CDI: Still more F-35 growth to come

This week some Pentagon officials morphed into street cleaners as the Defense Department’s F-35 “Joint Strike Fighter” left yet another load of unpleasantness on the street for all to see. It came in the form of major new revelations from Jason Sherman at InsideDefense.com with an article titled “DOD Warns Congress JSF Costs Could Skyrocket To $388 Billion.” The new, higher cost estimate intensified the sticker shock for the already unaffordable F-35. The word went out from the “E” ring of the Pentagon; reporters and others—including myself—were told it was all “shaky math,” “garbage,” “totally wrong.”

It was also directly from a DOD report, sent to Congress, obtained by InsideDefense.com and other reporters, and released to subscribers at the InsideDefense.com website.

The “Selected Acquisition Report (SAR) F-35 As of December 31, 2009” repeated some earlier information about F-35 costs, but it also dropped a new load of unwelcome new data. Previously, Congress had been told that the average price for each F-35 would be $79 million to $95 million, with primary emphasis on the lower figure.

But the F-35 SAR report made painfully obvious two devices used to understate the cost.

First, as some aware observers—none of them present at recent congressional hearings—already knew, the $79 to $95 million band of unit cost did not include all expenses, specifically, about $50 billion in research, development, test, and evaluation (RDT&E) expenditures.

Second, that band of cost was stated in “base year” dollars. ”Base year” dollars are normalized to an early date in the program’s history and, therefore, understate the amount of dollars that actually must be appropriated. “Then Year” dollars are the ones you want to know. They are the amounts that Congress actually appropriates.

The Pentagon likes both “base year” dollars and cost estimates that ignore huge portions of program outlays; they help to get the camel’s nose under the tent with low ball price estimates.

Careful reading of the SAR report (for example, on pp. 36) reveals that including the RDT&E expenses yields a total program unit cost of $97.1 million for each F-35. But, it’s still in those worse than useless “base year” dollars, specifically fiscal year 2002 dollars. (If you can find BMW car dealership that sells cars in 2002 dollars, buy one; it won’t cost you more than a Volkswagen.)

The F-35 SAR reveals that $97.1 million in base year dollars translates into $133.6 million in actual future appropriations (“then year” dollars).

But, there’s more in a well buried passage, on page 37. There, we are told that a new “complete Independent Cost Estimate is in process. The Department expects this analysis will result in increases to the stated [unit cost] estimates. The projected range of estimates are $97—$115 million . in Base Year 2002 dollars.”

So it looks like the $97 million, or rather the more honest $134 million, unit cost estimate is about to be overtaken by events. We’ve got the new, higher estimate ($115 million), but it is only in those worse than useless “base year” 2002 dollars. Nowhere do we find in the report the more straightforward “then year” dollar cost for the $115 million. Luckily, however, eight grade math and ever-helpful inside the Pentagon sources both provide the same answer: $158 million per aircraft. So, it’s not $79 million per aircraft; it’s not $134 million; it’s $158 million. That’s twice what the Pentagon was pretending last month.

Those same sources, and the same math, enable us to convert the old—soon to be over taken by events—cost for the entire program to what insiders in the Pentagon now expect: $388 billion, or what Sherman reported in his April 6 article. It was this figure that caused the major E ring eruption. However, on April 8, officials in the Pentagon admitted to Sherman, and the public, he was basically right—“in the ballpark.”

Even more unfortunate for the after-parade Pentagon street cleaners, there’s a lot more in the F-35 SAR report.

As Sherman also reported in another article on April 7 (See “DOD: JSF Combat Radius Shrinks, Logistic Footprint Grows As Design Matures”), the F-35 is beginning to go south on some of its performance specs. Specifically, the projected performance for range, payload, logistics requirements, and sortie rate of the various F-35 models are beginning to deteriorate from the originally stated “baseline” performance estimates and program objectives. It is a process that will continue as the original F-35 performance promises meet reality in the form of flight testing, now only 3 percent complete.

Finally, pages 25 and 28 of the SAR report show what Pentagon mythmakers are pretending they will pay for future F-35 production. For the next Pentagon budget proposal for fiscal year 2012, the unit cost—counting only production, not RDT&E, costs—appears painfully reasonable: the Navy will produce 21 copies of its F-35 versions for $5.1 billion. That calculates to $243 million each. That is what Navy F-35s are actually costing these days.

