (4)

However several pages later the report says “New construction as well as upgrades to existing infrastructure is required for two Main Operating Bases, in Bagotville, Quebec and Cold Lake, Alberta and for the five Forward Operating Locations in Inuvik and Yellowknife in the North West Territories; Iqualuit and Rankin Inlet in Nunavut; and Goose Bay in Newfoundland and Labrador.”(5) What happened to the four deployed operating bases? Are we to believe they will need no changes to support F-35s, or is the concept being abandoned?

Acquisition cost, capped at $9 billion, is entirely separate from all other costs, the total of which is currently estimated at over $45 billion over a thirty year period. (6) It’s interesting to note that the only operational activity included in this amount is an average of 200 NORAD air defence missions per year. (7) Any other activities, specifically those outside the country are not included in the budget and funding for them would have to come from other sources. (8) “Accordingly, the estimates in this document include the acquisition of a replacement fighter and the cost of making and keeping the replacement fighter capability ready and available for operational use. Costs related to deployed operations, for example with the United Nations or NATO, which are normally referred to as contingency operations and cannot be forecast at this time, are not included.”

A little basic math suggests that 200 intercepts per year over thirty years at a projected cost of some $45 billion works out to $7,500,000.00 per intercept. While it is true that these intercepts will be carried out by pilots fully trained and qualified for the full spectrum of warfare it is also true that it is hard to believe there is not a cheaper way to fulfill this mission. This calculation might be described by saying “these costs should be considered as rough order of magnitude approximations”, which unfortunately may be the most commonly used phrase in the report.

Also of note is this quote from the report “Canadian Modifications: At this point, no unique Canadian modifications to the aircraft are planned, and there are no provisions in the estimate for costs for such modifications as the F-35A meets all operational requirements.” (9)

In the past Canadian jet fighters tasked with NORAD duties, like the CF-18, have always been modified with a powerful wing mounted searchlight used for night time interceptions. This was a unique Canadian modification and along with things like probe and drogue air-to-air refueling its absence leaves one to wonder how many operational requirements have been changed to accommodate the F-35

It is also interesting to see how purchasing the F-35 will change other aspects of fighter operation. For example,”
Yearly Flying Rate: A significant cost driver for sustainment costs is the yearly flying rate. The yearly flying rate is described as a number of flying hours. This estimate uses a planned yearly flying rate of 11,700 hours – approximately 20per cent less than the currently planned CF-18 yearly flying rate – or 15 hours per month per aircraft.” (10)
This lower flying rate is driven not just by increased simulator capacity but also by” For the purposes of the current cost estimate, specific F-35A fuel consumption rates, which are higher than for the CF-18, are used”(11)
In other words, the single engine F-35 is expected to use more fuel and cost more to fly then the twin engine CF-18 and it is expected that these expenses will be managed by flying less.

The report also makes use of a variety of tables, graphs and figures, some of which date from the 2012 report and are out of date. For example; (12)

Table 3: Notional Canadian Buy Profile (March 2013)

Selected Acquisition Report 2012 – Unit Recurring Flyaway Cost Estimate
U.S. Fiscal
Number of Aircraft
($M US)
# Aircraft

Unfortunately slippages in the availability of software have been reported. (13) In fact, while the USAF will initially operate aircraft with lesser capabilities so as to bring them into service sooner, the 3F software release, needed for international customers to declare IOC, appears to have slipped to 2019

In this case IOC or Initial operating capability is determined by the USAF as occurring when the first operational squadrons of 12-24 F-35A’s and associated personnel are “trained, manned, and equipped to conduct basic close air support, interdiction, and limited suppression and destruction of enemy air defences operations in a contested environment”. This may not be the RCAF definition, but it seems unlikely that they will accept any aircraft not having at least the internationally agreed upon 3F standard software. This means that no aircraft will be available to them before at least 2019, which in turn means that all the above estimates are no longer valid.

The whole report only reinforces the perception that” Unfortunately, Canada wants to begin replacing its CF-18s by 2017. Which means that it needs to place an initial order by 2014.  The net effect is a fighter whose purchase costs are uncertain, but are clearly set to stay very high in the near term. Worse, at the time of purchase, the operating and maintenance outlays that comprise 2/3 of total lifecycle costs will be extremely vague”(14)

Perhaps the most important piece of information contained in this report is the astonishing fact that, at least as budgeted for in this report, Canada can not afford 65 F-35 fighters.

The report states “The objective of the Seven-Point Plan that the Government put in place in April 2012 is to ensure that Canada has the fighter aircraft needed to complete the core missions of the Canadian Armed Forces.”(15) In other words, we are purchasing a capability, the same capability that approximately 77 CF-18s currently afford us. The report is based on the belief that 65 F-35 will give us that capability. Specifically, “Based on the capability of modern aircraft and simulator technology, it is expected that a fleet of up to 65 aircraft will provide sufficient capacity and flexibility to meet and sustain Canada’s defence commitments at home and abroad.”(16)

It seems reasonable to assume that if a fleet of less then 65 F-35s would do the job then a budget conscious government and Defence Department would purchase less. One must conclude then that 65 is the appropriate number.

