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9/23/2020 3:47:02 PM
Posted: 6/2/2010 6:53:20 PM EDT
DoD: Total F-35 price tag could reach $382B

By John T. Bennett - Staff writer
Posted : Wednesday Jun 2, 2010 17:14:26 EDT

Senior Pentagon officials on Tuesday announced the F-35 fighter and five other major weapon systems have surpassed a legal cost threshold, while also criticizing the review process that triggers the “Nunn-McCurdy breaches.”

The Defense Department told lawmakers the F-35 fighter program could cost as much as $382.4 billion, with each Lightning II model coming with a $92.4 million price tag, according to DoD budget documents.

Those cost estimates assume the program continues down the current path, which officials told reporters they are working to avoid. One senior Pentagon official – who declined to point to a specific cost target — said efforts already are under way to move the overall cost of the F-35 program “as close as possible” back toward substantially smaller estimates crafted in 2002.

The Defense Department sent the new estimates to Congress after determining the program had breached the so-called Nunn-McCurdy statute, which requires the Pentagon to notify Congress when major defense programs experience substantial cost growth.

The $92.4 million per-model estimate is what defense officials refer to as a “cradle-to-grave” projection, meaning spanning each fighter jet’s entire life, the senior official said.

The Pentagon restructured the F-35 program just several months ago after internal DoD cost estimates showed the tri-service, international fighter initiative’s price tag had grown more than expected — and more than the joint program office claimed. This formal congressional notification, the senior official said, is merely a reflection of the same growth — “the paperwork has caught up to that.”

Why the bigger price tag? There are several primary drivers. One is the Navy several years ago reduced the number of F-35s it will buy. A second is a more difficult development process, which required additional years – and thus, became more expensive. The senior official said the program “will continue to struggle” with keeping the development phase on track, in part because the technology on the short take-off and landing variant is so complicated.

A DoD summary of the F-35 breach calls higher than projected “contractor labor and overhead rates and fees” the “single largest contributor to cost growth.”

The senior official said the new F-35 program management has been ordered to pare these costs because “I do not think that the department should have to incur those costs.”

As for the projected $382.4 billion overall price of the program, the senior official said the hope is “the taxpayers never have to pay that bill.”

Meanwhile, a senior Lockheed official said the company was very pleased with the results of the recent restructuring and reiterated the company’s stance that it does not expect the program to cost anywhere near the Pentagon’s $382 billion estimate.

“I cannot foresee any scenario where those numbers become a reality,” the official said.

Instead, the official said he expects the next batch of 32 production jets, known as “low-rate initial production lot 4,” to cost more than 20 percent less than that projection. The previous batch of production aircraft also cost about 20 percent below the Pentagon’s per-jet projections.

Lockheed officials have said previous Pentagon F-35 estimates have relied too heavily on data from older fighter programs, such as the F-22 Raptor and F/A-18EF Super Hornet.

Also breaching the cost growth threshold was the Navy’s truncated DDG 1000 destroyer program. Costs grew from $20 billion to just over $22 billion, DoD said. The senior official pegged this growth to the Navy opting to buy three instead of 10, which drives up unit costs.

As part of the Nunn-McCurdy process, DoD officials have ordered the destroyer program to strike the “Volume Searching Radar hardware from the ship baseline design … in order to reduce cost for the program,” according to a department fact sheet. The Navy has been ordered to shift the program’s initial operating capability date back one year, to 2016, and alter testing and evaluation requirements.

The Air Force-led Wideband Gapfiller satellite program also experienced a breach, the result of a break in production (between satellites 6 and 7), and the subsequent production re-start costs when the service opted to build two additional WGS orbiters (satellites 7 and 8). The cost grew from around $3 billion to just over $3.5 billion. The officials said Pentagon officials are mulling future satellite communications needs, leaving open the door to buying additional WGS satellites.

The Army’s Apache Block III program also made the list of over-budget programs. The initial intent was to overhaul 634 existing helicopters, but 56 “new build” birds were tacked on to meet war demands. The revamped helos saw cost growth of $9.9 billion to $12 billion; the new aircraft costs went from $2 billion in 2006 to $2.3 billion. The department has split the “AB3” program into two parts – one focused on the new helicopters and another for the upgrades ones – which has resulted in “a more conservative set of estimating assumptions.” Both are slated for a milestone C review this summer.

Another Army program made the list: the Advanced Threat Infrared Countermeasures/Common Missile Warning System, designed to take out infrared homing surface-to-air missile attacks on helicopters. The ATIC effort’s costs grew from $900 million in 2003 to $1 billion; the CMWs portion’s estimated price swelled from $3.1 billion in 2003 to $3.5 billion. The causes were “technological immaturity and unrealistic performance expectations,” according to a DoD fact sheet.

