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Big Price Tag Connected to the Joint Strike Fighter November 18, 2009

Posted by Stephen Abott in Analysis.
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Source: Air Force

Although there has been significant DOD budget increases over the last decade, there remains considerable pressure on the Pentagon’s budget due to rising war costs, increased personnel costs and healthcare payments, and overall government budget deficits (now at more than $1.4 trillion).  Such pressure looks to limit future increases in the defense budget, and, within this bleak budget outlook sits the most costly procurement program in DOD history: the F-35 Joint Strike Fighter (JSF).

The JSF was supposed to save us money.  Designed to be an all-around replacement for nearly 2,500 planes from the Air Force, Navy, and Marines including the A-10, F-16, some F-18 variants, Harrier, and others, the JSF was designed to be more effective than earlier generation planes while remaining relatively inexpensive.  In fact, earlier this year Secretary Gates argued for the early procurement of hundreds of F-35s, citing the ability to produce such aircraft “in quantity” and “at sustainable cost.” However, even before production has begun the JSF is expected to be the most expensive procurement program in DOD history.

What has caused such dramatic price increases?  A recent independent cost estimate highlighted in a March 2009 GAO report cited, among other things, continued manufacturing problems, higher contractor engineering staff levels, expanded flight test program, and more labor hours to manufacture the aircraft.  The JSF’s already rocky development process may be exasperated because of Gates’ new procurement schedule. The production of hundreds of planes before testing is completed will likely lead to costly modifications to these aircraft down the line, leading to even higher per-plane costs.

The impact of such setbacks is fewer planes for a lot more money.  The JSF’s cost today compared to its 2001 assessment is roughly 38 percent higher per-plane, totaling more than $38 billion.  Originally estimated at $72 million, the US expected to purchase 2,866 planes for a program total of roughly $206.5 billion.   The GAO now estimates that the reduced buy of 2,456 planes will cost nearly $100 million each for a total of $244.7 billion.  As the services will be phasing in their versions of the JSF over the next six years, the plane’s cost will likely rise above its current $100 million price tag.   Yet, the Pentagon hurdles ahead with both procurement and testing of the aircraft, even as estimated costs have skyrocketed.

Is the F-35 really necessary?  The JSF is unique in that it is being designed, tested, and procured by a consortium of nations including the US, UK, Turkey and others. Some view such interaction as central to allied military relations and the already substantial sunk cost of the program, if jettisoned, would cause discord among America’s allies. America and her allies are relying on this program to provide their air forces with fifth generation multi-use aircraft.

To further complicate the issue, many US aircraft are reaching the end of their service lives and the military services are relying on the JSF to replenish their ranks in the coming years. At this late date there may just not be many other options available if the DOD wants to procure large numbers of fifth generation aircraft. However, the mix of F-35 and updated earlier generation planes may see some adjustment. Instead of nearly 2,500 F-35s, a mix of updated F-16s (equivalent to 4.5 generation planes) and a smaller number of F-35s may save some money if the $100+ million F-35 is replaced by the $80 million updated F-16 Block 60.  For example, the replacement of 500 F-35s with the F-16 would save at least $10 billion while keeping America’s commitments to its F-35 program allies.

The other option, of course, would be to plus-down the force size, leaving the Pentagon with a more technically advanced force but with fewer total planes. This would require effort from the top of the DOD leadership; but, if seriously considered, we could expect to see a reference to a smaller total force in the upcoming QDR.

Absent reduced numbers, a more balanced aircraft purchase, or unexpected control over F-35 costs, the JSF program will likely put additional pressure on an already stressed DOD budget.

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