There has been a fair amount of misinformation coming out of the F-35 Joint Program Office lately. This week, program chief Lt. Gen. Christopher Bogdan told an Aviation Week conference that the estimated $1.1 trillion in life-cycle sustainment costs for the F-35 is expressed in 2056 dollars, which is wrong; it’s actually calculated using then-year dollars for every year between now and 2056. Last week, Bogdan accused his lead contractors of trying to “squeeze every nickel” out of the program, which is also wrong; independent auditors found that prime contractor Lockheed Martin has had an average operating margin of 7% on the program so far — a low rate of return on high-tech work (Intel’s operating margin is 40%).
Perhaps Bogdan’s “tough love” approach to dealing with industry is a reflection of the unusually difficult circumstances he faced in getting the Air Force’s new tanker under contract. If so, he needs to tone down the rhetoric because he is now running a program that is much more mature. The Government Accountability Office recently reported that the F-35 program is on a sustainable path to success, with flight tests being expeditiously completed and the cost of planes falling in each successive production lot. If recent trends continue, the most common F-35 variant, built for the Air Force, won’t cost much more at the end of the second Obama Administration than a legacy F-16 fighter sells for today (around $70 million). Lockheed has cut the airframe cost with each new production contract, repeatedly delivering the planes at a lower price than government estimators expected.
The same is true of engine maker Pratt & Whitney, which builds the fighter’s engine under a separate contract. It cut the cost of each F135 engine by $1.5 million in 2011 and by another $1.4 million in 2012, delivering the world’s most powerful, agile jet engine for 6% less in the most recent production lot than in the previous one. This downward vector in pricing will continue for decades to come, highlighting the emergence of the F135 as the global standard for tactical-aircraft engines. Pratt & Whitney is now delivering the engines at a rate of one per week, and they have powered nearly 3,000 flights of the new fighter. The savings in each new production lot have occurred despite the government customer’s repeated reduction in the number of engines to be bought over the rest of the decade (nearly 400 engines have been cut from the buy through 2020 in the last three budget cycles).
Despite all of the instability on the government side, contractors have committed vast amounts of their own money to risk reduction — money that traditionally would have been provided by the federal customer — and have signed up early for fixed pricing. Granted, much of their investment was necessitated by government actions, but Lt. Gen. Bogdan doesn’t give the companies credit for any of their numerous efforts to share risks. That is no way to build a durable partnership for the long term. In the dozen years since the F-35 program was first awarded, it has been through numerous delays and changes, but it is now producing a fighter that is unprecedented in its survivability, connectivity and versatility. It is the greatest hope America has for sustaining global air dominance through mid-century. If the Joint Program Office wants the F-35 program to be successful at home and abroad, then it needs to set the right public tone by acknowledging the contributions industry has made in developing what Senator John McCain recently observed “may be the greatest combat aircraft in the history of the world.”
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