Pentagon Factional Disputes Are A Key Driver Of F-35 Cost Increases

When the Pentagon released its latest cost estimates for the tri-service F-35 joint strike fighter program, many outsiders were aghast at the projected price-tag for the planes. Everyone knew it was the defense department’s biggest development program, but the per-plane costs were a good deal higher than most people were expecting. Now Tony Capaccio of Bloomberg Business News is reporting that acquisition costs could go even higher due to development delays — only a few months after policymakers restructured the program, supposedly to put it on a more predictable, executable path. So this program must be really fouled up, right?

Wrong. The same Pentagon report that disclosed the high cost projections also stated that all three variants of the plane were meeting key performance requirements and doing well in tests. It also said no major design or engineering concerns had been identified in any of the variants. That is still the case today. Minor engineering issues arise the same way they would in any other cutting-edge technology project, and software is taking longer than expected to generate and test, just as it seems to in every other new weapons program. But the F-35 program is basically in good shape. So why is there an endless drumbeat of bad news about the program’s schedule and cost?

The biggest reason, a reason few outsiders seem to grasp, is bureaucratic politics in the Pentagon. You see, there are these factions that benefit from generating cost estimates, conducting tests and doing other things associated with new weapons programs, and said factions tend to make the usual problems any development program encounters either look worse or actually be worse. Take the cost estimates. Prime contractor Lockheed Martin has recently signed the fourth consecutive production contract with the defense department in which the actual cost of building the F-35 came in well below the cost projected by Pentagon estimators. About 25 percent below, in the latest contract. Yet cost estimators continue to apply pessimistic assumptions to projecting future costs, based on historical data from other, older fighter programs. So they come up with wildly wrong cost estimates that the contractor beats every time. It has to beat them, because nobody is going to buy a single-engine fighter for much more than what the latest F-16 sells for today, so that’s how Lockheed needs to price the new plane.

Or take the possible development delays that reporter Capaccio of Bloomberg revealed. Most of those delays, if they occur, won’t be caused by internal program problems. They will be caused by the desire of the Pentagon’s testing community to conduct a vast array of redundant flight tests — literally thousands of them. Why? Because that’s what testers do. So now there’s an internal dispute between the testers and budget planners about just how many tests are really needed, and if the testers prevail the cost of the program could go up by billions of dollars. It’s ironic that acquisition functions funded by Congress to enhance program performance have the perverse effect of inflating costs and delaying fielding, but that’s why the term “bureaucratic politics” was invented. When you create an office in the government, it’s natural tendency is to grow in size and influence (look at EPA). It’s up to Congress to decide when these offices cease to add value, but in the meantime let’s not blame industry or the military services for all the unpleasant surprises.