Cost of F-35 Block 4 Upgrade Quadruples But May Not Suffice
(Source: Defense-Aerospace.com; posted March 09, 2018)
PARIS --- The cost of the F-35’s Block 4 upgrade program – the one that should allow the aircraft to finally meet its full contractual specifications – has quadrupled since August, according to the latest estimates that emerged during March 7 congressional hearings.

In August, the Government Accountability Office (GAO) reported that the Block 4 upgrade should be managed as a major defense program because of its high cost, which it then estimated at $3.9 billion.

During a 7 March 2018 hearing of the House Armed Services (HASC) tactical air and land forces subcommittee, the head of the F-35 program, Admiral Mathias Winter, said that Block 4 (whose name has now been changed to Continuous Capability Development and Delivery (C2D2), would cost USD10.8 billion through FY 2024.

He told reporters after the hearing that this $10.8 billion only covered development, and that an additional $5 billion would be needed for procurement, Inside Defense reported March 7.

During the same hearing, Rep. Niki Tsongas of Massachusetts estimated total cost of the C2D2 phase at $16.4 billion through FY 2024, of which $11 billion (close to Winter’s $10.8 billion) for development and $5.4 billion for procurement.

“This potential cost of $16 billion is an astonishingly high amount and, as far as I am aware, greatly exceeds any cost figures previously provided to Congress,” Tsongas said during the hearing. (Emphasis added—Ed.)

$16 billion may not be enough

Some observers, however, believe the $16 billion estimate may actually understate the cost of developing, procuring and implementing the C2D2 program.

This opinion is based on the fact that the Joint Program Office (JPO) has arbitrarily announced that the F-35 System Development and the Development (SDD) test phase will be over -- and thus unfunded -- by end-June of this year.

As a consequence, all the future money required to fix and flight-test the many remaining SDD deficiencies (plus many more that will invariably appear) will now have to be paid for by the C2D2 annual budgets.

Now, the JPO estimate of $10.8 billion for all C2D2 development work through FY24, but “that money has to cover both the overhanging mountain of deficiency fixes and the development of a wish list of new, hugely ambitious, gold-plated ‘modernization’ capabilities to be added to the still problem-ridden, relatively ‘simple’ Block 3F capabilities,” notes a knowledgeable industry insider.

The total SDD bill, up to the incomplete development of Block 3F and the arbitrary end of SDD, is $55.5 billion (in then-year $).

This means that the JPO is implying that a mere 20% add-on (Winter’s $11 billion) to the prior development bill will pay for:
a) completing and flight testing Block 3F,
b) fixing and flight testing 1000+ known and serious SDD deficiencies,
c) fixing and flight testing the myriad undiscovered deficiencies sure to emerge during the much more rigorous IOT&E tests starting next year, and
d) developing and flight testing the whole wish list of Block 4 "modernization" capabilities.

This appears impossible, and is one reason that the 2017 DOT&E Annual Report assessed the current C2D2 plan as "unexecutable".

The sums are even more improbable for procurement of C2D2, which is estimated by Winter to cost $5 billion for buying and retrofitting the C2D2/Block 4 capabilities for all 998 F-35s projected to be in the fleet as of 2024.

This implies that buying and retrofitting all the Block 4 capabilities -- plus all the unresolved deficiency fixes -- will cost about $5 million per aircraft, which appears improbably low.

Substantial additional costs for foreign partners.

Because of the way the program is structured, the six foreign partners can expect to pay hefty additional costs for the C2D2 upgrade.

Winter said development costs will be shared with U.S. allies, leaving the Department of Defense on the hook for $7.2 billion, Flight International reported March 8, meaning that partner nations will have to cough up an additional $3.8 billion.

In a Dec. 19 report, the House of Commons Defence Committee wrote (p. 23) that “Lockheed Martin also informed the Committee that following the completion of the SDD phase, the partner nations in the programme “are committed to developing enhancements to in-service aircraft through ‘Continuous Capability Development and Delivery (C2/D2)”. According to Lockheed Martin, they expect the UK to “pay approximately 4.5% of the total cost to develop and integrate new capabilities into the F-35”. (Emphasis added—Ed.)

US Air Force has no money for C2D2

Lt. Gen. Jerry D. Harris, Jr, Deputy Chief of Staff for Strategic Plans and Requirements, warned during the same March 7 hearing that the US Air Force did not have funds to pay for the C2D2 upgrade.

“The Air Force is concerned over funding for Block 4 modernization. Congress reduced the F-35 follow-on modernization in fiscal year 2017 by approximately sixty percent (60 %) and for fiscal year 2018, Congress is recommending a twenty-five percent (25 %) reduction in follow-on modernization funding.

…/…

“I can’t emphasize enough how important it is that we fully fund Block 4. We are at a crucial stage where we must commit to the developmental work to ensure we have these capabilities available to meet a 2025 need.”

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