True F-35 cost likely known by cabinet, auditor says

Auditor General Michael Ferguson says Prime Minister Stephen Harper's cabinet would have known national defence's cost estimate for the F-35 was $25 billion when the department said publicly it was only $15 billion.
Auditor General Michael Ferguson, shown at a committee meeting in January, took questions from MPs at the public accounts committee Thursday morning. (Sean Kilpatrick/Canadian Press)

Prime Minister Stephen Harper's cabinet would have known the cost of acquiring the F-35s was estimated at $25 billion, not the $15 billion that the public was later told, the auditor general said Thursday.

Among the revelations in Michael Ferguson's spring report tabled earlier in the week was the finding that the Department of National Defence estimated in June 2010 that buying and operating the planes for 20 years would cost around $25 billion.

In March 2011, however, the department responded to a report on F-35 costs by the parliamentary budget officer by saying his estimates were wrong and the cost would be around $15 billion.

"That was the opportunity that they should have used to come forward with the full costing, because they had that and that number was known," Ferguson said about the government when he spoke to reporters after an appearance at the public accounts committee. 

"I can't speak to individuals who knew it, but it was information that was prepared within National Defence, and it's certainly my understanding that that would have been information that, yes, that the government would have had."

The Prime Minister's Office released a statement Thursday evening in an attempt to clarify the costs of the F-35 program.

Opposition parties are accusing Harper and his ministers of misleading Parliament and in question period Thursday they demanded to know precisely when the prime minister knew the $25 billion cost estimate of acquiring the planes. 

Interim Liberal Leader Bob Rae posed the question three times, but Harper didn't answer it. He responded that the government accepts Ferguson's recommendation that national defence refine its cost estimate and that the government hasn't bought the planes yet.

Opposition MPs continued to push the F-35 issue in question period, demanding that someone take responsibility for the lack of due diligence that Ferguson found in his audit, and asking for the resignation of Defence Minister Peter MacKay.

When he spoke to reporters, Ferguson would not say that the government misled Parliament, he said it "missed the opportunity to come forward and say, 'here's what we think the full costing would be.'"

"I can only frame it as, they had information … they should have used that as the opportunity to bring that forward," he said. Ferguson noted that even the $25 billion estimate has weaknesses associated with it.

Rae raises question of privilege

Rae didn't let up on his attack on the government. He raised a question of privilege in the House of Commons, alleging that the government has provided two "completely different and contradictory versions of reality."

In the auditor general's report it says that national defence and public works accept his recommendation but do not agree with Ferguson's conclusions, the key one being his finding that due diligence was not exercised.

The government, however, does accept that finding, according to the ministers of those departments who told the House of Commons that the government accepts Ferguson's conclusions.

"These two versions of reality cannot both be true. One must be a falsehood," Rae told the House. The two versions are a deliberate attempt to confuse MPs, and MPs cannot perform their duties if they are not being given truthful information, he argued.

The Speaker of the House of Commons will decide if there is a prima facie case of privilege and report back to MPs.

Rae's interpretation of the government's position is that if it accepts Ferguson's report, then it accepts the fact that it misled Parliament.

"Maybe people have difficulty getting their head around $10 billion but how about getting your head around the fact that the prime minister has been saying things to Canadians which are simply not true, for a very long period of time," he told reporters.

House leader Peter Van Loan rejected Rae's arguments on the question of privilege and said there were no efforts to mislead Parliament.

"The position of the government is not the position taken by the officials in those departments," he explained.

"As a government, as ministers, as a cabinet we have a right and an expectation that the advice we receive is something on which we can rely and that is something that in this case the auditor general made some findings on, we happen to agree with those findings in the end," Van Loan said.

'The prime minister has been saying things to Canadians which are simply not true, for a very long period of time.'—Interim Liberal party leader Bob Rae

NDP Leader Thomas Mulcair, who was delivering a speech at the Economic Club of Canada in Ottawa, appeared to back Rae's move.

"We have clear and convincing evidence that the government intentionally provided false information to Parliament and that’s serious. This is a basic question of respect of our institutions," he said after the speech.

Earlier in the morning at his committee appearance, Ferguson said he couldn't explain why the departments of National Defence and Public Works disagree with his conclusions on how they handled the F-35 fighter jet process, but he stands by the findings.

He concluded in his spring report, tabled Tuesday, that those departments didn't apply due diligence in the process for acquiring new fighter jets. He reported that the departments accept the facts and the single recommendation in his audit, but don’t agree with the conclusions.

Ferguson faced questions from opposition MPs on what they said appears to be a confusing position — how can the departments accept his recommendation but not his conclusions?

"The reason that we put the statement in the report that the departments disagreed with our conclusions was because it was out of the ordinary to have that type of a response from a department or from departments," Ferguson told MPs.

'Our conclusions are right'

His audit found a lack of documentation to support key decisions leading up to the 2010 announcement that Canada plans to buy 65 jets from Lockheed Martin, and that defence officials kept senior decision-makers in the dark on the risks associated with the F-35 program and its true costs.

The report revealed that DND estimated the cost of buying and maintaining the planes for 20 years would be $25 billion, but a year later, in March 2011, when it responded to a report by parliamentary budget officer Kevin Page, it said the program would only cost $15 billion.

"I think in this particular instance, because our recommendation was so focused, that it's not totally inconsistent, the position that they took. However again, we feel very strongly that our conclusions are right based on the objective and criteria that we set and the evidence that we looked at," he said.

"They did agree with the facts, but the reason why they would have disagreed with the conclusions is something that only the departments can answer," he said.

The government announced a number of measures in response to Ferguson’s report immediately after it was tabled. They include stripping responsibility for the acquisition from the Defence Department, and handing the file to Public Works and setting up a special F-35 secretariat.

Ferguson was asked whether the measures adequately address his concerns and he responded that it's difficult for him to say but they "appear to be steps in the right direction."

PMO responds

The government says it responded to the Parliamentary Budget Office in March 2011, estimating the cost of acquiring 65 jets at $9 billion and sustainment costs for maintenance, software programming and logistic support at a further $5.7 billion, for a total cost of $14.7 billion over 20 years.

The estimates did not include operating and salary costs, the government says, which would be incurred regardless of the aircraft purchased. These costs would amount to $9 billion over 20 years.

The government says it accepts that these costs should have been included in its report to the PBO.


Meagan Fitzpatrick is a multi-platform reporter with CBC in Toronto. She previously worked in CBC's Washington bureau and covered the 2016 election. Prior to heading south of the border Meagan worked in CBC's Parliament Hill bureau. She has also reported for CBC from Hong Kong. Follow her on Twitter @fitz_meagan