Lockheed Martin promises $16.9B injection to Canadian economy with F-35s

One of the companies vying to build the air force's next generation of warplanes promises it can inject as much as $16.9 billion into the Canadian economy, even though its pitch to the Liberal government falls somewhat outside traditional boundaries.

Lockheed Martin Canada is offering the F-35, which has a controversial political history in this country, as a potential replacement for the military's nearly 40-year-old fleet of CF-18 jet fighters. 

Three bids in the often-delayed $19 billion competition were delivered Friday and the federal government expects to narrow the field to two by next spring, with the first fighters not scheduled for delivery until 2025. 

The other contenders are Boeing, which is offering the latest version of its Super Hornet, and Saab with the updated version of its Gripen jet. 

Under longstanding federal procurement policy, defence contractors are essentially expected to match the value of the contract and deliver an equal share of benefits to the Canadian economy.

The worldwide F-35 program is different in the sense that partnership in the program means Canadian companies are allowed to bid on fleetwide contracts and there is no dollar-for-dollar guarantee.

Lockheed's pitch

In a slick video presentation Thursday, Lockheed Martin put on display its Canadian partner companies that are already working on the program, supplying a diverse range of parts and systems with testimonials from employees about how proud they are to be working on the F-35.

Steve Callaghan, Lockheed Martin's vice-president of F-35 business development, said he is confident the company has delivered a solid pitch to the Canadian government despite the difference and the possible handicap it faces.

"We're delighted to be part of this competition," he said during a remote media availability on Thursday. "We understand the rules. We understand the way the competition is structured and the requirements."

The company conducted an analysis on the impact of its program in Canada and estimates over the lifetime of the F-35, it will pour $16.9 billion into the gross domestic product and that there is the potential for more as sustainment contracts for the warplane eventually come on stream.

Lorraine Ben, the chief executive officer of Lockheed Martin Canada, said the fighter jet program is important to the country's economic recovery from the pandemic because it delivers high-skilled, high-paying jobs.

Should Canada not choose the F-35, Callaghan said, the existing contracts, which are currently worth $2 billion, would be honoured for the duration of their commitment but might go elsewhere.

"Future contracting would likely be placed using industries and best value for those nations that are procuring the F-35," he said. "Canadian industry is truly embedded in the global supply chain today and brings great value to the program and of course great value to Canada and Canadian industry. We really do look forward to Canadian industry continuing their contribution." 

Controversial history 

It has been a decade since the former Conservative government set off a political firestorm when it signalled it intended to sole-source the purchase of 65 F-35s. 

After searing reports from both the auditor general and the Parliamentary Budget Office, which questioned the cost and how much homework the federal government had done in terms of competition, the plan was shelved.

The Liberals, prior to being elected in 2015, promised not to buy the F-35 and instead purchase a cheaper aircraft and plow the savings into the navy.

The Trudeau government eventually relented and allowed Lockheed Martin into the competition, and even bowed to pressure from the Trump administration to make sure the playing field was level in terms of evaluation of the economic benefits.

Callaghan steered clear of the politics on Thursday.

"We're really focused on this competition and providing the information Canada needs to make its decision," he said. 

Critics have often complained that the F-35 — a stealth fighter with advanced sensing technology — will be too expensive to maintain over the long term.

At the moment, it costs $35,000 US per hour to fly, according to figures released Thursday by the company.

Callaghan says the plan, using a variety of methods including artificial intelligence and robotics, is to cut that figure to at least $25,000 US per flying hour in the coming few years.