22 March 2010

F-35 price tag now $135 million each

[A]ccording to DOD’s Cost Assessment and Program Evaluation (CAPE) office. Total JSF program cost is now estimated at $329 billion for a 2,443 aircraft buy, up from the original 2001 baseline estimate of $197 billion for 2,852 fighters (all figures are in then year dollars) [the $197 billion would be about $240 billion in current dollars].

From here.

The new price for an F-35 is $134.7 million each. The 2001 price was $69 million each (about $84.2 million each after adjusting for inflation). Thus, the F-35 per unit price has increased by 60% in inflation adjusted dollars since 2001; it is $50 million per plane overbudget in real dollars, which is $89 billion all together.

Some of this is a result of a reduction in the proposed by of 409 units, which should increase the R&D cost per unit by 35%. But, the R&D cost should be only a fraction of the proposed 2001 price, and the increased per unit price far exceeds the amount of increased R&D cost attributable to the reduced purchase size. But, the surging cost of the F-35 is very simply, from a fault perspective, a case of a military contractor who has failed to deliver a product that is on budget or on time.

In the case of the F-35, a.k.a. the Joint Strike Fighter (JSF), this is a particular concern because a chief selling point of the JSF was that the per unit price would be kept low by combining programs to replace the Air Force's F-16 Falcon and A-10 Warhog, the Navy and Marine's F-18 Hornet, and the Marine's AV-8B Harrier (also used by all of the aircraft carriers of countries allied with the United States). The F-22 Raptor was the replacement for the F-15 Eagle.

The State of the Joint Strike Fighter Program

The F-35A is conceptually the simplest of the three variants. It is designed to do what the existing F-16 does, but better with stealth features and other improvements. There is some realistic hope that deliveries might begin in 2011. While the F-35A makes improvement over the F-16s now in U.S. Air Force service, no one expects the F-35A to be the best in the world air to air combat fighter that is the F-22, despite the fact that it is a newer design.

The F-35B, a short takeoff and vertical landing version of the F-35, successfully demonstrated its short takeoff and vertical landing capabilties for the first time this month in test flights. But there are many months of testing and final adjustments left for this design, and it will be years before these planes are coming off the assembly line in production numbers and ready to be used operationally. The Harrier AV-8B is out of production and could not realistically have production restarted for a lower cost than going forward with the F-35B program. There is no reasonable alternative out there right now or in the works for the Marines and foreign navies that would like to continue to be able to fly modern manned fixed wing fighter aircraft from small aircraft carriers. Realistically, deliveries will start in 2012.

The F-35C is currently the last in line to be put into military service. To my knowledge, no test flights with this variant landing and taking off from aircraft carriers have been completed to date. Deliveries will probably begin no sooner than 2013 and could come later.

Armed Drones To Replace Fighters Not Quite Ready For Prime Time

There are prospects that armed drones may be able to replace fixed wing small carrier based aircraft on many missions in the near future, but that development is still several years out beyond the F-35B program, and the Harrier AV-8B fleet continues to get older and harder to maintain.

The States of A-10 Replacement

It is now widely acknowledge that the F-35A is not, as originally intended, a good substitute for the A-10 fleet, which is designed for low speed air to ground missions. The U.S. Air Force has committed to extended the service light of the existing A-10 fleet, rather than replacing them with F-35A aircraft, and is now looking, along with the U.S. Special Forces for commercial off the shelf replacement aircraft for them.

The State Of The F-16

The F-16A (single seat) and F-16B (two seat) modesl of the F-16 entered operational service in the United States Air Force in 1980:

The USAF bought 674 F-16As and 121 F-16Bs, with delivery completed in March 1985. The F-16A/B had a unit cost of US$14.6 million (1992). . . .The F-16C (single seat) and F-16D (two seat) variants were introduced in service in 1984. A total of 1,261 F-16Cs and 205 F-16Ds were delivered to the USAF. The F-16C/D had a unit cost of US$18.8 million (1998). . . . The F-16E (single seat) and F-16F (two seat) are the latest version of the F-16. They do not exist in the USAF inventory and are currently an export variant only.

A model F-16IN in being developed for India and is in late stage testing. The F-16E/F variant is being sold to foreign Air Forces for "US $26.9 million (2005)."

