Inflated F-35 Cost Estimates Ignore Reality

On October 23, a newsletter called Inside the Air Force reported that a Pentagon Joint Estimating Team (JET) is predicting big cost increases and schedule delays in the F-35 fighter program over the next five years. The F-35 is a multi-role aircraft being developed to meet the needs of three U.S. military services and nine allies. The report is the latest installment in a longstanding pattern of leaks from the Pentagon’s Office of Cost Analysis and Program Evaluation to reporter Jason Sherman — a pattern clearly intended to influence public perceptions of programs before policymakers are briefed on the details. Not surprisingly, Sherman’s report speculates that the JET cost estimates — developed under the supervision of the program evaluation shop — will “carry greater weight” in budget deliberations than lower estimates offered by the program manager and prime contractor.

It would be a shame if that happened, because the JET estimates are wrong. In fact, the estimating team has already been forced to trim earlier predictions of an $800 million cost overrun in fiscal 2011, because the program is performing better than it expected. That performance will persist in subsequent years for the simple reason that the program office and the contractor learned from mistakes made on other programs like the F-22 fighter. It’s always dangerous to predict outcomes at the beginning of a long flight-test program, but to date the F-35 program has been performing far better than other major aircraft development programs due to the adoption of new development tools and techniques. The military aircraft industry has come a long way since the Cold War ended — although the JET methodology seems to assume no improvement at all.

For example, the latest JET projection is that $3.6 billion more will be needed than planned to finish the current development phase ($5 billion more if the cost of a second, or “alternate,” engine is included). That exceeds the estimate of the joint program office by 170% and the prime contractor by 300%. The higher number rendered by the JET results from thousands of additional man-years it says will be needed to develop software, conduct flight tests and so on. But so far, ground and flight tests are progressing much more smoothly than in previous programs, so what is the basis for assuming they will suddenly go haywire? Similarly, why assume over $11 billion in procurement cost growth during the program’s early years when F-35 costs have dropped 60% on initial production lots?

Secretary Gates said during a trip to the F-35 plant in late August that the fighter is essential to the future military needs of the United States and its allies. He certainly got that right. But he also warned the contractor to stay on cost and on schedule, which is what the record shows is happening. Leaking exaggerated cost estimates before Gates or his key advisors have even been briefed seems calculated to sow doubt and confusion about one of the nation’s most important next-generation weapons programs. Whoever is responsible for spreading such misleading information has done the cause of military preparedness and efficiency no favor.