Next Generation Fighter Capability - 2014 Annual Update

The Government's Seven-Point Plan called on National Defence, through the National Fighter Procurement Secretariat, to provide annual updates on the cost estimates of the F-35. The third Annual Update presents the estimated life-cycle cost (LCC) for a notional F-35A fleet, based on updated cost data received from Canadian sources and the F-35 Joint Program Office. The report compares current life-cycle cost estimates with those reported in the 2013 Annual Update. The full life-cycle cost estimate includes development, acquisition, sustainment, operating and disposal of 65 F-35A aircraft based on notional aircraft deliveries between 2020 and 2025 and 30 years of operations for each aircraft. A summary of the results is presented in the table below.

Table Summary

This table compares the cost element, what was its cost estimate in 2013, in 2014 and the variance between the 2 years.

Comparative Estimates
($ CAD Million in Budget Years)
Cost Element 2013 Life-Cycle Cost Estimate 2014 Life-Cycle Cost Estimate Variance
Development 606 633 27
Acquisition 8,990 8,990 0Footnote **
Sustainment 15,055 14,258 -797
Operating 19,857 20,736 879
Disposal 168 179 11
Total LCC 44,676 44,796 120
AttritionFootnote * 1,015 1,036 21
Total 45,691 45,832 141

While cost estimates continue to be refined based on the evolution of the Joint Strike Fighter Program, the comparative analysis indicates marginal changes in various sub-elements of the life-cycle cost estimate and an overall increase of 0.3 per cent between 2013 and 2014.

The change in cost can be summarized as follows:

  • The increase in the development cost estimate is primarily due to the additional years added to the development phase as a result of shifting the notional buy profile.
  • The decrease in the overall sustainment cost estimate is the result of a decrease in the amount of contingency to reflect the increasing certainty of the estimates as they have benefited from an additional year of data and have been independently confirmed by the United States Cost Assessment and Program Evaluation Office, in the 2013 Selected Acquisition Report.
  • The increase in the operating cost estimate results from the shift in Canada's notional buy profile and the resulting impact of inflation.
  • The increase in the disposal cost estimate results from the shift in the disposal schedule and the impact of inflation.

The Annual Update can be found on the National Fighter Procurement Secretariat website.

Footnotes

Footnote *

It is estimated that seven to eleven aircraft could be lost over the useful life of the fleet and that the cost to replace these lost aircraft could be in the order of $1 billion. However, this cost is not part of the life-cycle cost estimates.

Return to footnote referrer *

Footnote **

Although the overall acquisition cost estimate remains unchanged at $9 billion since the 2012 and 2013 Annual Updates, the estimated unit recurring flyaway cost for 65 F-35A has increased by $125 million since the 2013 Annual Update. Due to the frozen acquisition envelope of $9 billion, the full amount of acquisition contingency suggested by the Life Cycle Cost Framework is not included in the estimate (approximately $1,080 million).

Return to footnote referrer **