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Updated: Sun Aug 29 16:43:38 UTC 2010
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APA NOTAMS ISSN 1836-7135
F-35 JSF Program: When
is “Affordability” Not?
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Air Power
Australia - Australia's Independent Defence Think Tank
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Air Power Australia NOTAM
9th
July,
2010
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Peter Goon, BEng (Mech), FTE
(USNTPS),
Head of Test and Evaluation, Air Power
Australia
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| Contacts: |
Peter
Goon
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Carlo
Kopp
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Mob:
0419-806-476 |
Mob:
0437-478-224
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“Affordability
is
the
balance
of cost and capabilities required to accomplish assigned
missions. For over a decade the Marine Corps has avoided the cost of
new procurement during a time when the service life of our legacy
aircraft were sufficient to meet the missions assigned. However, in the
near future, our investment in the capabilities of the F-35B will
outweigh the unavoidable legacy aircraft operations and sustainment
(O&S) cost increases we will incur with the F/A-18, AV-8B, and
EA-6B.”
Introduction to “The
Projected Impact of F-35B on USMC Operational Costs”
By Lieutenant General
George J. Trautman, III, Deputy Commandant for USMC Aviation1.
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In
2002, the JSF started life as a “200
Billion dollar program .
. . to
develop
and
field
an
affordable, highly common family of next-generation strike
aircraft for the United States Navy, Air Force, Marine Corps and
allies”. For those not
familiar with the term, a “strike aircraft” is basically a
bomber, euphemistically referred to as a “bomb truck”.
In
all, some 2,852 JSF aircraft were planned to be produced for the US
Forces, with “Program
emphasis is on affordability – reducing the development cost,
production cost and cost of ownership of the JSF family of aircraft”.
The
JSF aircraft capabilities were to be fielded and start operations in
2008.
Touted
as the world’s largest defence procurement program of all time and
with such fanfare, Air Force Generals and politicians, alike, were
encouraged to commit to the program and flocked to “get
with the strength”,
declaring how they were very confident and extremely comfortable in
their belief in the promise that “Affordability
is the cornerstone of the JSF Program”.
Now,
some 8 years later, the JSF Program is seven years behind schedule
and counting while, at 382.4 Billion Dollars for 409 fewer aircraft,
the program’s budgetary estimate has effectively almost than
doubled, that is increased by over
97% to be more precise.
Development
costs, the ubiquitous RDT&E costs, for the System Development
/
Demonstration (SDD/EMD) Phase have gone from a budgeted target of 34.4
Billion Dollars at the start of 2002 to 44.8 Billion by the end of
2003 to the then current estimate of over 50 Billion by the end of
2009. The over 30% increase experienced from 2002 to 2003 should
have triggered what is known as an Approved Baseline Program (APB)
breach, but no such breaches have been reported to the US Congress,
even when the overall increases had reached over 45 % by the end of
2009.
Since
then, sources inside the Pentagon have now revealed that, following
the independent costing study completed in May 2010 which showed the
JSF Program had incurred a Nunn-McCurdy unit cost breach of over 90%
and not the 57% that reports from the Office of the Secretary of
Defense (OSD) were encouraging people to infer, the RDT&E budget
estimates have had to be increased further - by about another 7.2
Billion Dollars over and above the end of 2009 Budgetary Estimate
(50.1681 Billion Dollars) that was used in the President’s 2011
Budget Proposal – PB2011.
However,
these sources also say the new budget estimates for the SDD Phase of
the JSF Program would have been a lot higher save for some “highly
optimistic” management
and accounting practices. These have resulted, inter alia, in more
development activities and their associated costs being pushed beyond
the current SDD Phase. This is in line with the recently coined spin
in the December 2009 JSF Selected Acquisition Report (SAR) that the
JSF Program is now “focused
on developing, and delivering to the warfighter incremental blocks of
increasing capability”.
With
all the claims still being made about of how the lessons learned from
the F-22 Raptor Program would be used to make development of the JSF
more
affordable, the SDD/EMD budget for the F-22 Program of Record was
around 30.7 Billion – some 88.9% of the original JSF SDD Budget of
2002, 68.6% of this budget at the end of 2003, and ~60.9% of the
then current estimate at the end of 2009, while just over half (~53%)
of the latest estimate.
In
the meantime, the cost estimate for the much vaunted, affordable, low
costs for the all important on-going operation and support (O&S)
of the aircraft (here read “cost
of
ownership
of
the
JSF family of aircraft”)
has
ballooned
into what looks like a galactic telephone number –
almost a Trillion Dollars, and rising, over the life of a fleet with
409 fewer aircraft. This is 2.75 times the cost estimated in the
Approved Program Budget (APB) of 2002, when the 409 aircraft were
included.
If
you believe the contractor’s recent advice and others, like the
Lexington Institute, that the price for the JSF will be 60 Million
Dollars apiece, then the budgetary estimate for the life cycle costs
works
out to be between 6 to 7 times the price of the aircraft, when the
norm determined from legacy aircraft programs for an 8,000 flying
hour/25 year service life is around twice the purchase price.
