Thursday, August 22, 2013

F-35 COST EXPLODES: BUSINESS AS USUAL AT THE PENTAGON

By Ronald Fox


My skeptical juices rose when Lt. General Christopher Bognan, Program Manager for the Air Force and Navy’s F-35 fighter aircraft, proudly announced recently that unit cost for the F-35 “continues to come down” and will likely settle in at about $85 million per plane when in full production. His optimistic prediction of reduced unit cost was echoed by Defense Secretary, Chuck Hagel in Congressional testimony. The Navy’s commander of the Naval Air Systems Command, Vice Admiral David Dunaway, chimed in that the F-35 was a “fairly mature air vehicle,” suggesting that most of its bugs had been worked out.  The GAO also gave the F-35 (there are differing Air Force and Navy versions) a thumb up for progress, as did the DOD in its most recent Selected Acquisition Report (SAR). The cost savings and good performance news are supposed to result from economies of scale in larger production runs as well as the "learning curve" that comes from experience.  Isn’t it good to hear that our tax dollars are being well and carefully spent? Or are they?

In a recent report, the Center for Defense Information (CDI) exposes such optimistic assessments as pure fiction. Unit costs doubled from $81 million in 2001 to $161 million in 2012, and are estimated by the CDI to be, on average, $219.3 million in 2014 (higher for the Navy version). The boast by General Bogdan that the cost per aircraft will decline to $85 million in 2018 stretches credulity to the limit. The real question, according to the CDI, is how much more they will cost than the projected $219+ million for 2014. Nor is there any evidence to conclude that the F-35 is a “mature airplane,” implying  that it has been thoroughly tested and is on course to be put into operation in the near future. In fact, the aircraft is less than half way through its developmental flight testing, which when completed will have assessed only 17% of its capabilities. The more important and rigorous battlefield testing will not start until 2018, meaning that no meaningful appraisal of its performance can be made until after that testing is completed and reported.

There’s good reason to be skeptical of rosy weapon acquisition cost and performance predictions. The history of combat aircraft acquisition is full of examples of huge cost overruns, design flaws, and poor test performances that necessitate costly fixes and upgrades. The recent case of the F-22, whose unit cost ballooned to over $400 million per aircraft through the course of its operational development, offers a good example of why we should expect much of the same from the F-35. Years ago, the Navy’s F-18 Hornet underwent a similar cost spiral, so much so that it became too expensive to risk in close ground support, its proposed combat mission. Its vulnerability to ground fire necessitated the use of costly air-to-ground missiles, which degraded the cost effectiveness of supporting troops on the ground, when compared to the A-10 Warthog with conventional munitions. Navy brass, however, wanted the high tech machine, whatever the cost or mission reliability. And so it goes.

Cost increase is inherent in our military weapons acquisition system. The cost of a newly requested, major weapon system is always underestimated. Buying-in low lessens the potential for tough questions, making it easier to get an initial go ahead. However, as the weapon evolves from concept design to prototype construction, weapon development, full-rate production and operational deployment, it invariably takes on costs well above original predictions. Increases result from design changes, fixes of problems uncovered in development and operational tests, various add-ons imposed by the procuring bureaucracy, rising material and labor costs, budgetary changes, production line fabrication changes, inflation, waste and even fraud. Design flaws are frequent, which isn’t surprising given that contractors usually receive additional funding to fix problems, such as when Lockheed had to redesign the wing for the C-5A Galaxy. With little reason to worry about cost growth, since the Congress can always be counted on to cover overruns, there is no incentive to be cost conscious.  Extreme cost growth is thus business as usual.

As the weapon moves along its operational path, and costs escalate, it takes on an increasing number of allies among sub-contractors, members of Congress thirsting for pork, local constituencies with pieces of the manufacturing action, defense and pro-military lobbies, and labor unions. With increased “sunk costs” and widened political support, it becomes cancel-proof, regardless of its cost or poor test performances. We even sometimes  end up funding programs the Pentagon doesn’t even want. Given combat aircraft procurement history, and the fact that testing of the F-35 has barely begun, which will undoubtedly require a multitude of future upgrades, fixes and modifications, it is reasonable to expect unit cost to increase substantially in the future, making a mockery of General Bogdan’s learning curve, prediction of $85 million per plane.

Given the likely tightening of defense spending in the coming years, and the predictable rising cost per airplane, how many F-35s will we actually be able to purchase? Likely fewer than the Air force and Navy want, and, depending on your point of view, fewer than we need. Moreover, highly complex airplanes like the F-35 are not only expensive, but with more parts and gadgets to break down, system failures are more frequent, resulting in reduced reliability and operational readiness. This is the legacy of ballooning unit costs: fewer units purchased, less reliability, and reduced combat readiness; and, with fewer airplanes purchased, the unit cost goes up even further. When the defense pie shrinks and the DOD is forced to prioritize spending, they also tend to reduce spending on force structure, training, logistics, personnel costs, overhead expenditures and other priorities critical to troop safety and effectiveness. It is thus vitally important to be very wise and careful in how defense dollars are spent. Exploding cost overruns hurt taxpayers, our troops, and, ultimately, our national interests.

I’ll end this commentary by posing a number of questions to think about. Given the history of underestimating weapon costs, such as currently being displayed with the F-35, isn’t it time to require that all major weapon programs be subjected to an audit by an independent and competent party? Shouldn’t we have an independent testing agency, so that we don’t have to rely exclusively on testing conducted by contractors and the military services, which are both incentivized to offer only good news about a weapon, even if it requires the manipulation of tests? Isn’t it high time to base defense spending decisions more importantly on combat and troop requirements and less on our addiction to gold-plated, costly, high tech weapons that are less combat ready, break down too often, get purchased in reduced numbers, and force cuts in many areas crucial to our national defense? We need a national dialogue on these questions.

 






2 comments:

  1. This explains beautifully how weapons systems are sold, then become very difficult to control. By the time the actual costs are known, there is so much momentum that its hard to stop. Further, given that the Pentagon has had a blank check for so long, there doesn't seem to be an incentive to change the process. No wonder Eisenhower was concerned about the military industrial complex!
    Perhaps the sequestration budget cuts will inspire the Pentagon to reform their procurement process....

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  2. The power of the lobby behind the F-35 goes beyond our shores. A few years ago Boeing redesigned the F-15 to add stealth capability and more advanced electronics / avionics. Many believed this aircraft (called the F-15 Silent Eagle) matched or was better than the F-35 in air to air combat. Even better, its cost was projected at $105m to 110m. It also has the advantage of using many of the existing parts of current F-15's, reducing maintenance.
    The South Korea air force apparently agreed that the F-15 Silent Eagle would be a capable alternative to the F-35 and decided, in 2010, to purchase them instead of the F-35. In mid 2013, this decision was overruled by the South Korean defense ministry. They have decided to purchase F-35's instead. Here is what they said "Defense officials cited the need to address North Korea's nuclear threat with stealthy, radar-evading jets, though other regional tensions are also driving the preference for the latest technology."
    The F-15 is a stealthy, radar evading jet...
    This decision came after a full court press from Lockheed-Martin and its congressional supporters. Lockheed-Martin desperately needs every order because it helps bring the cost per plane down and the Pentagon wants this program to succeed no matter what.
    Hmmmm...what the Pentagon wants the Pentagon gets...even beyond our shores.

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