13 December 2007

F-22 Economics

The F-22 reached "full operational capability" yesterday, which essentially means that it is ready for prime time, and no longer in any way in an experimental or preliminary program stage.

[A]s of 2007, F-22 Raptors are being procured at the rate of 20 per year.

In a ceremony on 29 August 2007, Lockheed Martin reached its "100th F-22 Raptor" milestone. . . . The United States Air Force originally planned to order 750 . . . By 2006, the Pentagon said it will buy 183 aircraft, which would save $15 billion but raise the cost of each aircraft, and this plan has been de facto approved by Congress in the form of a multi-year procurement plan, which still holds open the possibility for new orders past that point. The total cost of the program by 2006 was $62 billion.

In April 2006, the cost of the F-22A was assessed by the Government Accountability Office to be $361 million per aircraft. This cost reflects the F-22A total program cost, divided by the number of fighters the Air Force is programmed to buy; and which has so far invested $28 billion in the Raptor's research, development and testing. That money, referred to as a "sunk cost", is already spent and is separate from money used for future decision-making, including procuring a copy of the jet.

By the time all 183 fighters have been purchased, $34 billion will have been spent on actual procurement, resulting in a total program cost of $62 billion or about $339 million per aircraft. The incremental cost for one additional F-22 is around $137 million; decreasing with larger volumes. If the Air Force were to buy 100 more F-22s today, the cost of each one would be less than $117 million and would continue to drop with additional aircraft purchases. . . . On 31 July 2007, Lockheed Martin received a multiyear contract for 60 F-22s worth a total of US$7.3 billion. The contract brings the number of F-22s on order to 183 and extends production through 2011.

From Wikipedia.

The F-22 is the dream plane of the Air Force and its wants more than the budgeted six dozen more that are awaiting production. It wouldn't be too surprising if the Air Force gets its wish, at least in part.

The F-22 is intended to be a more capable air superiority fighter than the F-35A, which is the next fighter planned to enter the Air Force's fleet. The F-22 is the successor to the currently ailing F-15C in the air superiority role. Consistent with that role, it has a very small bomb carrying capacity (few planes more closely match the motto "not a pound for air to ground") reducing its usefulness in air to ground operations, and is reputedly more stealthy. It does have a first strike role, to use its stealth to destroy critical ground targets in the early stage of a conflict when U.S. forces do not yet have air superiority. But, it isn't optimized for tank hunting, supporting ground troops, or dropping large volumes of ordinance later in a conflict.

The F-35A is intended to be a multi-purpose fighter with greater air to ground bombing capacity, replacing the multi-purpose F-16. The F-35 was intended to be much cheaper than the F-22 (15%-50% of the per unit price). Price creep in the F-35 program has severely reduced the expected price advantage of the F-35 over the F-22 to the point where it isn't out of the realm of possibility that the expected marginal cost of the F-35 may actually be more than the marginal current marginal cost of the F-22, despite the fact that a far larger F-35 buy is anticipated. While as a general rule in the military aircraft area, newer is better, the fact that the F-35 is mired in uncertainties associated with the testing phase of the program (hurdles that full operational capability indicates that the F-22 has overcome) has amazingly made the not cheap technological marvel that is the F-22 start to look affordable and technologically unambitious by comparison.

This all sounds good for the F-22 program. The trouble is that this doesn't necessarily mean that a larger buy of F-22s makes sense. The F-22 program was cut to 183 planes for the very good reason that it isn't clear that the nation will need more than 183 of the highly specialized planes in future wars. It is a plane that mostly makes sense in the first few months of an air war involving a sophisticated opponent (e.g. Russia or China or Saudi Arabia). Once air superiority is attained the job that it is optimized to carry out is done, and these resources are free to be devoted to some other conflict. The plane's much hyped effectiveness also implies that the capabilities of the current F-15 fleet can be matched with a smaller fleet of F-22s. And, it isn't at all clear that the current size of the F-15 fleet has any connection to reality in a post-Cold War world. If we have enough F-22s to meet our nation's needs in the context of our larger pool of Air Force resources in all plausible conflicts in the next few decades, then more F-22s don't make sense at any price.

There certainly isn't anything magical about the 183 plane number (the original 750 plane buy was premised essentially on a 1-1 replacement of current F-15s). But, the trouble is that estimating how many planes the U.S. military does need is more art than science.

There have been a number of major real life military air deployments in recent history. The Gulf War, Kosovo, the war in Afghanistan and the Iraq War have all commenced with a similar massive air attack that has become the signature feature of American military strategy. Some of these attacks have made all time records in their scale. Most have required capabilities that the F-22 offers in the early days of the conflict. All of these conflicts have resulted in overwhelming U.S. victories in the air phase of the war before ground troops moved in, in the wake of the initial assaults.

There have also been far more instances of air to air combat in modern history than there have of naval combat. But, the total number of air to air combat engagements resulting in downed planes in modern history (i.e. post-World War II) can be numbered in the low hundreds, and the bulk of those have been isolated engagements with just a few planes on each side. Both the F-15 and the F-16 have performed extremely well in the conflicts in which they have been involved, in part due to technical superiority and in part due to better training of their pilots.

The current military inventories of nations potentially hostile to the United States suggest that this will continue to be the case. There are very few nations with meaningfully effective blue sea navies. There are many with credible air forces -- increasingly with older generation aircraft upgrades with the latest high tech sensors, weapons and targeting devices.

None of the historical evidence of the last six decades is very useful in determining how many units of an improved plane are necessary in a conflict where two sophisticated parties engage in a conflict with large numbers of planes on each side in a non-lopsided conflict. The best resources available are wargames informed by modern experience, but with a host of unproven critical assumptions. We have an airplane optimized for just this scenario, but don't have a great handle on what realistic worst case scenarios require at a macro-level, and figuring out what scenarios are even within the realm of plausibility is also a murky act of prophecy. The Air Force, naturally enough, wants to err on the side of caution. But, this is an area where a large margin of safety for a quite unlikely event is very, very costly.

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