Thus, while the United States has not bought any F-16s for many years and has an aging F-16 fleet, there is a current version being sold to foreign Air Forces in production, and the F-35's current cost is 4.5 times as much as that version of the F-16.

The State of the F-18

The Navy can keep buying and is continuing to buy new F/A-18E/F Superhornets (the E has one seat, the F has two seats) because it is still in production and costs around $90 million a copy. This reduces the pressure the Navy faces to get the F-35C carrier based version of the joint strike fighter (the largest of the planes) that is intended to replace it into service. At current prices, each F/A-18E/F that the Navy buys instead of an F-35C saves the military $45 million, and makes it unnessary for the Navy to train its pilots to operate, train its sailors to maintain a new carrier based fighter design, and modify its aircraft carriers and aircraft carrier parts inventories to serve a new fight model.

The F-35C is supposed to be superior to the F/A-18E/F model currently in service (which entered service in 1999) with the U.S. Navy, but inadequate fighter capabilities have not been a major complaint of the U.S. Navy. The F-35C offers the Navy a somewhat longer range, a slightly larger ordinance payload and stealth that the Superhornet does not provide. The biggest benefit of the F-35C would be most relevant in a stealth strike capacity, where stealth aircraft from the Air Force (i.e. the F-22 fighter, F-35A fighter, F-35B fighter and B-2 bomber) were not available as quickly, and in missions where radar based anti-aircraft weapons were a threat faced by the carrier based aircraft.

Both the Superhornet and the F-35C offer significant improvements over the aging F-18C/D that would be replaced, which has a shorter range and smaller payload than either and has other more dated design features.

The State of the F-22 program

"The F-22 cost about $360 million per copy." F-22 production has been capped at about 180 units and is not authorized for export. This is considerably fewer units than the Air Force had wanted and does not fully replaced the F-15 fleet on a plane for plane basis. F-22 R&D costs are sunk costs and the marginal cost of producing new F-22s was about $220 million. It is probably not too late to restart the line at a modest cost if desired, although that window is rapidly closing.

There are reports of significant maintenance difficulties with the F-22s which are in the field and they have not yet been used in any major military engagements that test its capabilities in the field.

When giving up an F-22 meant getting three F-35s, many in the Air Force thought that having more planes that were somewhat less capable was a good deal. Now, with 3-4 F-35s costing as much as 2 F-22s, given the stunk costs and lack of risk of delay or technological failure with the F-22, the tradeoff looks less desirable to many in the Air Force. The Air Force also has a strong inclination to value its air to air combat mission for which the F-22 is optimized more than other missions like dropping significant bomb payloads, which the F-35 is more qualified to do than the F-22.

Marginal Costs v. Sunk Costs

The research part of the R&D budget for the F-35 is basically a sunk cost. At this point the designs have been created and final stage testing is in progress.

Abandoning the F-35B varient is extremely difficult because we have foreign commitments to allies who have no other alternative to produce it, and because the Marines are very committed to this purchase.

The F-35A or F-35C variants could be abandoned, because they have almost an exclusively U.S. purchaser, but since most of the research costs are already sunk, the only savings from discontinuing one of these variants entirely is the production cost avoided from actually having the planes built and the costs of getting a production line up and runing for a new variant.

The division of costs between R&D and production costs in the F-22 program was roughly 1/3rd R&D (about $20 billion) and 2/3rd production costs (about $40 billion). A third of the current F-35 program cost projections would be $106 billion, give or take, but this is probably too high. The F-35 program R&D costs shouldn't be as great a share of the total as those of the F-22 because the F-22 has to spread its R&D costs over 180 planes, while the F-35 budget plans now call for R&D costs to be spread over 2,446 planes. Even if the F-35 took three times as much R&D expense as the F-22 (since the program really involves 3 different plane designs), that would stil be only $60 billion. An even higher figure of $64 billion of R&D costs accounting for a little inflation, would account for only 20% of the total F-35 budget. Thus, the marginal cost of new F-35 aircraft should average about $108 million each.

Once sunk costs are disregarded, new F-35s will cost about four times as much as new F-16s are costing our allies, and they will cost about half of the marginal cost of new F-22s. Given sunk costs, the real premium in the cost of a new F-35 at this point over the cost of a new F-18 is about $18 million per plane.

What Should We Buy?

