The Fighter Saga part II: Hidden Costs
(Source: Republik.ch; posted Jan. 13, 2022)

By Priscilla Imboden (text) and Alexander Glandien (animation)
PARIS --- Non-transparent selection, over-optimistic cost calculations, changes to criteria at the last minute – this is the inside story of the largest arms procurement in Swiss history.

This is the second of three-articles in which the Swiss Republik.ch news website investigated the Swiss government’s controversial selection of the Lockheed Martin F-35 fighter as its future combat aircraft.


ZURICH --- Unassailable. Clean. Correct. This is how the selection process for the new fighter jet of the Swiss Air Force should have been run. That was the lesson the Swiss Defense Department (VBD) learned from the 2014 Gripen disaster, when Swiss voters rejected the procurement of the Swedish fighter jet after a voting campaign full of intrigues and scandals.

This time it would be different: no leaks, no foreign interference, no disagreement among supporters, no opaque lobbying.

For a long time, it looked as if this strategy would work. Nothing about the evaluation process was leaked. The basic debate about whether a new combat aircraft was needed fell silent, once the very thin margin of approval of the budget for the new jets by a popular vote.

Everything was calm….until the Federal Council decided to buy the F-35

Everything was calm….until the moment when the Federal Council decided to buy the F-35 stealth fighter jet from the USA.

Shortly before the summer holidays, on June 30, Defense Minister Viola Amherd announced that the F-35 had scored particularly well in the evaluation’s three main criteria of effectiveness, product support and cooperation. In addition, Amherd stressed, the F-35 was clearly the cheapest in terms of costs. Thus, the F-35 won against the American F/A-18 Super Hornet, the French Rafale and the Eurofighter, offered jointly by Germany, Great Britain, Italy and Spain.

The Federal Council's decision was a huge surprise. Both at home and abroad, the claim that the American F-35 was not only the best, but also the cheapest fighter jet on the market, stunned observers because, while that flying technological wonder, with its ‘stealth’ capability, is considered one of the best military aircraft in the world, it is also the most expensive US war machine of all time.

Since then, political and military circles have been puzzled: How is it possible that the F-35 is supposed to be operated more cheaply in Switzerland than anywhere else?

How a fighter jet can be made to look cheaper

The decision in favor of the F-35 was the result of a three-year evaluation in which the Federal Office for Armaments (Armasuisse) compared all the competing aircraft types. An extremely complex and hidden process: the data that flowed into the process is protected by the military and is subject to trade secrets. Only a few senior officials in the defense department, around Air2030 program manager Peter Winter, have detailed knowledge and a complete overview of the evaluation.

Discussions with the losing competitors from the USA, France and Germany therefore offer a rare insight into the fighter jet selection process. As competitors, they experienced the procurement process from the inside.

Naturally, the losing companies are not happy about the selection made by the Federal Council; after all, they lost. But their disappointment goes beyond missing out on a multi-billion contract: they accuse the Department of Defense of having measured different degrees in the evaluation. In talks with Republik.ch, with the assurance they would remain anonymous, the three defeated manufacturers speak of on an "incomprehensible and non-transparent" procedure.

The main reproach of the losing companies: It is not possible for the F-35 to end up being the cheapest combat aircraft in comparison., as their own offer was cheaper than the purchase price of 6.035 billion Swiss francs plus 400 million Swiss francs for its weapons, that has now been stated for the F-35.

For the billion-dollar armaments procurement, Armasuisse has chosen a new evaluation method for the first time, the "Analytic Hierarchy Process (AHP)". This is a seldom-used process in which the evaluators do not give the respective aircraft types any marks, but rather compare the individual offers in pairs.

The evaluation was a 'black box'

The score is relative. It is distributed in such a way that the points are low if the offers perform well and higher if differences arise. This increases the gaps between the aircraft types and is intended to simplify the decision. Armasuisse states that it chose this method because it makes it easier to explain why one candidate did better than another. Experts, on the other hand, criticize the AHP method because it is not transparent, and has a distorting effect compared to the usual grading.

Armasuisse has not released for which 79 criteria it awarded the points. "It's a black box," says one defense industry representative, adding "To this day, none of the manufacturers are aware of the exact evaluations and catalog of criteria for the AHP method."

None of the losing competitors want to be quoted because they fear negative business consequences for their company and threats against themselves. But from their consistent statements and information from Swiss military sources, six points illustrate how Armasuisse, the procurement authority, was able to find that the F-35 was the least expensive.

