Deputy ministers defend roles in F-35 costs

Deputy ministers this morning defended how their departments have been involved in theF-35 fighter jetfile and how the government has communicated the costs of replacing the CF-18s with them to Canadians.

Robert Fonberg, deputy minister of the Department of National Defence, rejected parliamentary budget officer Kevin Page's suggestion on the weekend on CBC Radio's The Housethat the government was keeping two sets of books on the costsone for internal use and one for public consumption.

Fonberg told MPs on the public accounts committee that "there was one book," but he acknowledged there were two estimates, as laid out in Auditor General Michael Ferguson's spring report that is now the subject of the committee's study. One column in a chart shows DND's internal estimate in 2010for the F-35s as $25 billion over 20 years, and the second column shows its public response to a report from Page that says the total estimate in 2011was $14.7 billion.

"One is acquisition and sustainment which is the way that we've reported on each of our acquisitions over the last four major airframe assets, and the other one includes operating costs which we haven't reported on publicly because it's included in the base budget of the Department of National Defence," Fonberg said when asked by NDP MP Malcolm Allen about two estimates.

Prime Minister Stephen Harper was asked by NDP Leader Tom Mulcair in question period why he allowed the "wrong" numbers to be given to the public.Harper replied that Mulcair was "mixing apples and oranges" and that operating costs are different fromacquisition and sustainment costs.

"There,of course, are not two sets of books.The auditor general, no one else has said so.The minister has not said so, and no such thing is true,"Harper said.

At the committee, Fonbergrejectedthe suggestion that cabinet was given the $25-billion estimate while the public was given the $15-billion one.

"There was one book. The column on the left-hand side went to cabinet for decision-making purposes and the government decided to communicate exactly the same way they've communicated since 2004 on the acquisition of major airframe assets acquisition costs and sustainment costs. We were not seeking incremental funding from cabinet at the time for operating costs, nor do we expect to be seeking incremental funding for operating costs," Fonberg said in reference to the chart in Ferguson's report.

Fonberg and another DNDofficialalso took aim at Page's methodology when he calculated his estimates for the F-35s at $29 billion over 30 years in his 2010 report. He said Page "did the best he could," but that his methodology wasn't an appropriate one.

The public accounts committee voted to hear from Page at itsnext meeting on Thursday.

Report says due diligence wasn't followed

Fonberg and other officials fromthe departments of industry, public works and government services, Treasury Board and national defencewerequestioned by MPs on the public accounts committeefor nearly two hours on Parliament Hill. Their testimonyfollowed an appearance by Ferguson last Thursday. His hard-hitting report into the process used to choose F-35s to replace the aging fleet of CF-18s was released in early April.

The report determined that due diligence wasn't followed in the selection process, that key decisions were made without proper documentation and approvals, and that parliamentarians weren't fully informed about the process or the estimated costs for buying and operating 65 planes.

Fonberg repeatedly explained to the committee that when estimating the costs of acquiring new aircraft, DND traditionally includes the purchase price and sustainment costs only, notoperating costs, because those are included in annual budgets for the whole department, whichare approved by Parliament, he noted.

The sameapproach was used for the F-35s as the four previous air force equipment procurements, he said.

"In each case, announcements and communications focused only on the costs of acquisition and sustainment, never did we talk about operating costs," he told the committee. "Our approach to costing has never been characterized as full lifecycle, our approach has been consistent and compliant with Treasury Boardpolicy and guidance," said Fonberg.

Michelle d'Auray, secretary of the Treasury Board, didn't contradict him during her testimony. She said that as Ferguson's report indicated, the Joint Strike Fighter program that Canada is participating in with the United States and other countries to develop the plane is a unique one, and it doesn't lend itself to the normal application of Treasury Board guidelines.

She said the program is not yet at the acquisition stage and her department has not been asked to approve funds to buy the planes. When it gets to that stage, her department will do a review of DND's cost estimates.

Ferguson 'got it wrong'

Fonbergcontradicted testimony from Ferguson's appearance last week, when the auditor general suggested cabinet knew about the $25-billion cost estimate as far back as 2008. Fonberg said that figure was not used in decision-making documents until 2010 and that Ferguson "got it wrong on the 2008 issue."

Those decision-making documents included estimates of $9 billion to buy the F-35 fighter jets and $5.7 billion to sustain them for 20 years, Fonberg said. Cabinet was advised that operating costs were estimated to be similar to the CF-18s, about $10 billion.

The exact operating costs will be firmed up over time, Fonberg said. He told the committee thatthe estimated cost for each plane has rise from about $75 million to $85 million.

The commander of the air force, Lt.-Gen. Andr Deschamps, said he's "not perturbed" by the problems that have emerged through the testing phases in the development of the F-35, and that it's better the challenges are dealt with now.

While the government says it has not yet decided to go ahead with theF-35 purchaseand hasn't signed a contract a memorandum of understanding has been signedDeschamps made it clear that it is the plane he wants.

"The F-35 is the aircraft that we assessed in 2010 as the platform that met our needs, all our requirements," he said when asked if there were other options on the table. "Currently, from an air force perspective, we are focused on delivering the transition to the F-35s."

Deschamps said he recommended Lockeed Martin's F-35 plane in the first place because it was the "only aircraft available that could effectively deliver operational success and optimize the safety of our crews."

The deputy minister from public works explained to the committee why his department disagreed with Ferguson's conclusion that it did not demonstrate due diligence in its role as the government's procurement authority.

Franois Guimont said his department did exercise "some" due diligence, and for that reason did not accept the language in Ferguson's report that indicates none at all was demonstrated.

In response to Ferguson's audit, the government announced it would set up a new F-35 secretariat within the Public Works Department to manage the replacement of the CF-18s going forward.

Guimont, who will chair the secretariat's committee of deputy ministers, said it will be focused on strengthening due diligence and transparency, and thatit is in the process of drafting terms of reference.

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