Further, the Navy’s Remote Minehunting System breached the cost growth threshold primarily because of “the result of lower than planned procurement quantities, unrealistic estimating, and failure to adequately address reliability issues,” according to DoD. Costs grew from $1.2 billion in 2006 to $1.4 billion.

Each of the six programs avoided termination because Pentagon acquisition executive Ashton Carter deemed each essential to U.S. national security, which is required by the Nunn-McCurdy statute.

But is the Nunn-McCurdy process worth it? The senior official said the Pentagon is working on cost estimates of how much the Pentagon puts into the Nunn-McCurdy process. Some DoD brass wonder “whether the Nunn-McCurdy process is in Nunn-McCurdy,” the senior official quipped.

Another DoD official said that estimation should be completed in several weeks.

The senior official said Pentagon leaders want to use the new Performance Assessments and Root Cause Analysis (PARCA) office to perform a similar function. PARCA has established by 2009 defense acquisition reform legislation, but Congress allowed the Pentagon to craft its charter.

In December, Carter signed a memo outlining how PARCA would work.

Its members would spring into action upon request by the defense secretary, DoD acquisition chief, a service secretary or a DoD agency director, according to the Dec. 9 memorandum.

The group would perform one of two kinds of analyses on major acquisition programs: • A performance assessment, which would “evaluate the cost, schedule, and performance of the program, relative to current metrics, performance requirements, and baseline parameters,” the memo said. “The assessments shall determine the extent to which the level of program cost, schedule, and performance relative to established metrics is likely to result in the timely delivery of a level of capability to the war fighter.”

• A root-cause analysis, which would examine the “underlying causes for shortcomings in cost, schedule and performance.” It would also determine whether program shortcomings were due in part to “unrealistic performance expectations; unrealistic cost and schedule plans; immature technologies; and excessive manufacturing or integration risk,” the memo said.

Both kinds of analyses would look at whether problems were caused by “unanticipated design, engineering, manufacturing, or integration issues arising during program performance; changes in procurement quantities; inadequate program funding or funding instability; [or] poor performance by government or contractor personnel responsible for program management,” the memo said.

One defense analyst said the re-certification of the F-35 program was a done deal, showing the Nunn McCurdy process might not be working.

“Certification of F-35 is no big surprise because three of the defense department’s four military services are counting on getting it, and there is no evidence of major design or engineering problems,” Loren Thompson of the Lexington Institute wrote in a June 1 blog post. “But doesn’t it make you wonder what the point of these costly reviews are, when even programs the department has targeted for termination are certified as complying with Nunn-McCurdy criteria for continuance?”
Link Posted: 6/2/2010 7:04:01 PM EDT
92.4 for F35
104 for F22
How much for superbug?
Link Posted: 6/2/2010 7:04:26 PM EDT
Lumping R&D costs into the unit cost is a deceptive way to price a program given how Congress (or the Services) can widely swing the number of authorized units and leads to rediculous claims about how much each individual plane costs. Of course if you spent $1bil to research and design a new state of the art plane intending to buy 1000 of them and suddenly are only buying 1 of them the "costs" are going to be outrageous (there is no consideration for the value of the design received, just the number delivered).  

Acquisition would be much better off if the non-reoccurring costs were tallied separately from the reoccurring costs.

Kharn
Link Posted: 6/2/2010 7:23:20 PM EDT
bow wave budgeting at its best
Link Posted: 6/2/2010 7:36:40 PM EDT
Tag

Posted Via AR15.Com Mobile
Link Posted: 6/2/2010 7:40:32 PM EDT
Wideband Gap Filler is the most important of all three.  There's a reason its called a gap filler.
Link Posted: 6/2/2010 7:43:49 PM EDT
Originally Posted By disco_jon75:
Wideband Gap Filler is the most important of all three.  There's a reason its called a gap filler.


Concur.  We need that program desperately.
Link Posted: 6/2/2010 7:46:53 PM EDT
Originally Posted By Sylvan:
92.4 for F35
104 for F22
How much for superbug?


Boeing says it could sell them for about 50 million each in a large quantities. In May the Navy decided to buy another 124 over the next 5 years which included a bunch of Growler variants. No idea what the unit cost is there, but probably somewhere between 50 and 60 for each E variant.

Boeing will keep making them thorough 2015 at least, and probably a long while after.

Link Posted: 6/2/2010 7:48:08 PM EDT
Clearly Lockmart is trying to bait and switch the USAF into just biting the bullet and buying more Raptors instead.





This is INSANE.





The way things are going,  the only thing Congress will approve is more F-15s, 16s, and 18s because they're the only things we can AFFORD,

but even those are getting very pricey!     A new F-16F Block 60 is something around 35 million dollars depending on options.  Not cheap,

but compared to the Raptor or the F-35,  not particularly expensive, either.





