The Weight of Evidence: Norwegian Defence Budget and F-35 Costings
(Source: Defence Analysis; posted Nov. 29, 2021)

By Francis Tusa
(EDITOR’S NOTE: This analysis of the cost of F-35 procurement compares the real-world figures contained in the Norwegian Ministry of Defence’s budget, as submitted to, and approved by, the Storting, Norway’s parliament.
The author, who is also the editor of the noted Defence Analysis newsletter, then compares Norway’s real-world costs to those officially presented by Swiss defense minister Viola Amherd, and approved by the Swiss Cabinet, and those submitted by Lockheed Martin in its bid for Finland’s HX fighter competition.
As described below, the discrepancies are very significant, to the point of casting serious doubts on the validity of the Swiss and Finnish cost estimates.
Coincidentally, the Swiss defense procurement agency, Armasuisse, yesterday released a new breakdown of its F-35 procurement cost, showing that it had increased by nearly 20% between June 30, when they stood at 5.098 billion Swiss francs, and Nov. 26, by when they had increased to 6.035 billion francs. (See previous story in our Features section)



LONDON --- In the aftermath of the Swiss decision to select the F-35A for its Air 2030 programme, when challenged, the F-35 lobby tried to brush away queries about the bizarre decision, stating that Bern based its decision (as had Belgium) on “real World data”, as opposed to “something that you might have seen on the internet somewhere”.

Which, of course, is interesting, as the only data that either country had serious access to was that provided by Lockheed Martin and the Pentagon, hardly impartial sources…

But if one wants “real World data” on the F-35, the A-model in this case, then why not consider that unreliable “internet source”, the Norwegian defence budget?

For if one cannot take, at face value, what one of the World’s foremost liberal democracies puts into its budget submission, then democracy is heading towards Hell in a hand basket!

The Raw Data

The 2022 Norwegian defence budget has the following cash figures for the F-35A programme:
-- Procurement of fighters + equipment: NOK90.23bn ($10.68bn)
-- Implementation/Administration costs: NOK3.8bn ($450m)
-- Base infrastructure costs: NOK8.32bn ($1.05bn)

Now, how does one add this up? Were you LM/Joint Project Office, you’d direct attention to “just” the procurement figure, but then stripping out things such as weapons etc, saying that these are not parts of the “cost” of an F-35.

But Defence Analysis would state that if something is required to allow a system, any system, to be used correctly, then this has to be included in the cost of that system, in this case, the F-35A. To quote the budget document:

“…procure a total of 52 combat aircraft with the necessary additional equipment and services, including weapons.”

It is pretty clear from this that the weapons are an integral part of the programme, and that it is pointless to consider the capability of the aircraft and the weapons separately. Basically, weapons are as integral to the F-35A as specialist ground support equipment, such as unique trolley A/Cs, or the ALIS/ODIN support systems. In which case, one can look at the procurement costs for Norway of the F-35A as being Point 1 on its own, Points 1+2, or Points 1+2+3:

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Right, this is pretty stark: on what grounds can anyone from the F-35 Fan Club state that these Unit Price Costs (as opposed to the LM preferred metric, “Cost of Production”, which equates to “Unit Production Cost”, which is simply the cost of manufacturing an aircraft, with no costs for other essential equipments) that Norway’s data is wrong?

Just consider: the lowest UPC, that of “just” the procurement of aircraft/essential equipment is three times the stated cost of production, and the highest figure is 3½ times the low-ball figure. On the basis of this data, it is worth making a comparison with some recent Defense Security and Cooperation Agency (DSCA) sales notes for F-35As:

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-- The Swiss UPC is pretty much devoid of weapons, as are the UAE’s and Belgium’s sales notes [Ed: so, try explaining why one is $50m per aircraft higher than another? It isn’t “just” support, as sales notes don’t cover, say, 10-years of support, only initial support].

-- It is well worth noting that the average UPCs from these deals is $200m, which sort of “proves” that the Norwegian “low” figure is an accurate one – is pretty much slap on that for Poland, and only a few million dollars above the Belgian figure. But all are a long way off from, “the $80m F-35” promised by Lockheed.

-- This data truly shows the difference between the pretty arbitrary, meaningless “Cost of Production” figure, showing the reality of buying the F-35 (and, to be honest, any complex weapons system): to get an operationally-useable aircraft, there are many, many extra tens of millions of Dollars that have to be spent.

What also comes clear from this chart is that one might query the UPCs for both Switzerland and Finland (as stated by the DSCA sales notes):

* Was the Swiss sale done at an artificially low price, but that there are a significant number of “hidden extras” that will arise as negotiations proceed?

* To keep the export drive for F-35 going, was LM allowed to offer an artificially low price [Ed: it is illegal to offer at the same or lower price to a customer, a product provided to the DoD] to offset for lower/slower US orders?

* Is the same true for Finland? That there has been a realisation that the F-35 faces some serious competition in Finland, so an artificially low price has to be offered?

