Last week witnessed an interesting bit of political theater concerning the Pentagon’s biggest weapons program, courtesy of Credit Suisse and Aviation Week. The two organizations hosted their annual aerospace conference in New York, and the audience was treated to surprisingly complementary views of the F-35 joint strike fighter from senior government and corporate officials. Pentagon acquisition chief Ashton Carter proclaimed that the projected price-tag of the single-engine plane — $92 million per fighter, he said — would not stand, and Lockheed Martin aeronautics head Ralph Heath readily conceded that his company would need to improve its performance.
What makes this political theater is that both presenters must have known the basic premise of Carter’s position was somewhat misleading. First of all, the cost of each F-35 has not risen anywhere near as much as he contends. His cost estimators may think it has, but every time Lockheed Martin signs a new production contract, it handily beats the government’s estimates. Last time around it came in 25 percent below what Carter’s own estimators were predicting the plane would cost, even though the company agreed to sign up to a fixed-price contract two years earlier than expected. So getting the cost of each F-35 below $92 million shouldn’t be hard for Secretary Carter: all he needs to do is stop listening to the professional pessimists in his program evaluation shop. After all, Lockheed has now beat the official estimates four times in a row.
The larger problem with Secretary Carter’s position on F-35 pricing is that he has more influence over what the plane will cost than any contractor does. His remarks in New York left the impression that costs have climbed because of development problems, but the biggest determinant of the unit cost at this point is how many planes the government decides to buy each year. The original vision of a low-cost replacement for the F-16 and other legacy tactical aircraft was grounded in a business plan featuring economies of scale and rapid production ramp-ups. If Carter and the Congress decide to buy fewer planes each year than the program of record specified, or delay production ramp-up to conduct thousands of superfluous flight tests, then of course the F-35 is going to cost a lot more money than it needed to.
The bottom line on F-35 unit costs is simply this: the most common version of the plane can be produced for about the same amount of money as the latest F-16 or F/A-18 fighter while delivering far greater survivability and situational awareness if policymakers stick with the business plan. If they don’t stick with the business plan, then it could become a very pricey item. So far, the signals Washington is sending on pricing are not encouraging — Congress tinkers with the production numbers each year, reducing them by as much as half from the original plan. Try doing that with any commercial item and see what it means for unit costs. So if Secretary Carter wants to get control of costs in the F-35 program, the smartest thing he can do is support a production profile that permits the economies of scale anticipated in the original business plan. Slowing the program down will just guarantee an over-priced plane.
Find Archived Articles: