Selective Arithmetic to Hide the F-35’s True Costs
(Source: Project On Government Oversight (POGO); published October 21, 2020) By Dan Grazier
By Dan Grazier
Despite claims by Lockheed Martin and the Pentagon, F-35 costs are not falling, as a look at Pentagon budget documents very clearly demonstrate. (POGO graphic)
Last month, while Lockheed Martin and the government negotiated a major contract modification for the troubled F-35 Joint Strike Fighter, stories appeared in the trade presses with familiar headlines: “The F-35 Is Getting Cheaper: Is It Time To Buy More Stealth Fighters?” and “F-35 program costs are evolving, and these savings matter.” Earlier this year, while Congress considered a coronavirus relief package that would have given the Pentagon $686 million for the F-35 program, we saw this story: “F-35 costs falling, Pentagon estimates indicate.”
As we’ve written before, when you look at the numbers, it is simply not the case that the F-35’s costs are falling—not this year, and not in years past.
Yet year after year, the media is full of stories and columns about the supposedly falling price of the F-35. In 2017, the press reported a price drop of 7.3% per aircraft compared to the previous year. In 2019, the press reported another lower price, from Lockheed Martin, of approximately $81 million per plane just as Congress began work on the annual Pentagon budget. As we have seen in recent years, misleading claims about falling prices often surface when the decision-makers in Washington begin to turn their attention toward the next year’s defense budget, as an effort to convince Congress to add more aircraft in the next authorization.
The story that appeared during the relief package negotiations portrays a particularly rosy forecast by putting the cost of an F-35 at $57.4 million, with a parenthetical admitting that figure doesn’t include the engine.
But in fact, across the services the real cost per plane—engine and all—is something in the neighborhood of double that figure.
When all the operating costs for the planned fleet are calculated across the expected 50-year lifetime of the program, the American people will spend an estimated $1.727 trillion
The American people were promised that the F-35 would be an affordable replacement for the A-10 and the F-16 when Lockheed Martin won the coveted contract in 2001. Then-Secretary of the Air Force Jim Roche said the new jets would cost between $40 and $50 million apiece and that the total cost of the program, from development to production, would be $200 billion.
In the 19 years since that announcement, total program costs have doubled to approximately $400 billion. When all the operating costs for the planned fleet are calculated across the program’s expected 50-year lifetime, the American people will spend an estimated $1.727 trillion.
As defense budget season gets underway again, it’s worth noting that unlike previous years, the F-35 has some competition in the form of the Boeing F-15EX. For defense contractors and their boosters, the competition that really counts in Washington is not which aircraft performs better in combat, but rather the competition for budget space.
For the F-35, selective math is the weapon of choice to try to make the costs of this struggling program disappear and give the impression that the jet is quite a bargain. And even as the program’s boosters push the Pentagon to buy more aircraft based on misleading numbers, the F-35 is already going down the well-worn path of shiny new weapon systems that don’t deliver as promised and, sooner or later, end up with cuts or outright cancellations from the services.
Selective Acquisition Arithmetic
The latest Pentagon and Lockheed Martin figure touted in the press is $77.9 million for each F-35 in the Lot 14 batch for fiscal year 2020.
But taxpayers pay far more than that for an F-35. This number, like the others trotted out to prove the plane’s affordability, hardly provides the full picture not just of the price per aircraft, but the program as a whole.
The services’ publicly available budget documents provide a more comprehensive picture of these costs. According to the Air Force’s aircraft procurement justification book for fiscal year 2021, the $77.9 million sticker price for the 2020 model F-35A jumps to $110.3 million per aircraft when all aspects of the program are added together. And this figure will rise in the coming years as aircraft purchased now receive significant upgrades.
When people quote the $77.9 million figure, they are talking about the unit recurring flyaway cost, which is only the cost of the parts of the aircraft and the labor to put them together. The doyens of the military industrial congressional complex always prefer to use this cost metric because it is the calculation that produces the smallest possible figure. In fact, it is merely the “sticker price” to get the F-35 off the proverbial lot. But it does not produce an aircraft that is ready for training, let alone for combat.
That price does not include the money spent in previous budgets to purchase parts for that lot of F-35s. Nor does it include the costs of other activities necessary to keep the program functioning, like standing up depot maintenance facilities, ground support equipment, simulators, and operating the maintenance network. The Air Force’s budget documents do include all of those costs.
According to the Department of the Navy justification book, which covers both the Navy and Marine Corps aircraft procurement, a Marine Corps F-35B costs $135.8 million and a Navy F-35C costs $117.3 million per aircraft.
For an even clearer picture of the real costs of a fully functioning F-35 and related support equipment, we can look at the F-35 contracts offered to foreign governments. The Swiss are considering purchasing 40 F-35s for approximately $6.58 billion, or $164.5 million apiece. This figure accounts for the spare parts, missiles, bombs, and bullets necessary for a fully functional weapon system.
