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Analysis: Fiscal Reality Catches Up with Joint Strike Fighter |
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(Source: defense-aerospace.com; published Sept. 10, 2006)
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by Giovanni de Briganti
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PARIS --- Fiscal reality caught up with the F-35 Joint Strike Fighter last week, as the full Senate reduced FY2007 funding and all three US services reduced their FY08 spending plans for the program. If confirmed, these funding cuts will result in production delays that could add as much as $12 million to $16 million to the unit price of early production aircraft, the Pentagon’s JSF program director warned Sept. 8.
These delays, and the resulting cost increases, could make some of the program’s eight foreign partners, who already have tight delivery deadlines, reconsider their purchase plans, and possibly their commitment to the program. Australia, Britain and the Netherlands have previously stated that their requirement calls for deliveries to begin in 2010-2011.
The risk that the F-35's price could soar was mentioned by US Air Force Brig. Gen. Charles Davis, the F-35 Program Executive, in a Sept. 8 interview with Reuters news agency. Davis said that “internal studies showed that F-35s in early batches could cost as much as an additional $12 million to $16 million if you ‘just basically slow down the first production significantly.’" However, he added, "they get much cheaper very quick."
This increase would be added, according to Reuters, to F-35 unit prices ranging from $45 million to $60 million, depending on the version. These prices are based on a 2002 projection and unadjusted for inflation, Reuters said, but did not state their origin.
However, other sources, including the Congressional Research Service, the Government Accountability Office and the Congressional Budget Office, have estimated much higher unit production prices, of between $94.8 million (CRS) to $115 million (GAO) for each of the 424 planned F-35 Initial Low-Rate Production (LRIP) aircraft.
Adding Davis’ estimate of cost escalation (averaged at $14 million) to the more realistic range of prices quoted by the three financial watchdogs, prices would increase to between $106.8 million to $129 million for each LRIP aircraft.
As things now stand, a postponement of at least one year of the F-35’s production launch appears to be a foregone conclusion, making Davis’ price escalation scenario highly probable.
The delay is already enshrined in the $469.7 billion military appropriations bill for 2007 approved Sept. 7 by the Senate by a 98-0 vote, which also cut $1.2 billion from funds earmarked for the F-35. The postponement had been recommended by the Government Accountability Office which says that, with less than 1% of flight tests completed, the program is not mature enough to warrant production.
In its version of the FY07 Defense Appropriations Act the House of Representatives in June axed funding for one of five F-35s requested by the Pentagon, and reduced funding for the program by $140 million. Senate and House now must work out differences in their respective versions before the bill is submitted to President Bush.
In separate but related developments, all three US services are reacting to anticipated FY08 funding shortfalls by reducing their F-35 budgets, the Inside Defense newsletter reported last week, and are moving funds earmarked for initial F-35 production to other budget accounts.
In the FY08 spending plan submitted to the Pentagon Aug. 15, the US Air Force has reduced its expected purchase of F-35s by 72 aircraft. It plans to use the money thus freed up to absorb cost over-runs in F-35 development that were revealed in April.
In mid-August, the US Navy and Marine Corps also introduced major changes to their F-35 plans for FY08. According to this revised scenario, the first Marine Corps squadron would be fielded in 2012 (and not 2010 as now planned), Inside Defense said. In addition, 35 production US Navy/Marine F-35s would be delayed to beyond 2013, thus freeing $1 billion needed to finance other acquisition budget lines.
These plans are not final, however, and could be either approved, rejected or modified by the Office of Secretary of Defense Ronald Rumsfeld during the FY08 budget process. But fiscal pressure is unlikely to disappear, making it hard to imagine a scenario in which F-35 funding could be maintained.
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