Canada starts new search for fighters, may still buy F-35

By David Ljunggren

OTTAWA (Reuters) - Canada scrapped a controversial sole-source plan to buy F-35 jets from Lockheed Martin Corp on Wednesday, saying it will now evaluate all available options for acquiring new fighters.

The announcement is another challenge for the F-35, which has been hit by cost overruns and delays and at $396 billion is the costliest program in Pentagon procurement history.

Canada's Conservative government - stressing it could still buy the F-35 if it turns out to be the best option - will set up an independent panel to look at replacements for an aging fleet of CF-18 fighters, which are due to go out of service by 2020.

"We are pressing the reset button on this acquisition in order to ensure a balance between military needs and taxpayer interests," Defence Minister Peter MacKay told reporters.

The move marks the government's most far-reaching attempt yet to put an end to a scandal that has grown steadily since the Conservatives announced in July 2010 they would buy 65 F-35 Joint Strike Fighters for C$9 billion ($9 billion) without holding an open competition.

Ottawa said it would give the new independent panel a series of detailed guidelines to help it evaluate the contenders.

It also released a report showing the full cost of buying, equipping, maintaining and operating the 65 F-35 jets would be C$45.8 billion over a 42-year operating life, far higher than earlier estimates.

"We are demonstrating that we are serious about looking at all available options to replace the CF-18s," Public Works Minister Rona Ambrose said in a statement.