Meanwhile, the design process for the F-35 is far from complete, even as the program limps toward full-rate production. Engineers couldn’t complete the design of many of the program’s promised capabilities within the original development budget and timeline. These changes have been designated as part of the program’s follow-on modernization program, also known as Block 4.
During this process, engineers will complete work that should have already been done in the original system design process, and will also add new capabilities. These changes will be integrated into the production line for the F-35s that will be built later, but added to the aircraft already in the fleet as part of a retrofitting process.
The overall cost of each individual F-35 will subsequently rise as more money is invested into them. The Government Accountability Office estimates that the total cost of the F-35 Block 4 program will be $12.1 billion, a sum that the history of the F-35 program suggests will rise much higher as the effort gets fully underway. The F-35 modernization effort is so large that the watchdog recommended in 2017 that it be classified as a separate acquisition program.
Lockheed Martin and Boeing Fighter Competition Adds New Pressure
For more than a decade, Lockheed Martin and the F-35 cornered the American fighter jet market. As the program fell behind schedule and proved to be a disappointment in the capabilities it delivered, the services started purchasing upgraded versions of existing aircraft to maintain the force structure they needed.
The Navy had expected to stop purchasing F/A 18 Super Hornets in 2015, but delays with the F-35C prompted the service to curtail those plans. The Navy continued purchasing the Boeing-made Super Hornets to replace older models as their airframes aged out of their useful lifespans. Last year, the service awarded a $4 billion multi-year contract for 78 new Super Hornets.
The Air Force is also rethinking its fleet mix, purchasing the new Boeing-made F-15EXs. These are upgraded versions of the original F-15s first flown in 1972. The Air Force awarded Boeing a $1.2 billion contract for eight of the new jets in July 2020 and may spend another $23 billion to purchase a total of 144 over the next few years. The new F-15EXs are anything but a bargain. Based on these contracts, each aircraft has a program cost of approximately $150 million.
For defense contractors and their boosters the competition that really counts in Washington is not which aircraft performs better in combat, but rather the competition for budget space.
The F-15EX deal is not without controversy. In 2019, people inside the Pentagon raised questions about alleged statements by the then-Deputy Secretary of Defense and former Boeing executive Patrick Shanahan promoting the F-15EX deal to Air Force officials. The Defense Department’s inspector general investigated allegations that he “took actions to promote his former employer, Boeing, and disparage its competitors, allegedly in violation of his ethical obligations.”
The inspector general ultimately cleared Shanahan of all wrongdoing, but the incident underscored both the increased pressure on the F-35 program to perform and the problems and potential conflicts that come with appointing a former defense industry executive to such an influential Pentagon post.
By purchasing newer versions of the so-called legacy aircraft, the services put Boeing and Lockheed Martin in direct competition for their shares of the fighter jet budget pie. If ordinary market forces were at work, the competitors would cut their prices to out-compete their rivals. But acquisition decisions are not driven by ordinary supply and demand considerations: The military industrial congressional complex is a political economy engineered through contracts that are spread through congressional districts, plus campaign donations.
Instead of a competition that will produce the best deal for taxpayers, what we see today are industry mouthpieces publicizing rosy cost figures to make it appear as though the F-35 is a real bargain.
The Marine Corps Considers F-35 Cuts, Further Increasing Costs
The cost of weapon systems matters in part because it ultimately determines the size of the force. Despite the vast sums bestowed upon the Pentagon every year, there is a great deal of competition for resources both among and inside the services. Today’s latest and greatest toy will inevitably get squeezed out when something even newer comes along. Because the military industrial congressional complex continually pursues ever more expensive weapon systems, service leaders have to cut back on last year’s prized weapon so they can buy more of the new ones.
This is happening now in the Marine Corps. The service announced plans in early 2020 to trim the number of F-35s in each squadron from 16 to 10 as part of its transformation to prepare for a potential war against China in the Pacific. Marine pilots fly both the vertical takeoff F-35B and the aircraft carrier F-35C variant. The service envisions a future fight for control of key islands across the south Pacific in a fashion reminiscent of World War II, but involving small landing battalions operating new high-tech weapons like long-range anti-ship missiles and unmanned aerial vehicles.
The Marine Corps has already taken steps to make room in the budget for these new capabilities. Already gone are all of its tank battalions and many of its towed artillery battalions. The service will also shrink by 12,000 Marines over the next 10 years. Cutting the F-35 squadrons by six aircraft each is another way to find more money to purchase other equipment. The Marine Corps had planned on purchasing 353 F-35Bs and 67 F-35Cs, for a total of 420 aircraft. Aviation Week reported in September that the service is expected to release a revised F-35 total purchase quantity next February. A simple calculation suggests that the Marine Corps will cut the total purchase to 312.