1. Fewer flight hours calculated than for other competitors

The Swiss Defense Department said the F-35 needs to be flown 20 percent less than the other types of aircraft, thanks to its ease of use and advanced training simulators – just 140 hours per aircraft per year. For this reason alone, Switzerland could save around 2 billion francs compared to the second-ranked competitor over the aircraft’s thirty-year life-time, Defense Minister Viola Amherd summed up.

The losing competitors react to this calculation with astonishment or even disbelief. The Federal Office for Armaments (Armasuisse) found the F-35 to be cheapest with this “sleight of hand,” one of them noted.

With any aircraft, it is possible to fly more in the simulator and less in the air. However, Armasuisse specified a number of flight hours of 180 hours per aircraft per year in its Request for Proposals. The Federal Office of Armaments even replied to the question of whether an optimal, realistic offer could be made, saying that this was only possible after the type had been selected. One wants to compare "apples with apples," it said.

Armasuisse counted 140 flight hours for the F-35, but 180 for the others

So, while the VBS calculated 140 flight hours per year for the F-35, it assumed 180 flight hours for the other models. Consequently, the other offers were more expensive, even though the other competitors say that any aircraft could fly fewer flight hours.

Asked to clarify, Armasuisse stated that the F-35 was cheaper to operate than the other competitors even without the reduced number of flight hours. It expects the American fighter to cost between CHF 55,000 and CHF 60,000 per flight hour.

It cannot be that the losing competitors are more expensive than that, comments an industry official: "In terms of flight hours, the F-35 is two to three times more expensive than the other models in all other countries in the world."

(During a Nov. 13, 2019 hearing of the House Armed Services Subcommittee on Tactical Air and Land Forces, the F-35’s cost per flight hour was quoted as “the F-35 CPFH was $44,000 an hour versus the F-18 at $25,000.”
Lockheed Martin has promised it will reduce flight-hour costs to $25,000 (in 2012 dollars) by 2025, which amounts to approximately $30,300 in 2022 dollars, increasing to over $35,000 in 2025, given today’s inflation rate of 7%--Ed.)


2. Only one short-range missile per aircraft planned

Armasuisse has announced that it will initially buy only one short-range missile per aircraft (the Sidewinder AIM-9X infrared-guided missile). These weapons are designed for close range air-to-air combat. In the event of a conflict, the sparsely armed F-35 would be practically useless.

Sooner or later the new aircraft will necessarily have to be armed with additional weapons. That is why Armasuisse has budgeted CHF 400 million for the purchase of medium-range radar missiles. However, those responsible did not include the costs in the direct purchase price, but instead deferred them to future operating costs.

The DDPS justified the budget shift with the argument that the Swiss Air Force still has enough operational weapons to arm the new fighter for the time being. This is a welcome coincidence, because without this budget shift, the purchase price of the F-35 would have exceeded the program’s 6 billion Swiss franc budget, as earlier research by SRF has shown.

The losing suppliers say that their offer, including a full weapons package, was even slightly lower than the purchase price of the F-35 with medium-range guided missiles.

3. Infrastructure costs underestimated

When purchasing new combat aircraft, air forces have to adapt their infrastructure: airstrips and landing strips have to be renewed and aircraft hangars converted and adapted.

Armasuisse calculated these investments for all competing aircraft types at CHF 100 million. "When we saw that, our warning lights turned red," says a representative of one of the losing manufacturers, because experience from other countries such as the USA, Australia, the United Kingdom and Norway show that the F-35 requires unplanned investments due to additional US security requirements, which are many times higher than those forecast by Armasuisse.

4. No upgrades were included in the offer

Modern combat aircraft are flying supercomputers. And like a laptop or a smartphone, they also have to be regularly updated with the latest technology. The upgrades were not included in the quote request, but even with the upgrades, it can be said for the US F-35 stealth fighter, which is not yet mature, the cost risk is likely to be a lot higher than for the other aircraft that have been in operation for a long time.

5. Noise protection was not budgeted

In its statement on the Air2030 budget, the Federal Council announced that it would publish the results of the aircraft noise measurements taken during the flight tests. For the military airfields Payerne, Emmen and Meiringen, the measurements are relevant to assess how expensive the noise protection investments will be. But Armasuisse says it does not yet have any data on the subject.

The Defense Department has not released the noise measurements of the different competing aircraft, but has since announced that the F-35 is twice as loud as the Swiss Air Force's current F/A-18 aircraft.

Over time, however, the noise level will be the same as with the old jet, it claims, since the F-35 will only take off and land half as often as today's fighter jets. The loud take-off of the F-35 can be very distressing for local residents, as experience in Norway and the USA shows. As of today, however, no additional noise protection investments are planned.

6. Extremely low risk premium calculated

In the case of technically complex machines, unexpected problems that require additional investments can occur despite dozens of tests. As the Defense Department recently announced, it calculated a risk premium for the F-35 of 1.4 percent.

