March 30, 2012 David Pugliese Defence Watch
New cost information has just been made available regarding the F-35. The Pentagon has just released its Selected Acquisition Report (SAR) dated Dec. 31, 2011. The Canadian government continues to quote a figure of $75 million per F-35A. This figure is the “unit recurring flyaway cost” (URFC) of the aircraft. However, the URFC only represents a component of the full cost Canada will pay to acquire this aircraft. The price Canada will pay to acquire the F-35A also includes additional items such as ancillary equipment (e.g. fuel tanks, weapon pylons, targeting pods), training and support equipment, tech data, publications, contractor services, initial spares, and facility construction. Nevertheless, it is useful to ascertain how reasonable is the government’s $75 million dollar figure. The just released SAR provides a perspective. It shows that the US Airforce’s planned expenditures for the unit recurring flyaway costs for the F-35A version are as follows (these figures include the costs for the aircraft and the engines):
2016 – $93.38
2017 – $91.43
2018 – $83.13
2019 – $83.95
2020 – $87.36
2021 – $95.16
2022 – $87.14
2023 – $88.08
Clearly, the government continues to understate the URFC.
Finally, as a point of interest, the Average Procurement Unit Cost (APUC) is a reflection of the cost Canada would pay. In this SAR it is $137.41 for 2012. Last year it was $132.81. While this figure is an average of the 3 variants, it provides a useful benchmark.
And then there is this from the U.S. Defense Department looking at the cost overruns:
WASHINGTON — Estimated costs for the F-35 joint strike fighter have increased over the life of the program, but the Defense Department is working to contain cost growth and remains committed to the fifth-generation fighter, defense officials said today.
Frank Kendall III said during confirmation testimony before the Senate Armed Services Committee that cost overruns for the stealth fighter are about $150 billion. Kendall is acting undersecretary of defense for acquisition, technology and logistics, and if confirmed will assume that position officially.
“We are doing everything we can to drive down the cost of the joint strike fighter,” Kendall told committee members.
He noted the program is still in testing, with about 20 percent of that process complete.
“We are finding design issues as we go through the test program that we have to correct,” he acknowledged. “So there are some cost adjustments associated with that.”
Kendall outlined the department’s actions to rein in the program’s price tag.
“We are attacking the production costs by putting strong incentives on the contractor to control costs, to get the changes that have to be made cut in quickly,” he said. Concurrent engineering design is one issue that has raised costs, he told the panel. In that approach, which is intended to develop a finished product faster, a new system may simultaneously be in engineering, production and testing processes, he explained.
“Most programs start production before they have completely finished their developmental tests,” he said. “The question is how much.”
The joint strike fighter was an “extreme example” of concurrency, he said, pointing out that production was started more than a year before the first flight tests.
Lessons learned during the F-35’s development are now being applied to other systems, Kendall said. “What we are doing now is setting up exit criteria so that we don’t make that production commitment until we are confident that the design is reasonably stable,” he added.
Kendall cautioned, however, that the joint tactical vehicle and ground combat vehicle could experience cost overruns.
Given the design complexity and the urgency common to new defense equipment requirements, “I am not confident that any defense program will not experience overruns,” he said.
The department now sets targets early for programs, Kendall said, which should help to force the supplier and the customer to meet target cost caps by making any necessary tradeoffs between cost and capability.
Kendall said he and his team also are working to contain sustainment costs, “which are larger actually than the production costs.” Those costs represent the greatest potential cost cuts, he said, and the department will continue to pursue those savings.
“I do think that the strike fighter is getting under control,” he added.
Kendall signed an acquisition decision memorandum yesterday on the F-35, Pentagon Press Secretary George Little told reporters today.
Little said in keeping with the Defense Department’s better buying power initiative, which requires tracking affordability targets and costs associated with acquisition programs, the memorandum sets the current outlook for F-35 final per-unit costs in 2019, when the fifth-generation fighter is scheduled to reach full production.
In today’s dollars, that cost is estimated at $81.4 million per aircraft, which when adjusted for inflation is estimated at $94.9 million in 2019 dollars, Little said.
Overall operating and support costs of the program are estimated at $1.1 trillion, up from last year’s estimate of $1 trillion, the press secretary added.
Little noted some of that long-term increase comes from the department’s decision, reflected in the 2013 defense budget request, to help in meeting requirements for short-term spending cuts by postponing purchase of some of the fighter aircraft.
“We remain fully committed to the F-35 program,” Little said, echoing Defense Secretary Leon E. Panetta’s remarks March 27 during a visit to Canada’s capital of Ottawa. “It’s very important to our capabilities [and] to our alliances.”
The United Kingdom, Italy, the Netherlands, Australia, Canada, Denmark, Norway, Turkey, Israel and Singapore are partners or participants in the aircraft’s development program, and the Japanese government announced in December it will buy 42 of the fighters.
“We are taking steps to ensure that we maintain fiscal discipline inside the program,” Little said. Panetta has said Kendall and the department’s acquisition, technology and logistics team have done an outstanding job working to contain costs for the stealth fighter, he added.
“This is a fifth-generation fighter,” Little noted. “It’s important for a variety of reasons: to maintain the U.S. military’s technological edge, to increase interoperability with our allies, and … for a range of other purposes.”