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Aerospace industry worries as Tories backtrack on F-35 purchase

Prime Minister Stephen Harper speaks to employees at a Waterloo, Ont., firm that manufactures accessories for the F-35 fighter jet on March 11, 2011.

FRED THORNHILL/REUTERS

The federal government is officially back-tracking on the process of buying the F-35 stealth fighter, part of a reassessment of the purchase that's causing anxiety among Canadian companies hoping to tap billions of dollars in spin-off work for the jets.

The Department of National Defence has issued a significant correction to the "Plans and Priorities" report it tabled in Parliament for MPs last year.

In an "erratum" note, it says the 2011-12 report wrongly described the F-35 purchase as being in "definition" project phase, which generally means an item has already received preliminary approval from Treasury Board, the gatekeeper for federal spending.

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Instead the decision to buy a next-generation fighter is being reclassified as being in "option analysis" phase, which means Ottawa is still determining what it needs in terms of a plane.

In the note, National Defence blames an unknown bureaucrat for the snafu, saying someone made a "typographical error" in the 2011-12 "Report on Plans and Priorities."

The annual Reports on Plans and Priorities are an important accountability exercise for federal departments, which must file these documents in the Commons each year.

The Conservatives have hit the reset button on the decision to buy the jets following a hard-hitting report by Auditor General Michael Ferguson that criticized DND for withholding information on the purchase from political decision makers.

This back-tracking has introduced uncertainty for the Canadian aerospace industry.

Maryse Harvey, a spokeswoman for the Aerospace Industries Association of Canada, confirmed growing concerns in the private sector as Ottawa re-evaluates its F-35 plans.

"If Canada doesn't buy the F-35, there will be an impact on Canada's contribution as a partner and the benefits that we receive from this platform. It will be a proportional impact."

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Ms. Harvey said that one of the biggest problems is that companies have to be "state-of-the-art" simply to bid on work on the F-35s, which requires large investments in equipment and training.

She said the government's current stance on F-35 is sowing doubts about its participation in the Joint Strike Fighter program and leaving companies in the dark.

"They have to take risks. Now that they have to assess if the risk is too great at this point or if it is worth it," Ms. Harvey said. "This is where the government's hesitation at this point, the questioning of its decision of July, 2010, is not helping. It's having an impact."

The lure of spin-off economic benefits was a key driver in the Harper government's decision to announce back in July, 2010 that it would purchase the F-35 to replace aging CF-18s.

Companies say they've effectively been put on hold.

"Things have been slowing down," said Suzanne Benoit, president of Aero Montreal, an industry association of some of Canada's biggest aerospace firms.

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"The industry is hoping for rapid decisions and for things to move forward, because companies now are in a waiting pattern."

A senior government official, speaking on the condition of anonymity, insisted that Canada remains an official partner in the F-35 project.

"There is no plan to leave the program," the official said.

The Harper government is tight-lipped about the F-35 project's benefits.

It refuses to identify all the companies that have won F-35 related contracts, saying that would be a breach of privacy.

If Canada decides to buy the F-35, taxpayers will spend upwards of $15-billion to buy and maintain the planes, but so far Canadian companies have only won a combined total of $435-million (U.S.) in deals to supply the F-35 project.

That's up slightly from $350-million (U.S.) last June.

The opposition, however, is seeking to pore through details of the F-35 process to date, which could prolong the uncertainty surrounding the program. The public accounts committee of the House has launched an inquiry into the Auditor-General's report, with the NDP and the Liberal Party seeking to hear from dozens of witnesses on the topic.

However, the Conservative Party, which has a majority on the committee, has agreed only to hear from Auditor-General Michael Ferguson on Thursday and senior bureaucrats from four federal departments on Tuesday.

Initially, the Conservatives tried to delay the appearance by Auditor-General, but relented after the chair of the committee, NDP MP David Christopherson, threatened to quit his position, stating that tradition called on Mr. Ferguson to launch the hearings.

In the note, National Defence blames an unknown bureaucrat for the snafu, saying someone made a "typographical error" in the 2011-12 "Report on Plans and Priorities."

The annual Reports on Plans and Priorities are an important accountability exercise for federal departments, which must file these documents in the Commons each year.

The Conservatives have hit the reset button on the decision to buy the jets following a hard-hitting report by Auditor General Michael Ferguson that criticized DND for withholding information on the purchase from political decision makers.

This back-tracking has introduced uncertainty for the Canadian aerospace industry.

Maryse Harvey, a spokeswoman for the Aerospace Industries Association of Canada, confirmed growing concerns in the private sector as Ottawa re-evaluates its F-35 plans.

"If Canada doesn't buy the F-35, there will be an impact on Canada's contribution as a partner and the benefits that we receive from this platform. It will be a proportional impact."

Ms. Harvey said that one of the biggest problems is that companies have to be "state-of-the-art" simply to bid on work on the F-35s, which requires large investments in equipment and training.

She said the government's current stance on F-35 is sowing doubts about its participation in the Joint Strike Fighter program and leaving companies in the dark.

"They have to take risks. Now that they have to assess if the risk is too great at this point or if it is worth it," Ms. Harvey said. "This is where the government's hesitation at this point, the questioning of its decision of July, 2010, is not helping. It's having an impact."

The lure of spin-off economic benefits was a key driver in the Harper government's decision to announce back in July, 2010 that it would purchase the F-35 to replace aging CF-18s.

Companies say they've effectively been put on hold.

"Things have been slowing down," said Suzanne Benoit, president of Aero Montreal, an industry association of some of Canada's biggest aerospace firms.

"The industry is hoping for rapid decisions and for things to move forward, because companies now are in a waiting pattern."

A senior government official, speaking on the condition of anonymity, insisted that Canada remains an official partner in the F-35 project.

"There is no plan to leave the program," the official said.

The Harper government is tight-lipped about the F-35 project's benefits.

It refuses to identify all the companies that have won F-35 related contracts, saying that would be a breach of privacy.

If Canada decides to buy the F-35, taxpayers will spend upwards of $15-billion to buy and maintain the planes, but so far Canadian companies have only won a combined total of $435-million (U.S.) in deals to supply the F-35 project.

That's up slightly from $350-million (U.S.) last June.

The opposition, however, is seeking to pore through details of the F-35 process to date, which could prolong the uncertainty surrounding the program. The public accounts committee of the House has launched an inquiry into the Auditor-General's report, with the NDP and the Liberal Party seeking to hear from dozens of witnesses on the topic.

However, the Conservative Party, which has a majority on the committee, has agreed only to hear from Auditor-General Michael Ferguson on Thursday and senior bureaucrats from four federal departments on Tuesday.

Initially, the Conservatives tried to delay the appearance by Auditor-General, but relented after the chair of the committee, NDP MP David Christopherson, threatened to quit his position, stating that tradition called on Mr. Ferguson to launch the hearings.

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About the Authors
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

Parliamentary reporter

Daniel Leblanc studied political science at the University of Ottawa and journalism at Carleton University. He became a full-time reporter in 1998, first at the Ottawa Citizen and then in the Ottawa bureau of The Globe and Mail. More

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