A comparison shows how low this estimate is: For the purchase of Iveco brand military vehicles in 2019, the DDPS indicated a risk factor of 3 percent. However, unlike the high-tech F-35 fighter jet, the Iveco trucks have been in civilian use for decades. And the DDPS also made much greater estimates for earlier aircraft procurements.

If DDPS had assessed the risks in the same way as for previous procurements, the F-35 purchase would have blown the budget.

This means that if the DDPS had assessed the risks in the same way as for previous armament procurements, the F-35 purchase would have blown the budget.

When asked, Armasuisse explains the low risk factor for the F-35 by saying that the manufacturer makes the aircraft according to the same standards and processes that are used to manufacture over 3000 aircraft.

But the F-35 is not yet in the full-rate production because it has not yet achieved the required performance. However, Lockheed Martin says it has so far only manufactured about 730 of the aircraft.

Conclusion: A highly controversial decision

It is already foreseeable today: There is a great risk that the F-35 will exceed all budget calculations made public by the Defense Department. This is a treat for the opponents of the purchase of a new fighter, who are already collecting signatures to force a popular vote (referendum) on the subject.

If this comes to a vote, the Defense Department could face a second debacle after the Gripen crash.

With its decision in favor of the F-35, the Defense Department is not only risking a lot in domestic politics. With its non-transparent procurement, it has also angered foreign governments and companies in the long term.

The losing competitors report that the inconsistencies accumulated mainly towards the end of the evaluation process. “In the beginning everything was organized professionally,” says an employee of a manufacturing company. "In the end, however, there was total chaos."

The turning point came after Christian Catrina, head of security policy at the Defense Department, surprisingly said goodbye and took early retirement in April 2020. He had held the strings in hand for Federal Councilor Viola Amherd in the renewal of the airspace defense. "Catrina ensured transparency and a balance between the political level, Armasuisse and the competitors," says a representative of one losing manufacturer. “Afterwards, nobody did that job anymore.”

Final evaluation “anything but professional”

The events in the final phase show that the end of the evaluation process was anything but professional. At the end of March 2021, Armasuisse delivered the secret results of its evaluation to Defense Minister Viola Amherd. The evaluation report was then written, as the Department reports, which was "purely editorial work" that "had no effect on the ranking or the distance between the candidates".

But the fact that Armasuisse also incorporated information into the cost-benefit analysis which only became available at the beginning of June shows that it was not just “editorial work.”

Delayed payments

In mid-May, in fact after the evaluation had been completed, Armasuisse unexpectedly sent a payment plan to all providers. It listed when Switzerland would transfer which amounts of money to the winning supplier. According to this payment plan, the winning contractor would have got its money later, and in fact would have to partially finance acquisition of its fighter jets by Switzerland.

Armasuisse justified this payment plan by saying that numerous armaments purchases would have to be made in the next few years, and that a staggered financial plan would therefore have to be made.

This had an impact on the prices in the offers from the suppliers: some manufacturers replied to Armasuisse that they would have to charge additional financing costs because of the payment delays.

On June 7th, Armasuisse delivered the evaluation report. The decision was made three weeks later. On June 30th, on the day the Federal Council voted for the type, Armasuisse informed the losing candidates in a brief e-mail.

Debriefing: “We don’t know how we were rated”

However, the procurement process did not end there for the losing competitors. Most recently, there was the so-called debriefing meeting, a kind of consolation for the defeated companies and governments that invested millions in the Swiss selection process. This gives them the opportunity to ask questions and to be told in which areas their offer did well and in which other areas it did not. Representatives of the manufacturing companies as well as the governments in Washington, Berlin and Paris took part in this debriefing. They left the meeting in consternation.

"This last meeting was demonstrably not a real debriefing," says one participant. Those present received no answers, either to political or technical questions. "We don't know how we were rated." Another defense company representative says they were fobbed off with a poor explanation. "That's not how you do it," he said.

The astonishing finding by the Swiss that the F-35 is the cheapest fighter jet has meanwhile also aroused suspicion in Switzerland. The Swiss Federal Audit Office is currently investigating the financial risks of procurement. And the National Council's business audit committee decided in November to investigate whether the fighter jet procurement had taken place “lawfully and appropriately.”

It wants to check the Defense Department’s fighter evaluation and also to clarify whether and why Armasuisse asked the losing competitors for their consent, during the debriefing, to destroy or return all data, as reported by SRF and "La Liberté." (Armasuisse has denied this accusation.)

Auditors will begin their work in February. But without these data files, a subsequent investigation of the evaluation process will be extremely difficult.

-ends-


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