Future F-35 Upgrades Send Program into Tailspin
(Source: Project On Government Oversight; issued April 13, 2022)

By Dan Grazier
Pentagon watchers were caught off guard when the president released his budget and it showed the services would be asking Congress for far fewer F-35s in 2023 than everyone expected. The services had been expected to request 94 new F-35s in their budget proposal, but the total request ended up being 61, a 35% production cut. The official explanation is that the program’s development delays have caused the F-35 to not have the capabilities the services need, and that leaders aren’t interested in buying more units of an aircraft that would later require upgrades at great expense.

That the F-35 went into production in the numbers seen so far is already a violation of federal law, even if only in spirit. The provisions allowing for limited production of a weapon system before development work is completed are a safeguard meant to protect both the troops and the taxpayers. Per federal law, the F-35 program can only produce a limited number of aircraft before it completes operational testing and is formally approved for full rate production. Were the services to request and receive the expected number of F-35s in 2023, the program would have exceeded the Low-Rate Initial Production cap.

Of all the troubling aspects of the F-35 program, and there are many, the Pentagon’s insistence on producing aircraft before finishing the design is the one thing that would obviously drive up costs the most — and it did.

As POGO has been pointing out for years, if any aircraft purchased before the program’s design is completed and tested are ever to be used as intended, they will have to undergo a costly retrofitting process once all the design flaws are identified and corrected. Pentagon leaders appear to have belatedly come to the realization that they will not be able to afford future F-35 upgrades if they continue purchasing new but untested aircraft, flouting the safeguards designed to ensure that only effective programs go into production.

The Cost of Retrofitting Underdeveloped Aircraft

Bloomberg first reported on March 16 that the Biden administration would be requesting 61 F-35s instead of 94 as part of the fiscal year 2023 budget. The Department of Defense confirmed that report when it released the official fiscal year 2023 budget request on March 28. Vice Admiral Ronald Boxall, the director of force structure on the Pentagon’s Joint Chiefs of Staff, cited delays on the F-35’s Block 4 “modernization” effort as the reason for the production cut.

The Department of Defense comptroller’s just-released fiscal year 2023 Program Acquisition Cost by Weapon System report actually shows that the services expected to buy 96 F-35s in the coming year. Either figure would have been an approximately 10% increase from the 85 purchased in the 2022 budget. At a time when most people believed the F-35 program would ramp up production in advance of the long-anticipated full rate production decision, a 35% or 36% reduction from the expected order represents a significant policy reversal. 

“Putting the F-35 into production years before the first test flight was acquisition malpractice. It should not have been done. But we did it.” Frank Kendall, Secretary of the Air Force

The reduced F-35 purchase is good news for everyone concerned about out-of-control government spending. Retrofitting design upgrades into existing aircraft is an expensive process. In Pentagon parlance, expenses along these lines are called concurrency costs.

“Putting the F-35 into production years before the first test flight was acquisition malpractice. It should not have been done. But we did it,” said Frank Kendall in 2012. At the time, Kendall was the acting head of the Pentagon’s top acquisition post and is now secretary of the Air Force.

The Government Accountability Office reported in 2020 that the concurrency costs for the F-35 program were then estimated to be $1.4 billion. At the time, approximately 550 F-35s had been purchased, which means that the estimated cost to upgrade each aircraft is $2.5 million. More than 200 F-35s have been produced since that report, and the resulting concurrency costs are now nearing $2 billion, based on the most recent estimated cost figures provided by the Pentagon.

Cutting the planned F-35 production numbers by 33 just from a single year’s buy could potentially save $84 million because of upgrades that will not be needed. While that number may seem small in Washington terms, it does add up over time. The GAO reports it will take at least another five years for engineers to complete the Block 4 development work and cautioned that the estimate is optimistic.

The modernization effort has been plagued with delays and resulting cost overruns. This part of the F-35 program alone is already at least three years behind schedule, and the current estimated $14.4 billion cost is more than $4 billion over the original estimate. If the Pentagon manages to restrain itself from increasing F-35 purchases until the design is complete, and Congress doesn’t make up the difference during either the authorization or appropriations process, the services could save more than $400 million.

When viewed in the larger context of all F-35 costs, the decision to cut production becomes even easier to understand. The Block 4 development costs are just one problem. Following a report that put the annual operations cost of each F-35 at $7.8 million, members of Congress floated a proposal to cut the size of the fleet to keep the overall costs down in the long run.

