Air Force Ambitions Higher Than Budget
(Source: Dutch Court of Audit; published Oct. 24, 2012)
The tasks and deployment of the Royal Netherlands Air Force should be reconsidered. Fundamental decisions are needed that will affect the armed forces as a whole. The Netherlands Court of Audit came to these conclusions after investigating three options to replace the F-16 fighter aircraft.

If the government continues its current policy of testing the Joint Strike Fighter with the Americans and preparing the Ministry of Defence for the arrival of the JSF, the air force's ambitions cannot be achieved within the current budget. Procuring fewer JSFs would be less expensive but would require a reconsideration of the ambitions. This could lead to new expectations of the new fighter aircraft's capabilities, the number of aircraft needed and the Netherlands' participation in international operations.

If, by contrast, the government accedes to the House of Representatives' wishes to take all necessary steps to withdraw from the JSF programme, there would also be far-reaching consequences for the armed forces as a whole. If military aircraft were purchased 'off the shelf' at a later date, it would be necessary to operate the ageing F-16 aircraft for longer at higher cost and with reduced deployability.

The Court of Audit's investigation of the cost of withdrawing from the JSF programme also found that withdrawing from the test phase only would be largely disadvantageous to the Netherlands and therefore should not be the first choice.

The investment budget reserved by the Ministry of Defence is not adequate to replace the current number of F-16 aircraft (68), never mind to procure the planned number of JSFs (85). Decisions must therefore be taken on the composition and capability of the Royal Netherlands Air Force or on the available budget.

The operational capability objectives are relevant as the Netherlands must inform NATO in 2014 of its F-16s' deployment capability in the period 2014-2019.

The Court of Audit's report, Cost of withdrawing from the Joint Strike Fighter programme, published on 25 October 2012, was prepared at the request of the Minister of Defence after the House of Representatives had submitted a motion in July 2012 calling on the government to take all necessary steps to withdraw from the JSF programme.

The Netherlands has already spent €1.2 billion on the JSF
The Netherlands has already spent €1.2 billion of the €1.7 billion it had reserved for the preparation, development and testing of the JSF. The expenditure includes the procurement of two test aircraft.

In its report, the Court of Audit notes that a decision on the procurement of JSFs must be taken soon because, as a partner country, the Netherlands must order the aircraft by 2015 at the latest in accordance with the production agreements made with the US and the aircraft manufacturer, Lockheed Martin.

Continuing the current international partnership as a member of the JSF programme would have functional benefits. Partner countries would have compatible aircraft, systems and operational concepts. But there would also be risks: the organisation and aircraft would be more complex, more delays might be incurred and the cost of the JSF aircraft might rise further.

Longer deployment of F-16: higher costs
The F-16 fighter aircraft will be replaced in stages. The Ministry of Defence initially intended to replace them in 2016-2024. Setbacks in the development and testing of the JSF have delayed the availability of the JSF by three years. Operating the F-16 with guaranteed technical quality for this period will cost €334 million, according to the minister. A delay of five years would cost at least an additional €180 million.

Such a delay might arise if the Netherlands withdraws from the test phase or from the JSF programme as a whole and later decides to procure a replacement American or European aircraft. In the meantime, the ageing F-16s will not be deployable on all missions and in all circumstances.

The Court of Audit had warned in 2011 that the ministry's ambitions were not in step with the available funding, the number of pilots and the number of F-16s. Operating an ageing fleet of fighter aircraft for longer would place even more pressure on the ambitions.

Response of the minister: opt for fewer JSF aircraft
In his response to the audit, the Minister of Defence favoured the procurement of the JSF and recognised that the armed forces' ambitions would need to be reconsidered. He thought 56 JSF aircraft could be deployed responsibly on fewer and shorter missions. The minister did not refer to the option of withdrawing from the JSF programme. The Court of Audit thinks the minister should explain what the new total of 56 JSF aircraft means for the air force, the operational objectives of the armed forces in general and thus for the Netherlands' participation in NATO.

Capital expenditure budget
The Ministry of Defence will have to apply half its total capital expenditure budget for seven years to order 68 JSF aircraft and for nine years to order 85 aircraft. Given this budgetary impact, it seems inevitable that fundamental decisions will have to be taken on other weapons systems, which might also affect the navy and the army.

