Comments on Wyss and Wilner article, Vol. 12, No. 2, Spring 2012 by W. Don Macnamara

Brigadier-General (Ret’d) Don Macnamara, OMM, CD, served for 37 years in the Canadian Air Force, then did 20 years as a professor in the Queen’s University School of Business. He has taken refuge in Sidney-by-the-Sea, British Columbia, where he is now President of the Royal United Services Institute Vancouver Island.

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The excellent and most logical analytical paper by Messrs Wyss and Wilner should help some of those whose thinking on this program is clouded by not understanding some more of the background, including the strategic and political rationale. However, although making reference to political and economic factors in procurement projects, there is neither discussion nor even mention of the uniqueness of the F35 project in terms of industrial opportunities and subsequent benefits.

Clearly, a consortium development of an aircraft can and should lead to increased effectiveness through sharing consolidation of new and emerging avionics, structures, and engine technologies that may not be either feasible or even available individually. In addition, the cost reduction benefits of a longer production run and common supply chain both during initial production and over the life of the aircraft should yield additional savings, as well as the benefits of shared experience that can lead to timely adjustments or modification, if necessary.

For Canada, as a signatory to the Memorandum of Understanding (MOU), the industrial benefits are particularly attractive and are already yielding solid results. 

As of mid-April 2012, Canada has paid the U.S. Government a total of $203.7 Million USD in support of the F-35 Program. Starting in 1997 through 2002, during the Concept Demonstration Phase, $10.6 million was paid, followed by $94.35 million contributed for the System Development and Demonstration Phase that covers the period 2002-2016, and then a further $98.72 million for the Production, Sustainment, and Follow-On Development phase for the period 2007-2051.

Because of Canada’s participation in the multi-national agreement, 70 Canadian companies have successfully competed for $435 million in contacts related to the F-35, and more are pending. This is a return-on-investment of over 2:1 – difficult to find anywhere these days. In addition, under the MOU, Canadian companies contract not only for Canadian purchases, but also all aircraft produced – as well as spares through the life of the aircraft - resulting in royalties to Canadian companies by other purchasers. It is also important to note that these contracts represent significant leading edge technologies and software applications involving an innovative and highly-skilled workforce – the stuff of which increased productivity is a result. Furthermore, these contracts place Canadian companies in contact with other U.S. and international companies, expanding their networks and synergistic opportunities – some of which have already occurred. Various estimates of total industrial contract benefits may meet or exceed the expected acquisition costs.

Because of the ‘hue and cry’ over this much-misunderstood project, the essence of the Next Generation Fighter Aircraft in terms of needs, requirements, opportunities, and benefits has  been missed – and especially the matter of the Memorandum of Understanding and its impact. Should this MOU not have been signed at the outset, and should Canada have decided later to purchase this aircraft and lost out on the MOU opportunities, just imagine the ‘hue and cry’ then.

Analysts – whether supporters or critics of the F35 Program, should avail themselves of the opportunity to review the facts in detail through the following websites:

MOU and production details: www.F35.com

Project details including program expenditures: http://www.forces.gc.ca/site/pri/2/pro-pro/ngfc-fs-ft/faq-eng.asp

Industrial Participation: http://www.ic.gc.ca/eic/site/ad-ad.nsf/eng/ad03863.html.



Lockheed Martin photo LM-5704643956

F-35 in level flight.