The report notes that; “Attrition Aircraft: It is anticipated that the Canadian Armed Forces will lose fighter aircraft to accidents throughout the lifetime of the aircraft fleet. It is recognized that the loss of aircraft over the life of the fleet would result in a diminished capacity to undertake and sustain discretionary operations. Therefore, operational risk will need to be managed, partly through the assignment of additional flying hours to the remaining aircraft, if lost aircraft are not replaced.
Rather than planning for the acquisition of more aircraft than are required to fill current needs, planners have recognized that the Government will retain the option to acquire replacement aircraft in the future if they choose to do so. In the case of the F-35A, production is planned to continue until at least 2035.
Assuming the loss of two to three aircraft for every 100,000 hours of flying, seven to eleven aircraft could be lost over the fleet’s lifetime4. Should a decision be taken by the Government to replace lost aircraft, the cost would depend on the budget year(s) in which the replacement aircraft were purchased. While the cost impact of replacing attrition aircraft has not been included in the life-cycle cost estimate, it is currently estimated to be approximately $1 billion” (17)

In December 2011, the Defence Department’s research arm, Defence Research and Development Canada, published a report in which it said “that the probability of having 63 or more (F-35s) remaining at this time (when the last one is delivered) is approximately 54 per cent.”

Canada plans to order 65 F-35As, for delivery from 2017-2022. Their expectation is 7-11 destroyed aircraft over the fleet’s expected lifespan, with losses fitting the standard fighter pattern and being heavier in the early years. So they’re expecting a 46% chance that 2 or more F-35As are crashed or lost in the first 6 years. Not unusual, or unreasonable. (18)

In other words the Department hopes that any attrition aircraft can be funded out of the, uncapped, sustainment budget. Unfortunately that is not the only problem. In the fine print at the bottom of Table 2; Full Life-Cycle Cost Estimate (2010-2052) can be found the notes;

” Note 1: The full amount of acquisition contingency suggested by the Life-Cycle Cost Framework would be approximately $1,550 million (Table 4). If the full available contingency was required, the shortfall could be met by buying fewer aircraft.

Note 2: It is estimated that seven to eleven aircraft could be lost over the program life-cycle and the cost to replace these lost aircraft could be in the order of $1 billion. This cost is not included in the Life-Cycle Cost estimate. Sustainment and Operating estimates assume a constant number of 65 aircraft” (19)

Unfortunately for the DND acquisition contingency is not something that can be moved from one part of the books to another, like attrition aircraft. In fact the report states;
“The table also displays the contingency amount that has been capped. The difference between the recommended contingency and the established expenditure ceiling constitutes a contingency shortfall of approximately $1.2 billion. If the full available acquisition contingency was required, the remaining shortfall would be met by buying fewer aircraft.” (20)

$1.2 billion is something like ten percent of the $9 billion budgeted for acquisition, if the whole contingency funding was needed then 6.5 F-35s would have to be cut from the program. (Another rough order of magnitude approximation”). Between aircraft expected to be lost to attrition and aircraft not purchased to make up for the budget shortfall the RCAF could have 55 or even fewer aircraft within just a few years.

In a masterpiece of understatement the report says “the provision for acquisition contingency could be considered low for a project of this scope and size”. In fact, according to the governments own figures, we can not, given the current budget, afford 65 F-35 fighters. We can increase our budget, we can find some other way to achieve the same effects or we can accept lesser capability, but, at least according to the Next Generation Fighter Capability Annual Update 2013 Report, we can not achieve our expected goals by buying F-35s for the amounts we have budgeted.

(1) Next Generation Fighter Capability Annual Update 2013 Report, Summary, page V

(2) Next Generation Fighter Capability Annual Update 2013 Report, pages 5 & 8

(3) Next Generation Fighter Capability Annual Update 2013 Report, page 28

(4) Next Generation Fighter Capability Annual Update 2013 Report, page 15

(5) Next Generation Fighter Capability Annual Update 2013 Report, page 18

(6) Next Generation Fighter Capability Annual Update 2013 Report, page 43

(7) Next Generation Fighter Capability Annual Update 2013 Report, page 3

(8) Next Generation Fighter Capability Annual Update 2013 Report, page 23

(9) Next Generation Fighter Capability Annual Update 2013 Report, page 14

(10) Next Generation Fighter Capability Annual Update 2013 Report, page 20

(11) Next Generation Fighter Capability Annual Update 2013 Report, page 22

(12) Next Generation Fighter Capability Annual Update 2013 Report, page 34

(13)  Combat Aircraft Vol. 14, NO 8 August 2013, page 7

(14) Defense Industry Daily, Canada Preparing to Replace its CF-18 Hornets

(15) Next Generation Fighter Capability Annual Update 2013 Report, page 4

(16) Next Generation Fighter Capability Annual Update 2013 Report, page 16

(17) Next Generation Fighter Capability Annual Update 2013 Report, page 14

(18) Defense Industry Daily, Canada Preparing to Replace its CF-18 Hornets

(19) Next Generation Fighter Capability Annual Update 2013 Report, page 27

(20) Next Generation Fighter Capability Annual Update 2013 Report, page 41

Next Generation Fighter Capability Annual Update 2013 Report

Defense Industry Daily, Canada Preparing to Replace its CF-18 Hornets