UPDATE 1-Canada says reviewing F-35 report, denies plan to cancel

Thu Dec 6, 2012 10:48pm EST

* Government plans "comprehensive" public update

* Report is latest problem for troubled F-35 program

* Alternatives include fighter jet made by Boeing

OTTAWA, Dec 6 (Reuters) - The Canadian government said on Thursday it was reviewing an independent report on the cost of the F-35 Joint Strike Fighter program, but denied that it had decided to cancel its planned purchase of 65 of the Lockheed Martin Corp warplanes.

The CTV network reported earlier that the cost of Canada's planned F-35 purchase was set to soar in cost and the government would start looking at alternative planes.

The media report was the latest embarrassment over the F-35 for the Conservative government, which announced in July 2010 it would buy 65 of the Joint Strike Fighters for C$9 billion.

Ottawa consistently brushed off critics who said the figure was too low, but had to launch a formal review of the project in April after a spending watchdog said the initial decision to buy the jets had been based on bad data from officials who deliberately downplayed the costs and risks.

CTV, citing unnamed sources, said the government would next week release an independent study showing the cost of buying and maintaining the jets was in fact around C$40 billion ($40.4 billion), much higher than the initial estimate of C$25 billion for purchase and maintenance.

The television network did not say what time period the C$40 billion covered. The C$25 billion estimate was for 20 years.

Andrew MacDougall, spokesman for Prime Minister Stephen Harper, said the government was reviewing the report prepared by the accounting firm KPMG, but that reports indicating the government had decided to cancel its F-35 buy were false.

He said the government planned a "comprehensive public update" before the House of Commons takes a Christmas break at the end of next week.

"We are committed to completing the seven-point plan and moving forward with our comprehensive, transparent approach to replacing Canada's aging CF-18 aircraft." MacDougall told Reuters.

CTV said Ottawa would launch a new review of how best to replace its aging fleet of CF-18 fighters, which will be retired in 2020, and could remove a requirement for the new jets to have stealth capability. Possible alternatives include Boeing Co's F-18 Super Hornet.

The $396 billion F-35 program, the largest in Pentagon history, is already late and well over budget.

The Canadian Defense Ministry did not hold an open competition to replace the CF-18s, saying the F-35 was the only plane that could meet all of Canada's requirements.

In April, Ottawa responded to the spending watchdog's criticism by stripping the Defense Ministry of responsibility for buying new jets and handing it to the Public Works Ministry.

No one in the office of Public Works Minister Rona Ambrose was immediately available for comment.

Lockheed is developing three variants for the U.S. military and eight partner nations: Britain, Canada, Italy, Turkey, Australia, Denmark, Norway and the Netherlands.

Neither Lockheed nor the Pentagon's F-35 program office had any immediate comment on the Canadian media reports.

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