A new report released by the Department of National Defence says that if the Canadian government goes ahead with the purchase of the controversial F-35 fighter jet, it could have to pay an additional $1 billion to replace lost aircraft over the life of the fleet.

The findings are contained in the department's third annual update on the potential cost to replace the CF-18 fleet with F-35 aircraft.

"It is estimated that seven to 11 aircraft could be lost over the useful life of the fleet and the cost to replace these lost aircraft could be in the order of $1 billion," the report says.

The report assumes the delivery of the first aircraft would come in 2020 taking into account the life extension of the CF-18 fleet to 2025.

The report estimates that Canada would pay $45.8 billion for the life-cycle cost of 65 F-35s, an increase of $141 million from the 2013 estimate.

The life-cycle cost calculation is based on 30 years of operation for each aircraft, from the start of program development in 2010 through to the disposal of the last aircraft.

F-35 purchase could be scaled back

If the government doesn't want to pay an additional $1 billion to replace lost aircraft over the life of the fleet, the report says it could simply cut back on the number of aircraft it plans to buy.

That $1-billion estimate factors in a weaker Canadian dollar and inflation.

The government now has $76 million set aside in contingency funds, an amount the report says is "low for a project of this scope and size."

"If the full acquisition contingency was required, the remaining shortfall could be met by buying fewer aircraft."

The National Defence report is accompanied by a government-commissioned review by the Quebec accounting firm of Raymond Chabot Grant Thornton.

The independent report says the government has yet to consider purchasing fewer than 65 fighter jets, but it is one of its two recommendations.

"Analysis has not been undertaken to explore the impacts of decreasing the total number of aircraft acquired by Canada on the life-cycle cost estimate," the independent review suggests.  

Next Generation Fighter Capability 2014 report

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