Canada stands to win big from development phase of joint strike fighter program

MOU opens door to participation

Canada has formally joined the system development and demonstration (SDD) phase of the Joint Strike Fighter (JSF) project with the February 7 signing of a memorandum of understanding (MOU) in Washington. The agreement puts Canada on the ground floor of the largest military aerospace project in years for the bargain-basement price of $240 million, with projected long-term benefits estimated in the billions.

As a Level III project participant, Canada will play a minor but significant role in the JSF program, which is being led by the US Department of Defense (US DOD) in conjunction with the UK. Lockheed Martin Corp won the contract — described as the richest military contract in history — late last year over arch rival Boeing Co. Its proposed X-35B demonstrator plane will ultimately be known as the F-35, and has been designed so that the majority of its components can be adapted for use in a variety of military roles. Northrop Grumman and British Aerospace are also major participants.

The MOU commits Canada to provide a minimum of $240 million over 10 years from the Department of National Defence (DND) and Technology Partnerships Canada (TPC), giving Canadian aerospace firms the opportunity to participate in technology development for systems required by the JSF. DND will make a direct contribution of $160 million to the JSF project office, facilitating access of Canadian personnel and the receipt of key reports throughout the 10-year SDD phase. For its part, TPC is obligated to set aside at least $80 million to assist Canadian aerospace firms which undertake approved JSF projects, although officials say that figure could go as high as $125 million. The funding will be provided under TPC’s standard terms and conditions, but TPC will provide 40% of the cost of each project as compared to the average of 33% it currently loans to firms.

“We fully expect that over the 10 years, a lot more TPC funding will be used for TPC projects,” says Michael Slack, DND’s director of Canada-US Materiel Relations and Canada’s chief negotiator for the recently signed MOU. “If it goes higher, the Canadian government will get credit for the additional spending and receive higher percentages for royalty payments on future sales. We have 64 Canadian companies that are actively pursuing JSF opportunities that we’re aware of. There could be lots more down in the fourth and fifth sub tiers.”

The JSF program is unique in many ways, not the least being the desire to keep the final aircraft more affordable than fighter jets of the past. It’s estimated that each copy of the F-35 will sell for $30 million, compared to $85 million for the current F-22. The US DOD has required that the project use innovative business practices to contain costs and ensure that all development efforts are essential to the program. In addition, the body of the aircraft will be nearly all composite (non-metal) with an emphasis on materials that are lighter and stronger than conventional structures.

CANADIAN FIRMS SURE TO BENEFIT

Two companies that stand to benefit the most from Canadian participation in JSF are Pratt & Whitney Canada (P&WC) and Honeywell Canada Ltd, in the areas of turbine engines and process control technology respectively. PW&C’s parent firm, based in Hartford CT, secured the contract for the F-35 engine along with General Electric, in a deal worth billions. The participation is even sweeter considering that much of the technology to be developed for the aircraft is dual purpose (military and civilian). The spin-off potential into the civilian sector is considered substantial, opening up new areas for competition which were previously unavailable to Canadian firms. Canada does not have a military technology program, per se, and this is the first time the US has opened up a major military program to international competition.

It’s also anticipated that Canadian government laboratories and universities will be able to participate in many of the technologies being developed for the JSF program, particularly in the areas manufacturing, advanced materials, combustion, modelling and simulation and prognostics and health monitoring.

In addition to DND, Industry Canada has been pursuing participation in the JSF program since the mid 1990s to ensure Canada received the greatest possible industrial benefit from the project. Those two departments are part of a working group formed two years ago that formulated the level of participation and the allocation of funding between DND and TPC.

As a Level II participant, Canada is eligible for 1-1.5% of the work during the SDD phase, focused mainly on the areas of testing and training, systems and high-speed machining of materials.

“The way the SDD phase is set up, it’s looking at continual improvement by reducing the cost and improving the lifespan of parts and systems,” says Les Goodwin, a senior industrial development officer with Industry Canada’s aerospace and defence branch. “The benefit to Canada will be $350-400 million during the SDD phase and $8-10 billion during the thirty-year production phase. Our $250-million contribution gives us the best bang for the buck.”

Another estimate by the Aerospace Industries Association of Canada, puts the benefit to Canada during the SDD phase at close to $1 billion, with job creation of between 3,500 and 5,000 over 10-years.

Goodwin says the participation of TPC in the project should not be underestimated, as the technologies funded for the JSF program will have an impact far beyond the confines of the project. He adds that many of the technologies Canada has to offer stem back to the days when Canada’s fledgling aerospace sector was being assisted by the Defence Industry Productivity Program.

“The R&D phase began in October 2001 and right now our efforts are on responding to requests for information and then going to requests for proposals,” says Goodwin. “The initial process will take about three years and lead to Lockheed making make or buy decisions,” he says. “Over the next one and half years, we will continue to visit and pressure US firms to consider Canadian players.”

There are three variants of the JSF. The US Air Force's F-35A version is a conventional takeoff and landing airplane. The Air Force plans to buy 1,763 of the aircraft. The US Navy's F-35B is a carrier-based strike fighter to complement the F/A-18E/F Super Hornet. The Navy plans to purchase 480. The US Marine Corps and Britain’s Royal Navy and Royal Air Force require a short takeoff and vertical landing aircraft, dubbed the F-35C. The Marines want 609 and the British want 150.

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