In June, the Ministry of Defence estimated the cost of 85 JSFs at €8 billion. It had reserved no more than €4.5 billion to replace the F-16s. Of this sum, €4.05 billion is still available. (ends)



Cost of Withdrawing from the Joint Strike Force Programme
(Source: Dutch Court of Audit; published Oct. 24, 2012)
At the request of the Minister of Defence, the Netherlands Court of Audit has investigated three policy options concerning the Joint Strike Fighter (JSF). We investigated the costs and consequences of the government: 1) continuing the current policy of partnership in the JSF programme; 2) continuing the current policy but no longer participating in the test phase of the JSF programme; 3) completely ending the Netherlands' involvement in the JSF programme and buying an aircraft 'off the shelf'. We investigated these policy options as to their functionality, timing and cost.

Conclusions
The government initially decided to participate in the JSF programme in order to achieve the deployability objectives set at the time for the Royal Netherlands Air Force.

We found that two of the three options (option 1 and option 3) would force the Ministry of Defence to take fundamental decisions on the composition and capability of the air force and possibly of other parts of the armed forces. Such decisions would probably affect the functionality of the Dutch defence organisation.

To resolve the conflicts between budget, capability and ambition, the minister needs to reconsider the current operational deployability objectives of the air force and possibly of other defence units, also in the context of NATO, for example in the form of closer operational collaboration with other countries, or reconsider the budgetary implications.

-- Option 1
If the current policy is continued without alteration, the air force will have an aircraft that the Ministry of Defence believes has highly desirable functionality. This option also harbours inherent risks, though, regarding timing and cost.

Unaltered continuation of the current policy also runs into the problem of lack of financial resources to replace the F-16. The resources, currently €4.05 billion, are inadequate to procure either 85 or 68 aircraft. If fewer fighter aircraft were procured, the air force would have to reconsider its operational deployability objectives.

-- Option 2
We do not consider withdrawal from the test phase (IOT&E) to be an appropriate option. It would produce only disadvantages for the state, both functionally and regarding timing and cost.

--Option 3
In view of the functionality, timing and cost consequences, withdrawing from the JSF programme and procuring another aircraft 'off the shelf' would be rational only if the air force's current operational deployability objectives were reconsidered.

Recommendations
We recommend that our findings and conclusions on the three policy options be taken into consideration in the decision-making on the JSF. If the minister can procure far fewer JSFs with the available resources, we believe he should reconsider the ambitions set for the air force. This might lead to new expectations of the capabilities the Netherlands requires of the aircraft that will replace the F-16, the number of aircraft needed and the air force's participation in international operations.

Response
In his response to the audit, the Minister of Defence favoured the procurement of the JSF and recognised that the armed forces' ambitions would need to be reconsidered. He thought 56 JSF aircraft could be deployed responsibly on fewer and shorter missions. The minister did not refer to the option of withdrawing from the JSF programme.

Court of Audit's afterword
The minister chiefly confirmed our conclusion that the Ministry of Defence needs to take fundamental decisions on the composition and capability of the Royal Netherlands Air Force. If 56 JSFs were procured, the operational objectives of the armed forces, and thus the Netherlands' contribution to NATO, would have to be reconsidered.


Click here for the full report (144 PDF pages; in Dutch only) on the Rekenkamer website.

(ends)
Continuing JSF Is Cheaper Than Stopping
(Source: SEO Economic Research; issued Oct. 25, 2012)
(Issued in Dutch only; unofficial translation by defense-aerospace.com)
Continuing the test phase of the Joint Strike Fighter (JSF) is a lot cheaper than would be pulling out. Participation in the JSF brings with it tens of billions of euros of turnover for the Netherlands. The JSF also brings innovation to the Dutch aircraft industry, causing additional spin-offs to occur. The program leads to workers shifting from other jobs, while employees are more productive. The employment effect is mostly short-term, but neutral in the long-term.

Stopping the JSF is expected to have a negative effect on spin-offs and spillovers compared to proceeding with the program.

The consequences of getting out of the test phase are difficult to estimate. The effect is negative but may be limited if the Netherlands remains firmly committed to the other parts of the JSF program.


(EDITOR’S NOTE: SEO Economic Research is a think-tank associated with the University of Amsterdam)

-ends-




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