F-35 Fighter: Price Goes Up $771 Million on Most Expensive Defense Program
(Source: ABC News; published July 14, 2011)
The F-35 Joint Strike Fighter program -- already the most expensive defense acquisition program in U.S. history -- just got even more costly, to the tune of $771 million.

The Pentagon informed the Senate Armed Services Committee Monday that the first 28 production models of the F-35, some of the world's most technologically advanced fighters developed by defense contracting giant Lockheed Martin, were going to cost the additional three quarters of a $1 billion, and the government will be picking up part of the tab.

The news sparked a brief Twitter spat between Sen. John McCain, the senior Republican on the Senate Armed Services Committee and longtime critic of the F-35's cost overruns, and Lockheed Martin.

"Congress notified that first F-35 jets have cost overruns of $771M. Outrageous!" McCain tweeted Tuesday. "Pentagon asking for $264M down payment now. Disgraceful."

The next day, a tweet from Lockheed Martin said, "The F-35 team is focused on reducing costs of the jets and is showing significant improvement in key areas," and linked to recent Senate testimony by Tom Burbage, Lockheed Martin's executive VP and general manager of the F-35 program.

McCain responded just hours later by directing his next tweet at Lockheed Martin: "To most observers, a $771M cost overrun for 28 F-35s doesn't qualify as 'significant improvement.' Taxpayers deserve better."

A member of McCain's staff told ABC News that while the Pentagon has hinted at a significant new round of cost overruns for the F-35, Monday was the first time a hard figure was given for the total scope of the problem. In late June, the Pentagon filed a request to transfer $264 million from other programs to help pay for it, the staff member said.

Lockheed Martin said the additional cost was due to "inefficiencies" related to a 2004 redesign that was meant to shave thousands of pounds of excess weight from the plane and said that at this phase in production Lockheed shares the cost overruns with the government.

Throughout its production, the F-35 has been wracked with unexpected cost overruns and production delays to the point that a recent report by the Government Accountability Office said the cost of purchasing and maintaining each plane has approximately doubled from original projections by Lockheed Martin. The GAO estimates U.S. taxpayers will invest a total of $385 billion to develop and maintain 2,457 planes through 2035. The program has also come under fire for the initial inclusion of a duplicate engine development program that the Pentagon said was unnecessary.

It's not the first time McCain has publicly decried what he called "out-of-control cost overruns" by the F-35 program. In June, he proposed an amendment that would saddle Lockheed Martin with the burden of any cost overruns in the latest group of F-35s still under development.

"If we fail to act now, continuing cost overruns on the F-35 of the kind we have experienced over the last 10 years will siphon off precious resources and put at risk every other major Defense procurement program," McCain said then.

Lockheed said they have learned as the program has grown and later batches of the planes will be made more efficiently and affordably.

"Our factory performance metrics are now showing significant improvement in all key areas, we are experiencing excellent learning curve reductions in assembly hours and we have essentially eliminated all traveled work," the company said.

Representatives for the Department of Defense's joint F-35 program did not respond to requests for comment on this report. (ends)

A Billion Here, A Billion There (excerpt)
(Source: Aviation Week’s ARES blog; posted July 15, 2011)
Credit where it is due for Steve Trimble's reporting of overruns -- now estimated at $1.15 billion, or $40 million per aircraft -- on the first three low-rate initial production (LRIP) batches of Joint Strike Fighters.

A billion here, a billion there, you might say, but these disclosures, while not unexpected, are very important.

Since March 2010 -- after SecDef Robert Gates fired program director Maj Gen David Heinz, and a Senate hearing disclosed new cost estimates for the fighter -- Lockheed Martin and its supporters have been arguing that the Pentagon's estimates are too high.

Their principal weapon in this fight has been a chart showing, purportedly, that "actual" JSF costs have consistently been lower than government estimates. (end of excerpt)

Click here for the full article, on AvWeek’s Ares blog.

The Last Manned Fighter
(Source: The Economist; published July 15, 2011)
Leon Panetta is under no illusions about what Barack Obama moved him from the CIA to the Pentagon to do. The wily Mr Panetta, who took over from Robert Gates as defence secretary at the beginning of the month, is everyone’s idea of a safe pair of hands. But his greatest claim to fame (other than presiding over the plan to kill Osama bin Laden) is as the director of the Office of Management and Budget who paved the way to the balanced budget of 1998.

Mr Panetta has inherited from his predecessor the outlines of a plan to reduce military spending by $400 billion by 2023. But America’s fiscal crisis (and the lack of any political consensus about how tackle it) makes it almost certain that Mr Panetta will have to cut further and faster than Mr Gates would have wished.