But the so-called “learning curve” promises to make Navy F-35s much more affordable.

For 2013, the Navy plans to pay $188 million for each of its F-35s.

In 2014, it plans to pay $173 million.

In 2015, it will be $156 million

$118 million in 2016.

Tables on Air Force production show the same trends.

Nirvana! The learning curve permits the advocates to pretend that the average unit price can be lowered to rescue the program from even higher costs than those now projected: As we get deeper into production, optimization of production processes will result in cheaper and cheaper aircraft. That’s what happens in mass production, they argue.

There is only one problem: modern combat aircraft are not Chevrolets. For them, the learning curve barely exists. As Franklin “Chuck” Spinney has shown us for aircraft like the F-14, F-15, F-18, Apache Helicopter, V-22 Tilt Rotor, B-1 bomber, and even the less complex F-16 and relatively simple A-10 in the 1980s and 1990s, the projected “learning curves” were always vastly overstated. In fact, Spinney’s analysis, which was based on official data in the Pentagon’s budget planning and execution documents, showed that the Pentagon could not even use learning curves to predict the costs of runway cleaners and pickup trucks bought on the commercial market.

Once you look at the details, this denial of the prevailing conventional wisdom becomes perfectly obvious. A major reason is that there never exists a stable design to mass produce. Engineering change proposals, upgrades in the form of new production blocks, product improvements, and new requirements from the user never end. Modern tactical aircraft procurement programs never really allow a design to stabilize to enable “mass production” or any meaningful optimization of production and of the resulting cost. For this and several other reasons, the learning curve is mostly illusion.

In the case of the F-22, the closest design and fabrication cousin to the F-35, the learning curve actually went backwards late in production; the unit costs went up. That is by no means new—the same thing happened with the F-14 and the F-15. For the late models of the “mass produced” F-16, the block 50 model, unit costs were about twice the amount of early production models.

When the non-learning curve starts to become obvious in the F-35, the latest total program cost, $388 billion, will be a thing of the past, a long gone whisper of what never could have been.

Costing more and doing less is the standard profile for failing Pentagon programs. The F-35 is becoming today’s poster for what in the 1980s Washington Post cartoonist Herblock depicted as a $600 toilet seat hanging around the neck of then Secretary of Defense Casper Weinberger. The modern day cartoonist for the Post, Tom Toles, would be entirely correct to give us a depiction of new millstone for Secretary of Defense Robert Gates, the F-35.

Perhaps, if we are lucky at some future date, when still more F-35 cost growth is first extracted from a user-unfriendly DOD document by an enterprising journalist, the E ring of the Pentagon will not lunge for invective, but will appreciate that it is being told something it didn’t know and that others in the building didn’t want them to know.

Alas, perhaps someday.

Winslow T. Wheeler is Director of the Straus Military Reform Project at the Center for Defense Information, Research Fellow at the Independent Institute, and author of the Independent Policy Report, Congress, the Defense Budget, and Pork: A Snout-to-Tail Description of Congress’ Foremost Concern in National Security Legislation.
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17 replies

  1. The irony is that they still have no clue how much the final cost of all of this is going to be.

    They say the total life cycle cost will be ~$1.5 trillion (2013 USD).

    • Let’s take a look at what the lowest possible cost would be:

      USAF:
      Unit procurement cost: 300 million USD/aircraft (150 million USD flyaway + 50 million USD R&D + 100 million USD support sytems)
      Operational cost: 198 million USD/aircraft (30.000 USD/hour * 120 hours / year * 55 years)
      Number of aircraft: 1.763
      Total lifetime cost: 878 billion USD

      USN:
      Unit procurement cost: 350 million USD/aircraft (200 million USD flyaway + 50 million USD R&D + 100 million USD support sytems)
      Operational cost: 198 million USD/aircraft (30.000 USD/hour * 120 hours / year * 55 years)
      Number of aircraft: 420
      Total lifetime cost: 230 billion USD

      USMC:
      Unit procurement cost: 350 million USD/aircraft (200 million USD flyaway + 50 million USD R&D + 100 million USD support sytems)
      Operational cost: 198 million USD/aircraft (30.000 USD/hour * 120 hours / year * 55 years)
      Number of aircraft: 260
      Total lifetime cost: 142 billion USD

      All services:
      Procurement cost: 767 billion USD
      Operational cost: 484 billion USD
      Total lifetime cost: 1,25 trillion USD

      • Given that is the minimum cost, we can probably expect that the $1.5 trillion is not an unrealistic estimate.

