Canada’s plan to buy 88 U.S.-built F-35 fighter jets is facing significant challenges, including skyrocketing costs, a shortage of trained pilots and a lack of critical infrastructure, according to a new report from Auditor General Karen Hogan.
The audit for the F-35 program is part of Hogan’s spring audits, released Tuesday, which also found contracts awarded to GC Strategies for the ArriveCan app and other services regularly did not follow proper processes or deliver value for money.
In December 2022, the Liberal government announced it had signed a deal to buy 88 F-35 fighter jets from the United States to replace Canada’s aging CF-18 Hornet fleet.
Hogan’s audit of the F-35 program focused on whether National Defence’s plan to acquire the jets was on schedule and on budget, finding significant challenges on both fronts.
“This is a large, multi-year project that requires active and ongoing management of risks and costs to ensure that the CF-35 fleet can be brought into service on time,” Hogan said in a statement.
According to the report, the cost of the F-35 program has risen to $27.7 billion — up from the $19 billion National Defence announced in 2023. That’s without factoring in the costs for essential infrastructure upgrades and advanced weapons purchases.
Securing critical infrastructure, such as operating bases, and weapons, such as missiles for the aircraft, will cost at least an additional $5.5 billion, the audit said.
Part of the reason for the increased base costs of the program was that National Defence used outdated cost estimates when it announced the deal, but global factors are also to blame.
“We found that an important part of the increase in the department’s updated cost estimates of $27.7 billion was caused by global factors, specifically: rising inflation; fluctuations in foreign exchange rates and heightened global demand for munitions.”
The audit also said “unforeseen infrastructure complexities” significantly impacted National Defence’s cost estimates.
According to the audit, the construction and outfitting of the fighter squadron’s main operating bases in Cold Lake, Alta., and Bagotville, Que., are more than three years behind schedule.
The original plan was to have these bases up and running when Canada started receiving its first delivery of F-35s in 2028, but that date has now been pushed back to 2031.
Construction was delayed after National Defence determined that the design needed to be reworked to accommodate specific requirements of the F-35, it said.
With the fighter squadron’s main operating bases unfit for service, National Defence was forced to develop an interim operations plan that involved using movable facilities and renovating existing facilities.
The audit said the need for an interim facility will increase the total planned cost of infrastructure for the fighter jet program, but the cost for the interim measures were not available at the time of the audit.
While the rising costs and delays to infrastructure are a challenge in order “to make the CF-35A fleet fully operational, the Royal Canadian Air Force will need more trained pilots,” Hogan’s report added.
The audit also provided an update on when Canada can expect the delivery of its F-35s. Canada initially put down money for 16 — a squadron ranges in size from 16 to 18 jets — but Lockheed Martin said it would only be able to give Canada 12 jets in the short term.
The first eight of those jets will be sent to Luke Air Force Base in Arizona between 2026 and 2027. The remaining 80 aircraft will be sent directly to Canada starting in 2028, with the last of the jets expected sometime in 2032 if Canada fulfils the full contract.
A day after Portugal signalled it was planning to ditch its acquisition of the F-35 in March, Canada announced it will talk to rival aircraft makers as it considers potential alternatives to the U.S.-built F-35 stealth fighter.
F-35 setbacks worsened by ‘outdated information’ and ‘slowness’ from DND: Auditor general
There has been a groundswell of support among Canadians to kill the $19-billion purchase and find aircraft other than those manufactured and maintained in the United States.
Defence Minister David McGuinty issued a statement saying he will “ensure that the AG’s recommendations are fully integrated and that the best value continues to be provided to Canadians.”
McGuinty said his government has already acted to try to mitigate challenges pointed out in the audit by:
Hogan’s audit also looked at the contracts awarded to and payments made by federal organizations to GC Strategies, focusing on whether the federal government received value for money and whether appropriate processes were followed.
Between April 2015 and March 2024, 31 federal organizations awarded 106 contracts to GC Strategies worth $92.7 million — of which about $64.5 million was ultimately paid out, the audit said.
That $64.5 million includes the value of the four contracts GC Strategies received to develop the ArriveCan app during the COVID‑19 pandemic. Hogan’s February 2024 report estimated that GC Strategies received $19.1 million for its work on ArriveCan.
In March 2024, the federal government suspended GC Strategies’ security clearance and no new contracts were awarded to the company in the 2024–25 fiscal year.
“The findings in this audit echo those of previous audits, where we found deficiencies in how public servants applied federal procurement rules,” Hogan said in a statement.
“There are no recommendations in this report because I don’t believe the government needs more procurement rules. Rather, federal organizations need to make sure that the rules that exist are understood and followed.”
Public sector watchdog latest to dig into ArriveCan scandal
Hogan’s audit included an analysis of a randomly selected sample of the contracts given to GC Strategies, excluding the ArriveCan contracts, finding that in one-fifth of cases, the firm’s work was proceeding without the proper security clearances.
The audit said that in 94 per cent of the contracts examined, timesheets were used as a monitoring tool by the relevant government department. But in 58 per cent of these cases, timesheets were either accepted with “poorly documented descriptions of work” or the timesheets were not collected at all.
“Without ensuring receipt of timesheets from all contract resources, the department could not verify who worked on the contract and what work was completed by the contract resources,” it said.
The audit also found that in one-third of the contracts it examined, the federal government could not show GC Strategies “had the experience and qualifications needed to complete the required work,” or whether the rate the company was being paid reflected its ability to do the job assigned.
“We found that neither Public Services and Procurement Canada, nor any other federal organization, collects government‐wide information on rates paid and supplier performance,” it said.
“This type of information would help federal organizations evaluate whether the supplier is qualified to perform the work and validate that the rates charged are not higher than market rates,” the report added.
Hogan’s report concluded that when it came to the work awarded “to GC Strategies and other companies incorporated by its co-founders … value for money for these contracts was not obtained.”
