UPDATE 1-Canada to make announcement on search for new fighter jet

Wed Dec 12, 2012 12:45pm EST

* Canada says could still buy the F-35

* Full costs of buying plane set to soar, media reports say

OTTAWA, Dec 12 (Reuters) - Canada will make an announcement on its search for new fighter jets at 3:15 eastern time (2015 GMT) on Wednesday, the public works ministry said in a statement.

Officials said last week that the government would restart the process of searching for a new fighter for Canada's air force after soaring costs spurred a rethink of plans to buy Lockheed Martin Corp's F-35.

They said it was still possible that Ottawa would eventually decide to buy the F-35, dismissing reports Canada had decided to walk away from the jet.

The Conservative government has been dogged by the F-35 file since it declared in July 2010 it intended to buy 65 of the Joint Strike Fighters for C$9 billion ($9.1 billion) without holding an open competition.

Officials say Public Works Minister Rona Ambrose on Wednesday will unveil an independent report on the true costs of buying the jets and maintaining them over 42 years.

According to the National Post, the report by accounting firm KPMG puts the total at almost C$46 billion. The previous highest defense department estimate was C$25 billion, but that covered a 20-year period.

Critics from opposition parties said the single-source decision was wrong and complained right from the start that Ottawa was not being clear enough about how much it would cost to buy and maintain the planes.

The Conservatives brushed off the criticism for almost two years but launched a review in April after a spending watchdog said the decision to buy the jets had been based on bad data from officials who deliberately downplayed the costs and risks.

A government source last week said an independent four-person panel will study the F-35, Boeing Co's F-18 Super Hornet and the EADS Eurofighter and report back to Ottawa by early 2013. The panel will not make a recommendation.

Other possible choices to replace the CF-18s are Saab AB's Gripen and Dassault Aviation SA's Rafale jet.

Lockheed is developing three F-35 variants for the U.S. military and eight partner nations: Britain, Canada, Italy, Turkey, Australia, Denmark, Norway and the Netherlands.

The $396 billion program - the most expensive in Pentagon history - has been beset with cost overruns and delays.

U.S. officials say Canada remains part of the international group that is funding development of the F-35 and that status remained unchanged. Canada agreed in February 2002 to contribute $150 million to the F-35 development program.

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