What really pisses me off is I KNOW that there's a lot of cost padding going into the high price!





I know a guy who owns and operates a machine shop.   I did some work for him.   He bid on a subcontract job for a major US defense contractor

and got an "informal" call from the manager who'd oversee the making of that kind of part,  who said,  "Increase your bid by 25 percent."



So he did...and he won the bid.  After INCREASING his bid by 25 percent after the defense contractor said to do so!





THAT is cost padding!    This guy had made a fair bid,  offering to make the part(s) for a fair profit over and above cost of materials and supplies

and operator time.    And his bid was TOO LOW.





That's how this works...it's called FRAUD and the major contractor was committing it.    They're allocated a certain amount of money for a project,

say it's 100 million dollars per year for this ongoing contract work, and the way this works is that they HAVE to spend ALL 100 million dollars this

year in order to get next year's full 100 million.   If they spend less, next year, they'll GET less in the amount of the difference.



And there is NO incentive for them to NOT spend more than they have to.   There certainly SHOULD be.   It should be set up so that any cost savings

which the company can generate,  while still meeting ALL delivery and quality goals,  should be used as a reference value for an incentive program

in which ALL the employees on that project get to split a bonus which is a percentage of the total cost savings.    Say it's 20 percent of the savings.



So if they turn in the project for a delivered cost of 90 million this year,  that's cost savings of 10 million.    20 percent of 10 million is 2 million,  so

give a bonus of 2 million dollars to the project crew, to be distributed among ALL the employees in a fair and equitable manner.



It encourages thrift and results in savings to the taxpayer.   Quality is not negatively impacted.  Just less WASTE.





Of course I'd totally support such a program.  I'd like to think ANY rational person would.





I've heard of machine shops doing .gov contract work that get a set budget for tools and consumables.  They buy up the whole allotted budget's

worth every month (or however often they're given the money for tooling and consumables) and at the end of the month, whatever new tooling

and consumables they haven't used,  they just dump into the scrap metal bins,  brand new in the box and costing maybe hundreds of dollars per item.





It's great if you're the guy who scrounges these items out of the scrap metal bins once it gets to the recycler, but it's still a waste of OUR tax dollars.





CJ


Link Posted: 6/3/2010 8:11:19 AM EDT
Link Posted: 6/3/2010 8:29:36 AM EDT
Originally Posted By Kharn:
Lumping R&D costs into the unit cost is a deceptive way to price a program given how Congress (or the Services) can widely swing the number of authorized units and leads to rediculous claims about how much each individual plane costs. Of course if you spent $1bil to research and design a new state of the art plane intending to buy 1000 of them and suddenly are only buying 1 of them the "costs" are going to be outrageous (there is no consideration for the value of the design received, just the number delivered).  

Acquisition would be much better off if the non-reoccurring costs were tallied separately from the reoccurring costs.

Kharn


Nailed it
Link Posted: 6/3/2010 8:41:08 AM EDT
Originally Posted By cmjohnson:
Clearly Lockmart is trying to bait and switch the USAF into just biting the bullet and buying more Raptors instead.





Not necessarily a bad move.
Link Posted: 6/3/2010 8:43:10 AM EDT
The F-35 is a dumb concept and is way too expensive.  More F-22's and make strike versions of them like we did the F-15, reopen and modernize the F-16 or use Super Bugs.
Link Posted: 6/3/2010 8:46:45 AM EDT
Originally Posted By Seven-Shooter:
Originally Posted By cmjohnson:
Clearly Lockmart is trying to bait and switch the USAF into just biting the bullet and buying more Raptors instead.





Not necessarily a bad move.


That's been the USAF procurement model since 1947.  It worked in the era of functionally unlimited budgets...not any more.  The USAF is going to have to learn how to buy stuff, or someone is going to do it for them.  They can't expect Congress to come riding to their rescue, as has happened in the past.
Link Posted: 6/3/2010 8:47:31 AM EDT

No, I respectfully disagree, the concept is good.

Scope creep and current procurement process is the real problem.




Like you, I want more F-22's and Superbugs, in addition the F-35 would be good to have in the mix. Or at least it would have been before the project spiraled out of control.



Originally Posted By VTHOKIESHOOTER:


The F-35 is a dumb concept and is way too expensive.  More F-22's and make strike versions of them like we did the F-15, reopen and modernize the F-16 or use Super Bugs.






 
Link Posted: 6/3/2010 8:59:51 AM EDT
The F-35 program is beyond saving now, the Navy is quietly expanding their orders for Super Hornets in FY11, it's entirely possible that AESA equipped F-18e/f will replace the F-35. What a fiasco.

The wideband gap filler is without a doubt the most pressing of the three, it's a program that was created after the T/Sat proved to be a technological bridge too far.
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