Admittedly,
this is a budgetary estimate that has taken 8 years to develop and
not one that appears to have been published, if at all considered, by
the recent independent cost review brought about by the Nunn-McCurdy
Breach. However, the form guide on the JSF Program of Record makes
further increases an almost certain winning bet.
There
is the question of the purchase price itself which, until recently,
was always answered with a cost; namely, the “unit recurring
flyaway cost” or URF Cost. This would be expressed more than not
in historical dollar values, like in 2002 dollars, and as an average
URF Cost across the full production of 2,443 units – a reduced
price figure now not expected to be attained till sometime after
2023. No doubt, the number in 2002 Dollars is smaller, by some
degree, than the actual number of dollars that would be required to
be paid at the time of purchase, even more so and by a far more
significant degree when purchasing early production aircraft. Australia
is pencilled in to start purchasing early versions of the
F-35A JSF Conventional Take Off & Land (CTOL) aircraft somewhere
between 2012 and 2014, out of the Low Rate Initial Production (LRIP).
These aircraft will require significant and costly upgrading to
reach the capabilities promised back in 2002 as well as correct any
deficiencies found during both developmental and operational testing.
According
to various defence acquisition guides, handbooks and experts in the
field, the URF Cost is only part of the overall purchase price, and,
in the case of the JSF, a relatively smaller part than that of legacy
aircraft programs. But, the Air Force Generals and senior
procurement bureaucrats have persisted in answering any question
about the price of this aircraft by using this figure.
However,
since the latter part of last year, this figure has been morphed into
the newly coined term “unit recurring flyaway price” or URF
Price.
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If
you
read
the
disclaimer
on the contractor’s Powerpoint slides, it
appears that this URF price does not include the cost of the engine
and related propulsion components nor some other things, such as
Engineering Change Orders or ECOs.
This
same chart, though somewhat artistically sanitised, was recently used
by Tom Burbage of Lockheed Martin in his presentation to Australia’s Minister for Defence Materiel
& Science, the Hon Greg Combet, to
show that all is well, at least pricing <sic> wise. The upshot
is that these two charts and the data contained therein are
fundamentally the same, as are the trends of the curves themselves
which have just been moved upwards by a fixed amount across the
periods of the schedule as shown.
However,
the intents and purposes of the later chart would appear to the
educated
observer to contain the additional elements of subterfuge and
confabulation, likely for the consumption of senior officials in the
Australian Department of Defence and the Defence Material
Organisation (DMO) as well as their Minister, though hardly for their
benefit, or for the
benefit of their fellow Australians.
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A similar though apparently earlier slide
entitled “URF Cost Status”
from a presentation put together by the Danish Ministry for Defence and
dated the 29th of January, 2010, puts some more flesh on the
bones in relation to the F-35A JSF (CTOL) unit recurring flyaway cost,
now being called the URF Price; this time with some actual dollar
figures populating the vertical axis of the graph. This chart may
go
some way to explain why Lockheed Martin representatives and others,
like the Lexington Institute, are saying the price for the F-35A JSF is
going to be around US$60 Million Dollars, in Then-Year Dollars or TY$s.
Slide
2.2 This would appear
to exclude propulsion, listed as Government Furnished Equipment.
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For
the
JSF
Program,
ECOs
are going to be very important . . . and very
costly – even more so given the level of the aforementioned
advisory about “highly
optimistic” management
and accounting practices being the order of the day.
The
JSF program has much of the design, development, testing and
production being done in parallel; also known as “concurrently”. Low
Rate Initial Production (LRIP) aircraft are being built before
designs are complete and before these designs have been fully
verified, validated and demonstrated/tested. This high level of
“concurrency” is what the US Government’s Audit Office (the
GAO) and others have been warning about for years; in fact, since the
program’s inception.
The
extreme levels of risk associated with this inordinately high level
of “concurrency” are what will drive up the costs of such things
as ECOs or Engineering Change Orders. These are the design changes
that result from things like the waivers and concessions required on
the production line through to problems found during testing which
require redesign. The JSF Program is almost certain to have the
highest level of ECOs ever seen in any military aircraft production
program, by far, and they will be ongoing for over a decade, well
beyond the current development phase.
Now,
this has just been a quick overview of the JSF affordability issue
and, as always, the devil is in the detail of which there is much;
both detail and devilishness. But, suffice to say, if there are
those who still believe in the claim that “Affordability
is the cornerstone of the JSF Program”,
then they are almost certain to also believe in tooth fairies that
ride on the backs of pigs that fly.
Given
the OSD continues to claim the F-35 Joint Strike fighter is still
going to be affordable, the fundamental and unanswered question is:
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Notes:
1 Please refer: Lieutenant General
George J. Trautman, III, Deputy Commandant for USMC Aviation, The Projected Impact of F-35B on USMC
Operational Costs, URI: http://www.sldinfo.com/?p=10063.
2 Slides © Lockheed-Martin; reproduced in
accordance with 17 U.S.C. §107, this material is distributed for
non-profit research and educational purposes only.
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Air
Power Australia Website - http://www.ausairpower.net/
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Analysis - http://www.ausairpower.net/research.html
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