Defence Minister Peter MacKay is promising "increased oversight and much increased dialogue" in the process of replacing Canada's aging fleet of CF-18 fighter jets after the auditor general recently slammed the government's cost figures for purchasing controversial F-35 aircraft.

MacKay, who has been under fire for the government's and Defence Department's handling of the F-35 purchase, was again unapologetic, insisting a $10-billion discrepancy in internal and public cost estimates for the aircraft came down to "differences in accounting."

He said last week's report by Auditor General Michael Ferguson signalled a "new way of doing business" in military procurements, despite Treasury Board regulations that call for operational cost estimates to be included in spending outlines.

"There will be much increased oversight and much increased dialogue as we go forward," the defence minister told reporters at a funding announcement for ill and injured service members in Halifax.

MacKay also said the "new method" meant that other procurement projects such as the $33-billion shipbuilding contract announced in October would have to be re-costed to include salaries of military personnel, as well as fuel and oil replacement.

"It's clear to me that there is a new way of doing business, and we will do it in compliance with the auditor general's recommendation, with his conclusions," MacKay said.

"That's how we'll proceed, but do note that this is not the way it was done by previous governments."

Costing questions

Ferguson's report tabled early last week found a $10-billion discrepancy between numbers that the federal government quoted publicly for the purchase of 65 F-35 stealth fighter jets and the numbers it quoted in private.

Ferguson later said it was clear cabinet ministers knew the costs of buying 65 of the jets for Canada's military were likely to reach $25 billion, not $16 billion as they had been saying.

But MacKay said Tuesday the government did not feel the $25-billion figure fairly reflected an acquisition cost because it included "sunk costs" such as salaries and fuel, which the minister said the government was already paying now for the CF-18s.

"Whatever the aircraft we bought, these costs are going to be paid no matter what we fly," MacKay said.

When questioned by reporters Tuesday, MacKay cited segments of Ferguson's report that he said showed Parliamentary Budget Officer Kevin Page had also left operating costs out of his accounting on the F-35s.

But MacKay was actually citing the Department of National Defence's own accounting in the auditor general's report, not Page's. DND took out the operating costs for its lower estimate, while Page included them in his own $14-billion figure.

With files from Terry Milewski