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 An 18-month review of Canada's fighter jet needs has concluded
that the government should skip a new competition and proceed with
the C$9 billion ($8.22 billion) purchase, three sources said.
The decision must still be finalized by Prime Minister Stephen
Harper's cabinet. The government is likely to face fierce criticism
from opposition politicians concerned that the contract is being
awarded without an open competition. Similar concerns over
sole-sourcing and costs derailed the purchase two years ago.
A spokesman for Harper's office said there was nothing to announce
yet.
However, the sources said the recommendation was expected to lead to
formal approval of the F-35 purchase. They said Harper and key
cabinet members supported the decision.
Canada's planned purchase is the 6th-largest by a country and would
further safeguard the $399 billion program. Its rising costs had
sparked fears of a "death spiral," in which countries cut plane
orders, driving up the price of remaining planes and triggering
further cancellations. (Full Story)
 The Pentagon recently estimated the average price per plane at $139
million, about twice the original estimate in 2001, but said the
projected cost to operate and maintain the jets was down 9 percent
from earlier estimates.
Ottawa announced in 2010 it would buy 65 jets but scrapped the
decision in late 2012 after an official watchdog said Canadian
officials had grossly downplayed the high cost of maintaining and
operating the jets.
The Canadian government then launched a multi-agency examination to
determine whether to buy the F-35 or launch a new competition. That
review has found that the F-35 is the only warplane that meets the
government's needs, said the sources, who were not authorized to
speak publicly.
A four-member panel of outside experts set up to ensure the
objectivity and impartiality of the Canadian review also is expected
to give its blessing to the process in coming weeks and may make its
own recommendation that Ottawa proceed with buying the F-35, said
one of the sources.
ANNOUNCEMENT DUE SOON
The Canadian government has said it will make an announcement in
coming weeks, around the time the Canadian Parliament is dismissed
for the summer.
Public Works Minister Diane Finley declined comment on Tuesday about
the timing of a decision.
“Once we have made a decision we will announce it, and the reports
will be released,” she said.
The opposition New Democratic Party decried the review as secretive
and designed to provide cover for the original decision to buy the
plane.
"We have a public tendering process in this country, and
sole-sourcing is not part of it," NDP Member of Parliament Jack
Harris said. "We want a transparent process. This is not a
transparent process."
The recommendation to proceed with the F-35 purchase was expected,
the sources said, in part because the cost of each plane has
recently declined. Other factors seen as influencing the outcome of
the review was the decision by Japan, South Korea and other
countries to buy the jet. Canadian firms could win up to $11 billion
in potential business orders linked to the program, they said.
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Canada would be the 11th country to buy the jet. It was one of the
original nine partners on the F-35 program, contributing $150
million to its development costs. One of the reports completed as
part of the review showed that a new tender would take three years
to complete, which would force the Canadian Air Force to spend about
$20 million per plane to keep its fleet of older Boeing CF-18
"Hornets" flying, according to a source familiar with the findings.
Russia's annexation of the Crimea region of Ukraine, which has
created tensions with European countries, the United States and
Canada, also underscored Canada's need for a fifth-generation
stealth fighter, said two of the sources.
The F-35 is designed to be the next-generation fighter jet for
decades to come. No other new fighters are in the pipeline and the
warplane fleets of the United States and Canada are aging.
Canada's participation in the program would help Washington drive
down costs, which U.S. officials say are finally heading lower after
rising 70 percent over initial estimates.
The total cost of the F-35, the Pentagon's most expensive weapons
program, is now estimated at $1.42 trillion, down about 6 percent
from $1.50 trillion from last year, including research, development,
procurement and operations through 2065.
A spokesman for the Pentagon's F-35 program office said officials
were awaiting Canada's decision and understood the country's need to
revisit the decision process.
 A spokesman for the Pentagon's F-35 program office said officials
were awaiting Canada's decision and understood the country's need to
revisit the decision process.
But it would spell more bad news for rival bidders, including Boeing
Co BA.N, which is urgently looking for orders to keep its F/A-18
production line running past 2016. Boeing argued that its fighter
would be cheaper for Canada to buy and operate. The Eurofighter
Typhoon and Rafale fighters, both European planes, were also in the
running.
Lockheed spokesman Mike Rein said the company supports the Canadian
government's process in determining the best way to replace its
CF-18s.
Boeing declined to comment.
(Reporting by Andrea Shalal; Additional reporting by David Ljunggren
and Randall; Palmer in Ottawa; Editing by Alwyn Scott and Ross
Colvin)
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