Of course, the cost of the entire program has long been a significant issue. When the Pentagon announced the beginning of the F-35 program in 2001, the cost to develop and purchase the entire fleet stood at $200 billion. That figure doubled to approximately $400 billion by 2019 and continues to rise. The current best estimate for the total cost to operate the fleet stands at $1.3 trillion.

Legal Safeguards Limiting Premature Production

An issue not mentioned in any of the announcements and apparently otherwise overlooked is that the repeatedly delayed full rate production decision has backed the program into a legal corner because the services are rapidly approaching the maximum number of aircraft they can purchase during low rate initial production.

Low-Rate Initial Production of weapons is allowed by law with some stipulations. The law’s authors wanted to make sure the services weren’t purchasing significant numbers of underdeveloped weapons before the design was finished and fully tested. Low rate initial production is meant to provide enough units to conduct testing, build a manufacturing base, and provide the means for an efficient increase to full rate production. Federal law is notably silent on producing aircraft or any other weapons to be used in combat before the design is fully tested and formally approved for production.

The law generally limits weapon programs to 10% of the total planned production during the development phase, although it also allows the secretary of defense to specify an amount larger than 10% when the development contract is awarded. The justification for the larger initial production run must be included in the program’s selected acquisition report. The F-35 program has an authorized Low-Rate Initial Production quantity of 518, 21% of the 2,456 F-35s to be produced for the United States.

The secretary of defense provided a somewhat confusing justification, saying the increase is “due to the necessity to prevent a break in production and to ramp up to [Full Rate Production].” The number of aircraft delivered to the U.S. services so far is at least 454, although that number increases constantly. The production of even the 61 F-35s requested for 2023 will put the total close to the authorized Low-Rate Initial Production quantity, and that doesn’t account for the rest of the aircraft that will be delivered in the remaining months of the current budget year.

Congressional Discipline Needed

Some members of Congress, particularly those with a political stake in the program, are responding to the proposed smaller F-35 buy exactly as expected. Some members of Congress are circulating a letter around Capitol Hill urging their colleagues to increase F-35 production, citing the Russian invasion of Ukraine and industrial base concerns as justification. The letter is curiously silent on the actual reasons why the request is smaller this time around.

The effort to boost F-35 production on Capitol Hill is being led by the co-chairs of the Congressional Joint Strike Fighter Caucus, Representatives Marc Veasey (D-TX), Mike Turner (R-OH), John Larson (D-CT), and Chris Stewart (R-UT). Veasey represents the Fort Worth area where Lockheed Martin has its F-35 final assembly plant. Turner represents Dayton, Ohio, and Wright-Patterson Air Force Base, home of the F-35 Hybrid Product Support Integrator Organization, which will “integrate support across the supply chain, maintenance, sustainment engineering, logistics information technology and training disciplines” according to an Air Force press release. Larson’s district encompasses parts of Middletown, where Pratt & Whitney manufactures the F135 engine. Stewart’s district is close to Hill Air Force Base, where 78 F-35s are based; it is also home to the Air Force’s 309th Air Force Maintenance Group, which provides depot-level maintenance for the entire Air Force fleet of F-35s.

Chairman of the Joint Chiefs of Staff General Mark Milley testified before the House Armed Services Committee last week that the F-35 doesn’t yet have the capabilities the services need.

Members of Congress eager to add aircraft to the buy received some ammunition to aid their efforts: The services are already circulating their unfunded priorities lists indicating they are not getting all the aircraft they wanted in the president’s proposed budget. Air Force leaders included seven F-35As in their list, the Marine Corps wants three additional F-35Bs and three additional F-35Cs. The Navy is asking for six F-35Cs. These 19 F-35s being requested as unfunded priorities would make up more than half of the number cut from the president’s budget. Their inclusion creates a significant contradiction coming from the Pentagon. Chairman of the Joint Chiefs of Staff General Mark Milley testified before the House Armed Services Committee last week that the F-35 doesn’t yet have the capabilities the services need.

Conclusion

All of the problems now coming to a head with the F-35 program should not be a surprise to anyone, even though many seem to be caught off guard. Purchasing large numbers of aircraft before the design work is completed will add to unnecessary costs. This should be common sense, but apparently the power brokers in the military-industrial-congressional complex need to learn these lessons the hard way.

Perhaps the decision-makers 20 years ago believed they could bend reality to their will. Perhaps they figured they could say whatever they needed to in order to get the program started, knowing they would be long-retired before the consequences of their disastrous plans would manifest.

Whatever the case, it is the American people and the service members today and in the foreseeable future who are left to deal with those consequences.

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