Raising the Stakes: When Defence Contractors Suck at Math

Lockheed Martin may be getting nervous about Canada's review of the next fighter purchase.  The company has indicated that $10.5 billion of potential work for Canadian companies would disappear if the Canadians didn't buy the plane.  Oh my gosh, let's run out and confirm that we are buying this plane right now, or they might then kill the hostage!!!

Or not.  First, let's do some simple math: $10.5 billion over 40 years is about $250 million a year.  Which is not peanuts, but in defense spending terms, it is not that huge of a deal,

Second,  there are heaps of budgetary consequences if the government buys the F-35.  This Lockheed Martin calculation ignores "opportunity costs" as the money that might be saved by the government can then be spent elsewhere if the F-35 turns out to be way, way more expensive than the alternatives.  Indeed, the government could just spend $250 million a year for the next 40 years on industrial policy and not buy the plane, and it might just be better for the Canadian economy.  Or not.

Third, this "threat" ignores the reality that if Canada purchases a different plane, that company will almost certainly be spending some money on Canadian co-production.  Indeed, I am pretty sure it is one of the sets of factors being included in the decision process, especially with this government suddenly looking at defence spending as industrial policy.

So, this effort at blackmail reminding the Canadians what they might lose by choosing another plane is very lame.  I am beginning to understand why so many defence programs have over-runs--these guys suck at math.