        See here:
        http://www.bloomberg.com/news/2013-02-22/flawed-f-35-fighter-too-big-to-kill-as-lockheed-hooks-45-states.html

        Of course, even that may prove too optimistic if they cannot get it down.

      • From article:
        “The program’s life-cycle cost, which includes development and 55 years of support, is projected to top $1.5 trillion, according to the latest Pentagon estimates. ”

        Let’s remember that these are Pentagon estimates, not an objective third party too.

      • I just realized that I made a miscalculation as I only used direct operating costs. But F-16C has direct operating costs of 7.000 USD/flight hour and total operating costs of 21.000 USD/flight hour. So:

        USAF:
        Unit procurement cost: 300 million USD/aircraft (150 million USD flyaway + 50 million USD R&D + 100 million USD support sytems)
        Operational cost: 594 million USD/aircraft (90.000 USD/hour * 120 hours / year * 55 years)
        Number of aircraft: 1.763
        Total lifetime cost: 1,58 trillion USD

        USN:
        Unit procurement cost: 350 million USD/aircraft (200 million USD flyaway + 50 million USD R&D + 100 million USD support sytems)
        Operational cost: 594 million USD/aircraft (90.000 USD/hour * 120 hours / year * 55 years)
        Number of aircraft: 420
        Total lifetime cost: 396 billion USD

        USMC:
        Unit procurement cost: 350 million USD/aircraft (200 million USD flyaway + 50 million USD R&D + 100 million USD support sytems)
        Operational cost: 594 million USD/aircraft (90.000 USD/hour * 120 hours / year * 55 years)
        Number of aircraft: 260
        Total lifetime cost: 245 billion USD

        All services:
        Procurement cost: 767 billion USD
        Operational cost: 1,45 trillion USD
        Total lifetime cost: 2,22 trillion USD

        And that is the lowest possible estimate.

      • “And that is the lowest possible estimate.”

        Hmm … they probably won’t be buying that many aircraft. It’s simply not affordable. That and the technical problems with swamp the program at some point.

        Of course, not buying that many planes will worsen a defense death spiral.

      • Hi Mr.Picard,
        “But F-16C has direct operating costs of 7.000 USD/flight hour and total operating costs of 21.000 USD/flight hour”
        waht is the difference between:
        – direct operating costs
        – total operating costs
        ?
        Thanks

        • Direct operating cost only includes things directly connected to the aircraft operation itself (fuel, spare parts, aircraft maintenance etc). Total operating cost includes everything necessary for operation, including maintenance of maintenance facilities themselves, airbase maintenance etc.

  2. Interesting question though, what happens when the F-35 falls apart?

  3. For 2013, the Navy plans to pay $188 million for each of its F-35s.
    In 2014, it plans to pay $173 million.
    In 2015, it will be $156 million
    $118 million in 2016.

    Actually, in FY2015 Navy will pay $348m each for two airplanes, almost $100m more than in FY 2014.

    current year procurement plus prior year adv proc
    dollars in thousands

    2013 4 917,052 + 109,052 = 1,026,104 = 256m ea
    2014 4 1,059,114 + 30,699 = 1,089,813 = 272
    2015 2 689,668 + 79,016 = 768,684 = 384

    procurement programs
    http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_p1.pdf

    • Not long, probably. Also, helmet is basically a reality-turned-virtual-reality projector. So even if it does not lag during normal flight does not mean it will not lag during the combat, when there are a lot more inputs to be processed.

      • How useful could that possibly be in a dog fight? It’s more of an augmented reality sort of thing.

        The issue is that it would take some time to get used to, and even more time to make use of that helmet’s information? It seems to offer limited benefit and the risk of failure.

        Existing helmets can already launch missiles through the blink of an eye.

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