Department of National Defence Next Generation Fighter Capability - Annual Update
The Government’s Seven-Point Plan called on National Defence, through the National Fighter Procurement Secretariat, to provide Annual Updates. The first Annual Update has been independently reviewed by KPMG and implements leading practices for estimating life cycle costs (LCC), developed by KPMG.
National Defence’s full life cycle cost estimate includes development, acquisition, sustainment, operating and disposal costs for 65 F-35A over a 42-year period. The longer period of 42 years accounts for the majority of the cost increase over the 2010 estimate contained in the Spring 2012 report of the Auditor General, which used a time frame of 20 years. When the life cycle costing framework is applied to a 20-year time frame, the total cost estimate of $25.8B is very close to the 2010 estimate of $25.1B. The summary table is below.
This table shows the full life cycle cost estimate including development, acquisition, sustainment, operating and disposal costs for 65 F-35A for different periods of time.
|2010 Estimate (as presented in the Spring 2012 Auditor General Report, page 27)||2012 LCC estimate in DND Annual Update (same time period as the 2010 estimate)||2012 LCC estimate in DND Annual Update (42-year Program Life Cycle estimate)|
|Time Period||Acquisition plus 20 years of sustainment and operating costs, from delivery of first aircraft||Development, acquisition plus 20 years of sustainment and operating costs from delivery of first aircraft||Development, acquisition plus 30 years of sustainment and operating for each aircraft and including disposal|
|Development||Not includedFootnote 1||446||565|
National Defence's 42-year life cycle begins with the start of the Next Generation Fighter Capability Program in 2010 and ends in 2052, the expected disposal date of the last F-35 (if acquired). The 42-year calculation is based on the following: 6 years for development (2010 to 2016); 7 years for acquiring the aircraft (2017 to 2023); and 30 years of operations for each aircraft (2017 to 2052), recognizing there are overlap years when Canada would be both acquiring and operating the aircraft. Planned disposal would occur between 2047 and 2052.
As part of the Seven-Point Plan, National Defence's Annual Update has been independently reviewed by KPMG. Both KPMG's report and the Annual Update can be found on the National Fighter Procurement Secretariat Web site.
- Footnote 1
Note: National Defence had identified MOU payments of $356M in its 2010 cost estimates. Adding the MOU costs to the $25.1B estimate would bring the total to $25.5B and close the gap to the 2012 LCC estimate to $355M or less than 1.5%.
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