That could be bad news for the F-35 Joint Strike Fighter, the most expensive military-industrial programme in history, and its lead contractor, Lockheed Martin. The plane is expected to come into service six years late (in 2016) and wildly over-budget. The Pentagon still plans to buy 2,443 F-35s over the next 25 years, at a cost of $382 billion. [Actually, $389 billion and counting—Ed.] But in a parting shot, Mr Gates gave warning that although he did not think the F-35 faced cancellation, “the size of the buy” might have to be cut.

After beating a Boeing design that was deemed technically riskier, Lockheed Martin signed the contract with the Department of Defence to develop the F-35 in 2001. It was an ambitious undertaking. The aim was to reap huge efficiency gains by replacing nearly all of America’s ageing tactical aircraft (the air force’s F-16s and A-10s; the navy’s A/F-18s and the marines’ AV8B jump jets) with three variants of one basic design. There would be a conventional take-off and landing (CTOL) version for the air force, a short take-off and vertical landing (STOVL) version for the marines and a beefier carrier version for the navy.

With radar-beating stealth capability and a suite of advanced software and sensors, the F-35 would be a “fifth generation” fighter, far more effective in both its primary ground-attack role and air defence than “legacy” aircraft. (Respectively eight times and four times better, say Lockheed Martin executives, though by what measure is anyone’s guess.)

Burning banknotes

Above all, the F-35 was meant to be affordable. Development costs would be shared across the three versions and with eight foreign partners who were also buying and helping to build the F-35. Manufacturing scale economies were assured because more than 3,000 planes were to be sold—2,443 to Uncle Sam and the rest to his NATO allies. And because 80% of the parts were common to all three versions, maintenance and logistics would be simpler and cheaper. Deliveries of operational aircraft were to begin in 2010.
That was the idea, anyway. The F-35’s critics have long argued that its performance is compromised by having to fulfil too many roles and that an over-complicated design lashed to an over-optimistic schedule was asking for trouble. In the past 18 months, as delays have mounted and costs escalated, even some of the plane’s ardent fans have become alarmed.

In 2009 the Pentagon realised that a breach of the Nunn-McCurdy rules on over-budget defence-procurement programmes was inevitable, because costs would exceed the original baseline by more than 50%. An internal report declared: “Affordability is no longer embraced as a core pillar.”

Anticipating the breach, in March 2010 Mr Gates restated his support for the F-35, but hit out at “unacceptable delays and cost overruns”. He said he was “fundamentally restructuring” the programme, adding more money and time for development. He also withheld $614m in performance payments to Lockheed Martin, tying its future earnings to specific criteria rather than the subjective ones that he believed had stiffed the taxpayer.

In January this year Mr Gates made a series of further announcements which included spending another $4.6 billion on development, slowing down initial production to avoid building aircraft that would later have to be expensively upgraded and putting the marines’ STOVL version on two-year “probation” because of problems with the aircraft’s structure and propulsion system.

Condemning the failure to get costs under control, which he blamed partly on the lack of financial discipline in the defence department during George Bush’s presidency and partly on execution failures by Lockheed Martin and its partners, Mr Gates said that “the culture of endless money that has taken hold must be replaced by a culture of restraint”.

The latest cost estimates from the Government Accountability Office (GAO), published in May to coincide with a Senate Armed Services Committee hearing on the F-35 programme, were shocking. The average price of each plane in “then-year” dollars had risen from $69m in 2001 to $133m today. Adding in $56.4 billion of development costs, the price rises from $81m to $156m.

The GAO report concluded that since 2007 development costs had risen by 26% and the timetable had slipped by five years. Mr Gates’s 2010 restructuring helped. But still, “after more than nine years in development and four in production, the JSF programme has not fully demonstrated that the aircraft design is stable, manufacturing processes are mature and the system is reliable”. Apart from the STOVL version’s problems, the biggest issue was integrating and testing the software that runs the aircraft’s electronics and sensors. At the hearing, Senator John McCain described it as “a train wreck” and accused Lockheed Martin of doing “an abysmal job”.

What horrified the senators most was not the cost of buying F-35s but the cost of operating and supporting them: $1 trillion over the plane’s lifetime. Mr McCain described that estimate as “jaw-dropping”. The Pentagon guesses that it will cost a third more to run the F-35 than the aircraft it is replacing. Ashton Carter, the defence-acquisition chief, calls this “unacceptable and unaffordable”, and vows to trim it. A sceptical Mr McCain says he wants the Pentagon to examine alternatives to the F-35, should Mr Carter not succeed. (end of excerpt)

Click here for the full story (and a related editorial) on the Economist website.


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