Report On the Basis for Decision Prepared By the Danish Ministry of Defence Concerning Procurement of 27 F-35 Combat Aircraft
(Source: Danish court of Audit, Rigsrevisionen; issued Nov 01, 2017)
The purpose of the study is to assess whether the Ministry of Defence has elaborated an adequate basis for the decision to procure 27 F-35 combat aircraft. The report answers the following questions:

-- Has the Ministry of Defence carried out an adequate evaluation of whether the procurement of 27 F-35 combat aircraft will meet the level of ambition set out for the Danish combat aircraft?

-- Has the Ministry of Defence’s applied an appropriate model for the analysis of the life-cycle costs of procuring 27 F-35 combat aircraft?

It is Rigsrevisionen’s assessment that generally the basis for decision is founded on thoroughly conducted analyses and calculations. However, the study shows that the Ministry of Defence has neither provided evidence of some of the significant assumptions underlying the calculations nor reflected the uncertainty associated with the assumptions.

It is Rigsrevisionen’s assessment that this will increase the risk beyond what is indicated in the basis for decision that, the Danish Defence will be unable to perform all the agreed tasks with the 27 F-35 combat aircraft.

CONCLUSION

The political agreement to procure new combat aircraft was made on the basis for decision provided by the Ministry of Defence. It is Rigsrevisionen’s assessment that generally the basis for decision is underpinned by thorough analyses and calculations.

However, the study shows that the Ministry of Defence has not provided evidence of a number of key assumptions underlying the calculations, nor has it reflected the uncertainty associated with the assumptions.

It is Rigsrevisionen’s assessment that there is a higher risk – than indicated in the basis for the decision – that the Danish Defence will be unable to perform all the agreed tasks with the 27 F-35 combat aircraft.(Emphasis added throughout—Ed.)

Rigsrevisionen’s study shows that the calculation of the necessary number of flight hours is based on assumptions concerning synergy and the pilots’ working conditions. However, these assumptions are not sufficiently evidenced nor is the possibility that they do not hold adequately reflected.

The study also shows that the Ministry of Defence’s calculation of the total number of flying hours for the 27 F-35s does not reflect potential shortcomings of the assumptions concerning average number of flying hours per year or the availability rate of the aircraft.

Therefore, there is a risk that the requirement for flying hours has been under-estimated, and the total number of flying hours overestimated.

The basis for decision should have highlighted the risk related to the necessary number of flight hours and the total number of flying hours, since both aspects have an impact on the ability of the 27 F-35 combat aircraft to deliver all the required tasks.

Furthermore, Rigsrevisionen’s study shows that the Ministry of Defence has estimated the life-cycle costs for the 27 F-35 combat aircraft at approximately DKK 66 billion over 30 years. Generally, the Ministry of Defence has employed an adequate model for calculating the life-cycle-costs, but the ministry has not adequately reflected all the risks associated with the underlying assumptions concerning, for instance, synergy and the pilots’ working conditions.

Therefore, the ministry may have underestimated the costs allocated to cover risks, which may increase the estimated life-cycle costs.

The Ministry of Defence has informed Rigsrevisionen that if these risks materialise, it would expect the capabilities of the Danish Defence to deliver the expected tasks to be affected first.

Based on the results of the study, Rigsrevisionen finds that the Ministry of Defence should improve the Danish Parliament’s basis for decision in connection with the submission of the request for approval of the procurement to the Finance Committee by:

 Accounting for the risk associated with the key assumptions, including the inherent risk that the Danish Defence cannot deliver all the expected tasks with the 27 F-35 combat aircraft.

 Updating the estimated costs to cover risks and more clearly reflect the risk associated with the estimated total life-cycle costs.


Click here for the English-language summary (4 PDF pages), and

Click here for the full report (in Danish, 44 PDF pages),

both on the website of the Danish Court of Audit.

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