Finland HX Programme

The Norwegian defence budget data, coupled with the other DSCA sales notes, raises an interesting question: is a €10bn procurement budget (weapons and infrastructure included) be enough to buy the desired 64 aircraft? Consider the following:

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-- Basically, if the Norwegian data has validity – and as seen above, there is data convergence with other air forces – then there is zero chance that a €10bn procurement budget (including weapons, infrastructure – see below re the latter) will buy 64 F-35As.

Defence Analysis hears more rumours that only the F-35A, and possibly Gripen E can meet the target of 64 aircraft…

-- Even the low-end Norwegian cost (excluding infrastructure etc) is the shy end of $2bn higher than the stated HX budget.

-- At Norwegian costs, €10bn/$11bn would buy 48-53-aircraft, at best.

-- As an extra aside, the current approvals for the 48 F-35Bs stand at £9.132bn (€11/$12.55bn). Yes, the F-35B is more expensive than an F-35A – but it isn’t meant to be this much dearer!

Joint Strike Missile Integration

The Norwegian 2022 defence budget mentions two phases for JSM/F-35 integration:

-- Phase 1: NOK1.328bn ($158m)
-- Phase 2: NOK5.780bn ($690m)
TOTAL: NOK7.327bn ($870m)

So what? Well, Defence Analysis will revert back to the costs of integrating UK weapons onto the F-35 (although the F-35B’s bomb bays are smaller than those of the F-35A, bringing extra, and more expensive engineering costs):

-- UK contract cost of Meteor integration: £75-80m
-- June 2021 contract announced by Lockheed Martin: $472m (£340m)

The LM contract is for the physical integration of Meteor BVRAAM and SPEAR 3 into/onto the F-35B, as well as an Italian-specific guided bomb, so the majority of the costs would refer to the UK weapons.

On the assumption that, say, $350-400m is for the long-range UK weapons, it would seem to be justifiable to Defence Analysis’s eyes to query why the JSM integration – which won’t be an internal fit, but on an external pylon – seems to be costing so much. Is it because, like with Meteor – Kongsberg is having to create an F-35-specific version of JSM?

To put it mildly, there are few “good” explanations as to why the JSM/F-35 integration costs seem to be so high.

F-35 Upgrades

There is a budget line item for F-35 upgrades: NOK6.487bn ($770m).

Now, it is unlikely to refer to historic work, such as possibly upgrading Norwegian F-35As to the basic Block 3 standard, and it cannot refer to far-future upgrades such as any Block 5, 6 etc – these are simply unknown, so you cannot even begin to budget for them.

The figure is far more likely to refer to the known Block 4 upgrade that will start to be embodied by c.2025-26.

Dividing $770m by 52 aircraft (assuming no new-builds are delivered in the Block 4 standard) produces a Block 4 UPC of $15m. This looks quite light, when comparing with other Block 4 data.

F-35 Base Costs

A very ignored cost. After all, if you have to spend $Xm to make an airbase capable of operating the F-35 (or any aircraft), then isn’t this a legitimate cost to add into the procurement figure? OK, you pays your money and takes your choice…

The Norway 2022 defence budget has a figure of NOK8.318bn ($1.05bn) for F-35-specific base infrastructure. The Main Operating Base is at Ørland, with a Forward Operating Base at Evenes in N Norway.

From a different part of the budget, the relevant cost breakdown produces:
-- Ørland: NOK6.673bn ($790m)
-- Evenes: NOK1.747bn ($210m)

So what? Well, with noting that whereas Ørland has all the vital supporting infrastructure to maintain/support the entire fleet, Evenes is a bare base for forward operations. And to take this hard data a degree further, one can start to see what a generic F-35 MOB costs:

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-- Pretty simple to see that the base cost of an F-35 MOB is $600m.

-- Although the cost of RAF Marham’s upgrade can partly be attributed to the core infrastructure being old, the same is far from true of RAF Lakenheath or Ørland.

-- Infrastructure cost is included in the Finnish €10bn procurement budget. If this data is solid [Ed: it is], then the actual available budget for procurement has just been cut by €750m+. And as seen in the analysis of UPCs, that would mean that Finland could only afford a maximum of 50 F-35As.

-- The data for Evenes is important, as Finland, too, wants a set of satellite bases to make the system more resilient. If the wish for four such bases were to be met, then this would cost close to $1bn extra.

Operating Costs

While the procurement of the F-35A is costing Norway some NOK90bn, complete/global costs for everything are NOK326bn ($38.75bn) for 52 aircraft. Deducting the first number from the second, and one gets the lifetime operations costs at NOK226bn ($27bn).

Now, the budget says that the programme started, for Norway, in 2012, and will run to 2054. But the Norwegian Air Force only received aircraft by c.2018, so proper operational costs would only have started to be incurred around then. This means that the F-35A will see 37-years of service [Ed: it could go on, but Defence Analysis will use what is in black-and-white]. So,

-- 52 aircraft procured.
-- 37-years of service.
-- $27bn through-life operations costs.
=>$19.5m per aircraft per year operations cost.

