Canada is hoping to finally issue its new request for bids on a contract to supply the Royal Canadian Air Force with 88 new fighter jets to replace that service’s aging CF-18A/B Hornets later this month. The county’s fighter jet replacement plans turned into a saga long ago that has now lasted more than a decade, but the new plan looks set to create even more problems and controversy. A specific requirement regarding industrial offsets in the request could force Lockheed Martin’s F-35 Joint Strike Fighter out of the running from the start for the somewhat obtuse reason that Canada is already, technically, a member of that program.
The Canadian government issued a draft request for proposals in October 2018. The country subsequently “pre-qualified” four planes as potential competitors for the deal, worth approximately $14 billion. These were the Boeing F/A-18E/F Super Hornet, the Eurofighter Typhoon, Lockheed Martin's F-35, and the Saab Gripen.
As part of this pre-qualification process, Canadian authorities had reached out to the U.S. military’s F-35 Joint Program Office, which manages international cooperation on the Joint Strike Fighter (JSF) with Lockheed Martin, to clarify various points ahead of the competition. The main issue centers on the extent of Canada’s continued obligations under what is known as the JSF Production, Sustainment, and Follow-on Development Memorandum of Understanding.
To rewind quickly, Canada has been a member of the F-35 program from the very beginning, but initially only as a so-called “Level 3” industrial partner without a firm commitment to buy any actual aircraft. This helped Canadian firms secure dozens of contracts related to the Joint Strike Fighter’s development and production, which, to date, have been worth a combined total of more than $1.3 billion. It also means that Canadian companies remain eligible to bid on F-35-related contracts throughout the service life of the aircraft.
In 2010, Canada’s Conservative Party government announced plans to purchase 65 F-35s. The process moved slowly and was the subject of much criticism from opposition parties. When the Liberal Party won elections in 2015, incoming Prime Minister Justin Trudeau vowed to scrap the deal and recompete the contract. Plans to purchase a smaller number of “interim” fighter jets have come up against a trade dispute and other issues, turning into a saga of their own, which you can read about more here.
But documents that various Canadian media outlets and think tanks have now obtained, show that the country’s membership in the F-35 program could actually upend any possibility of purchasing those aircraft. The U.S. military has apparently been adamant that it can’t allow the JSF to take part in Canada’s latest fighter jet tender, at least in its present form, which lays out a specific requirement for the winner to pledge to arrange a certain amount of industrial cooperation with Canadian firms.
“Fundamentally, the F-35 program is different from Foreign Military Sales or Direct Commercial Sales procurements,” U.S. Navy Vice Admiral Mathias Winter, the head of the F-35 JPO, wrote to the head of Canada’s Future Fighter Capability Project (FFCP) in December 2018. “The F-35 Partnership includes Canada as an integral member of a global enterprise containing multiple Partners, with both shared and unique strategic, operational, and tactical requirements and investment opportunities.”
“This [partnership agreement] includes that Partners are prohibited from imposing requirements for work share or other industrial or commercial compensation,” Winter continued. “Instead, IP [industrial participation] is determined on a competitive, best value basis to maximize affordability across the F-35 enterprise.”
You can read the full letter below:
Ellen Lord, the U.S. Under Secretary of Defense for Acquisition and Sustainment, echoed the same sentiments in her own letter in August 2018. You can read that below, as well:
In short, Lockheed Martin can’t meet the Canadian requirement for a certain level of industrial cooperation because the way the F-35 program is already structured, something that Canada is already benefiting from, that prohibits these kinds of firm allocations in favor of open competition. Giving Canada any leeway in this regard is a non-starter since it would open the door to other JSF partners demanding specific industrial offsets, rather than bidding among each other for them as they do now.
“The current FFCP procurement process does not allow for the F-35 to participate in a fair and open competition that recognizes the special nature and distinct advantages of the Partnership,” Winter wrote. Lord described Canada’s current plan as “fundamentally and structurally prejudicial to any F-35 bid.”
This can only put Canada in a particularly convoluted position. Authorities could certainly choose to disqualify any F-35 bid immediately for not meeting the industrial cooperation requirements, but this could potentially prompt a legal challenge from Lockheed Martin or an outcry from the U.S. government.
In 2017, a trade dispute between Boeing and Canadian aircraft firm Bombardier, which eventually led to various economic threats from both U.S. President Donald Trump and Canadian Prime Minister Trudeau, already killed a planned deal to purchase a number of new F/A-18E/F Super Hornets as an interim fighter jet. There have been reports since then that Boeing has faced its own specific challenges in entering the Super Hornet into the Canadian fighter jet competition.
At the same time, loosening or removing the industrial participation requirements might leave Canadian authorities considering offers from the other three competitors without any firm guarantees in this regard. Those companies could certainly choose to include domestic cooperation as part of their proposals regardless, but would be up against an existing deal between Canada and the F-35 JPO. This, in turn, could lead to accusations that Lockheed Martin’s bid has an unfair advantage.
It’s unclear where things stand now. In his December 2018 letter, Vice Admiral Winter asked Canadian authorities to let him know before the end of January 2019 about how they intended to proceed. Public reports as recently as April 2019 make no mention of any potential issues with the F-35’s participation in the competition.
The country’s Department of National Defense says the goal is still to begin delivering new fighter jets of some kind to the Royal Canadian Air Force starting in 2022, though it has admitted the potential for delays in that aggressive schedule. Any difficulties in the contracting process would certainly push that date back.
But after more than a decade of waiting for new fighter jets, the Royal Canadian Air Force has already gotten steadily stretched toward a breaking point and is now also suffering from a critical shortage of fighter pilots. The service can ill afford to wait much longer for Canada's fighter jet replacement saga to finally reach its conclusion.
It remains to be seen now whether Canada's years of involvement in the F-35 program will actually prevent the Joint Strike Fighter from being one of the final contenders to replace the country's increasingly dated CF-18s.
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