Starting over with the F-35 program without buying commercial off the shelf alternatives like the current models of the F-16, the F-18 and the F-22 would mean many, many years of delay. It takes something like ten or fifteen years from starting to draft a request for proposal for a new fighter aircraft to the entry into service of the first aircraft of that type, if one isn't using an already existing design.

If the United States remains committed, as it has been in the past, to purchase a major military system like a significant number of manned fighter aircraft from a domestic defense contractor, the F-16, the F-18 and the F-22 are the only models that could be delivered before 2020 to 2025.

It isn't unreasonable to think that by then, an armed combat drone might make a new manned jet fighter an obsolete concept. Planes without people in them can handle much more intense aerial manuvering than any plane with a person flying it could.

Purchasing new F-16s would be a major cost savings and would solve the problem of an aging F-16 fleet while providing the U.S. military with a moderate upgrade from its current capabilties, but would be inferior to the F-35. An F-16 can't be used on a carrier and doesn't have short takeoff/verticle landing capabilities, so it isn't a substitute for the F-35B or F-35C.

Purchasing new F-18s instead of F-35Cs would produce a modest cost savings, would solve the less urgent problem of an aging F-18 fleet, and would not provide any meaningful upgrade from existing capabilities because this is what the U.S. Navy, and part of the U.S. Marines fleet uses now.

The Air Force could also buy some model of F-18s with little delay or development cost, rather than F-35As.

Buying more F-22s would cost twice as much per plane as buying new F-35s ignoring sunk costs which are almost all sunk in any case at this point, and would allow new planes to be provided at a similar schedule. But, it isn't clear that we need more of the capability of the F-22 for which we have already paid a premium price, given the air dominance that the United States already has with its existing F-22 fleet.

How Many Planes Should We Buy?

In addition to the question of which planes we should buy, there is the question of how many we should buy. The original planned buy of F-22 and F-35 aircraft combined was intended to replace all of the A-10s, F-15s and F-16 in the Air Force, all of the AV-8Bs and F-18s in the Marine Corps, and all of the F-14s and F-18s in the Navy on a roughly one to one basis. So, the current aircraft fleet of the United States military is really based on estimates of how many planes the U.S. military needed in the 1970s and 1980s, with the technologies available then and the Cold War as the pre-eminent concern, reduced somewhat but cuts to air craft fleets made immediately following the end of the Cold War in the late 1980s and early 1990s.

The world has changed.

Many of the opponents that look likely today are less technologically sophisticated than the Soviet/Warsaw Pact Air Force that was the primary threat considered when the requirements of U.S. military air power were developed, and the size of those forces have withered and developed technology more slowly than anticipated, although the Russians are starting to catch up again in terms of fighter technology.

The importance of air to ground missions against non-radar equipped targets for some portion of our air fleet has become clear. In these engagements radar stealth, extreme manuverability, and supersonic speed are far less important, and an ability to remain aloft and loiter for long periods of time at moderately low altitudes while carrying substantial bomb payloads are more important. The utility of simply reliable air to ground oriented fixed wing aircraft, relative to attack helicopters was shown in the early days of the Iraq Qar and has also been apparent in the conduct of the war in Afghanistan.

The importance of military aircraft to fill a domestic air security role, for example, over the skies of Washington D.C. and New York City, has also become much greater in the wake of 9-11. The F-16 has been used for that role, but is costly to use in that role and has many capabilities that are irrelevant to this role. The lack of fit to this mission was not a major problem when the F-16 was designed, but this has since become a major Air Force mission.

Fighters dropping bombs are much more accurate than they were when the fleet requirements that the current buy is derived from were developed. The old estimates didn't give as much weight as we can now to the ability of the U.S. Air Force to swiftly relocate fighters from one part of the world to another using air tankers to extent the range of fighters. Increased guidance systems that make bombing runs more accurate also make it more feasible to use high altitude bombers with large payloads for bombing missions that previously would have required lower altitude missions that called for the grater capabilities of fighter aircraft.

Military experience since Vietnam with modern aircraft has showed us that battles for air dominance are intense but short, rarely lasting more than a few months, after which air dominance is secured and relatively few air power resources are needed to continue to have air dominance. It has also shown us that every major air engagement that might strain our air fleet has been conducted with significant allied air fleet support.

The F-22 is supposed to be the dominant air to air fighter in the world, far surpassing the capabilities of its F-15 predecessor or leading foreign models in service.

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