This is substantially higher than target of $4m per F-35A set by the US DoD, and also than the 2019 actual annual cost per F-35A of $7.1m. And as the data is given in 2021 prices, future years’ costs will be inflated.

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Defence Analysis puts this in to show that Norway doesn’t seem to be buying into the $25,000 cost per flight hour. At best, Oslo seems to believe that an F-35A – the cheapest of the three variants – costs at least double that.

But what does the real-World Norwegian data say about the recent Swiss data, as well as what is being postulated in Finland?

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-- To repeat: the Norway budget is based on an air force that now has 30 F-35As, and has been flying them for 4-5-years. This is not the case for either Switzerland, let alone Finland.

-- The Swiss operating budget for 30-years is at least $4bn lower than that based on the Norwegian costs.

-- The current Finnish HX operations budget is nearly four times smaller than what would be the case for a 64-aircraft fleet if Norway’s F-35A operations costs are taken as the baseline.

-- As seen above, there are a number of reasons why Switzerland’s UPC is far lower than pretty much everyone else’s: will Bern be getting a shock once it starts to see what real-World F-35 operations/support costs are?

-- But it has to be said that the Swiss F-35A operations costs are far more realistic than those put forward by Finland – and the Swiss data is based on 36 aircraft, while Finland desires 64, and will likely settle for 60.

-- Finland’s operations/support costs for a 64-aircraft fleet over 30-years, if the Swiss costs are applied, would be three times higher than budgeted for.

-- Worth noting that one thing that Switzerland has “accepted” is that its air force might need to fly fewer hours, and operate more on simulators, keeping costs low. So, on that basis, how come its operating costs are still substantially higher than the Finnish HX budget?

A €10bn ($11.6bn) 30-year operating budget seems to be completely unrealistic for Finland’s HX programme if the F-35A is selected. Real World data from Norway shows, categorically, that a far higher budget will be needed.


Flight Training costs

To consider, further, the issue of training/flying, Defence Analysis would note another comment from the Norwegian 2022 defence budget:

“In the spring of 2021, three Norwegian F-35 aircraft were transferred to the training base at Luke Air Force Base (Luke AFB) in the USA. This was done in order to train a sufficient number of Norwegian F-35 pilots. A total of ten Norwegian aircraft are now part of the multinational partnership's training base at Luke AFB.”

-- This means that now, 10 out of 31 RNorAF F-35As are based in the USA – a third!

-- And note that this is to provide a sufficient number of pilots, suggesting that there is something “difficult” about producing pilots (and other crew?).

-- As it is going to be more expensive to train in the USA, why do this? Is it because the F-35 is just so noisy, that the RNorAF feels that it is better to do this Stateside?

-- By-the-way, the RNorAF has eight simulators, so this would seem to be about double what the UK has, but still has to undertake more live flying to train.

-- And to recap something mentioned above, Switzerland was convinced that the F-35’s simulation was so advanced, that there was less need to do live flying, as it could be done virtually. Swell, Norway seems to show that this is not the case!


Ratio of Acquisition – Operations costs

An extra issue to consider, as regards the Norwegian budget data, and then the Finnish HX programme:
-- Norway ratio of operations to procurement costs: 2.5:1
-- Finland ratio of operations to procurement costs: 1:1

So what? Well, it is a well-known rule of thumb (and backed up by real world data), that support/operations costs of complex equipment are always higher than the procurement cost, and figures of 2-4:1 are normal.

The Norwegian defence budget data falls right into the basket with its ratio – but the Finnish requirement seems to be pretty unrealistic on the basis of historical evidence.

So why has the HX programme got what would seem to be a completely provable low figure, one unlikely to be attained?

Conclusion

Defence Analysis might – just might – apologise for this deep data dive. Well, possibly – but no. What this data shows is that a lot of figures for F-35 costs are hardly based on reality.

For those who might doubt what Defence Analysis has derived here, a simple question has to be asked: why has the Norwegian MoD put these budget figures to their Parliament, if they are not based on realities on the ground? And why would a Parliament connive in using figures which could be audited and shown to be false?

To recall: the RNorAF is flying the F-35, which is not the case with either the Belgian or Swiss Air Forces. So, whose data/figures would you trust?

What the 2022 defence budget shows is that the F-35 has serious costs, is far from being as easy to operate as an F-16, and has astronomical operating costs.

And, bearing in mind that the US Air Force is free to admit that the F-35A costs about double what it had planned for, how do you get from the RNorAF’s $19.5m per aircraft per year to even the current $7m experienced by the USAF? It’s not a few percentage points off – it’s an order of magnitude off!

Defence Analysis also does not apologise for bringing Finland’s HX programme into the equation, as the Norwegian data ought to be a hard baseline for Helsinki to base its procurement on.

As the two countries seem to have similar budget systems, one has to work hard to explain why Norway’s F-35 data is not of great relevance to Finland.

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