Saturday, March 31, 2012

Slower procurement raises F-35 program costs $7B

According to a summary of the latest Select Acquisition Report (SAR) released by DOD today, slower procurement of the the F-35 has increased program costs by $7B during this reporting period.

The categories of program cost increase due to lost orders are as follows.

F-35 US - +$5.254B
F-35 International - +$.833B
PW F135 motor - +$.987B

While there has been some spin on this from the F-35 cheerleaders (bad,bad F-35 partner nation governments for not buying to plan), decision-makers can't buy to plan because the jet is so faulty and program management is unable to deliver on the promise.

Because of the lost production learning curve and lack of technical knowledge of knowing what they are building actually works, these costs will cascade.

From the DOD release:

F-35 Program– It should be noted that last year's December 2010 SAR was a single total program SAR "F-35 Program," for which the estimate at that time was $379,392.8 million and included both the aircraft and the engine. The overall F-35 program estimate increased from $379,392.8 million in the December 2010 SAR to $395,711.8 million in the December 2011 SAR. In the December 2011 SAR, the program has been divided into two subprograms, the "F-35 Aircraft" and the "F-35 Engine." Below is a description of the details of the changes for these two subprograms:

F-35 Aircraft – Program costs increased $10,679.5 million (+3.3%) from $321,175.7 million (the FY 2012 President's Budget (PB12)), to $331,855.2 million (PB13), due primarily to the application of revised escalation indices (+$3,303.2 million) and cost impacts of a slower near-term production ramp rate (+$5,254.8 million) (Air Force completion was extended two years to FY 2037 and Navy completion was extended two years to FY 2029). There were additional increases for higher than forecasted contractor labor hours (+$4,021.5 million), higher than expected material burdens placed on subcontractors by the prime contractor (+$1,768.5 million), revised military construction estimates (+$4,245.6 million), and increases due to a revised, slower international procurement buy profile (+$832.6 million). These increases were partially offset by a net decrease in initial spares (-$5,587.0 million), a decrease due to maturation of the technical baseline, definition of customer requirements, and further delineation of Service beddown plans (-$3,609.3 million). Lastly, there were various miscellaneous increases (+$449.6 million) to the aircraft subprogram.

F-35 Engine – Program costs increased $5,639.5 million (+9.7%) from $58,217.1 million (PB12) to $63,856.6 million (PB13), due primarily to an increase in initial spares (+$3,999.5 million), the application of revised escalation indices (+$705.4 million) and cost impacts of a slower near-term production ramp rate (+$986.5 million). Lastly, there were various miscellaneous decreases (-$51.9 million) to the engine subprogram.

2 comments:

Anonymous said...

Even buying to plan, the jet would still cost more than previously pre-conceived and advertised. Being excessively delayed and reduced is just icing on the cake. But being able to blame all cost hikes merely on production delays is an easy way out to save face and excuse for cheerleaders to tout 'staying on course' and wait for FRP to kick in, etc. But those who know what's what have to nail Cheerleaders on that 'just wait for FRP, things we'll be OK' issue every time and NOT give them one free pass!

Anonymous said...

LM, their surrogates, and F-35 cheerleaders and fanboys complain that delaying the purchase of some 179 LRIP jets will drive up the unit cost of each F-35 (implying that ramping up production earlier will save money.) The fact is that LRIP unit cost will increase in any event, but less so by delaying production. Sticking to the old plan would be more expensive due to the cost of modifications of hundreds of completed jets.