It is a bit ironic that the Marine Corps would be the first service to pare down its planned F-35 fleet. The program started as a replacement for the AV-8B Harrier vertical takeoff and landing fighter. Pentagon officials later expanded the program to include the Air Force’s conventional takeoff variant and the Navy’s aircraft carrier variant. All three variants share the same basic center fuselage. The requirements for the Marine Corps’ short takeoff and vertical landing capability meant the center of the aircraft needed to be wider to accommodate the specialized engine. This added weight and aerodynamic drag to all variants, affecting their performance in flight.
As the saying goes, a weapon that is too expensive to lose is too expensive to use.
Buying fewer F-35s will free up some budget space for the Marine Corps, but it will make each F-35 the service does buy that much more dear. The cost of each airplane will rise dramatically as the economies of scale shift, which creates two new problems. First and most obviously, the smaller force may not be large enough to meet all of the demands placed upon it. Less obvious is the fact that commanders may be less willing to place a scarce and expensive asset in harm’s way. The author witnessed this first-hand in Afghanistan in 2013, when raid targets were approved or rejected based on the risk posed to helicopters. Commanders would bypass valuable targets in favor of lesser targets because they were unwilling to risk having a helicopter shot down.
As the saying goes, a weapon that is too expensive to lose is too expensive to use. If that is the case, then all the time and money spent to develop and purchase the weapon has been wasted.
Unilateral Disarmament
The Marine Corps is hardly the first service to slash a planned weapons purchase to free up resources when something newer came along. Several once-marquee programs have been drastically reduced or canceled entirely because rising costs would force the services to either devote too many resources to acquire the planned fleet or to sacrifice other programs.
Here are a few examples from the past 30 years:
-- B-2 Spirit:
The Air Force originally intended to purchase 165 B-2 stealth bombers for $36 billion, or approximately $218 million per aircraft, during the Cold War. As the costs rose and the Soviet threat diminished, procurement numbers dropped incrementally through the 1980s until President George H.W. Bush announced that production would be halted at 20 aircraft after more than $40 billion had been spent on the program. Each B-2 had a final program cost of $2.1 billion.
-- F-22 Raptor:
Originally intended to replace the F-15, the Air Force planned to purchase 648 F-22 stealth fighters. The cost of the program grew steadily throughout the development process and the planned fleet shrank accordingly. The Pentagon’s 1993 Bottom-Up Review saw the total shrink to 442. It shrank again to 339 following the 1997 Quadrennial Defense Review.
The Air Force originally estimated each aircraft would cost $149 million but, in the end, they cost approximately $400 million. Defense Secretary Robert Gates curtailed production in 2009 at 187 after more than $65 billion had been spent on the program.
-- Zumwalt-class Destroyer:
The Navy wanted to replace the Arleigh Burke-class destroyers as part of its electric boat concept. The original plans called for a fleet of 32 Zumwalt ships, but cost overruns and technological difficulties prompted Congress to curtail the program at three ships. The Navy spent a total of $22.5 billion on the program, or $7.5 billion per ship.
-- Littoral Combat Ship:
Navy leaders wanted to increase the size of the fleet with a relatively large number of small surface ships meant to operate close to enemy shores. The Littoral Combat Ship program ended up producing two hull designs because no decision was ever made between the two competing manufacturers, even though the original strategy called for the Navy to do so. Neither design ever worked properly.
Costs more than tripled from $220 million per ship to more than $688 million per ship. The planned fleet shrank accordingly from 55 to 33.
-- Future Combat Systems:
Fresh from the success of the 1991 Gulf War and the demise of the Soviet threat, the Army sought a way to reinvent itself to fight the wars in the 21st century. It launched the Future Combat Systems program to develop an entire family of vehicles and weapons platforms to replace weapons like the Abrams tanks and Bradley Fighting Vehicles that were the backbone of the force. The new weapons were to be linked with a communications network that promised to provide commanders with a perfect picture of the battlefield. But engineers could never get the technology to work properly and the projected cost of the program skyrocketed to $200 billion. After 14 years and $32 billion had been spent on the project, it was canceled in April 2009 with little to show for the effort.
A Better Way
Uniformed and civilian military leaders, as well as Congress, should not hesitate to cut weapons programs like the F-35 if they are not living up to expectations or meeting the needs of the services. Likewise, if the costs of a program spiral out of control, the proper course of action will likely be to either fulfill the minimum order or outright cancel the program. All of the examples cited above were programs the Project On Government Oversight (POGO) opposed in large part because the exorbitant costs were destined to result in production curtailment or cancelation.
Pentagon leaders could go a long way toward solving this dilemma by pursuing simpler programs from the outset. The pursuit of dazzling yet unproven technologies inevitably results in programs that waste billions of taxpayer dollars on weapons that failed to live up to the lavish promises made at their beginning.
Besides the F-35, the Navy’s Ford-class aircraft carrier is another program that may suffer a similar fate. As all of these over-budget and underperforming programs through the years crashed into reality, their numbers were slashed, which forced the services to extend the life of the existing weapons the new programs were intended to replace.
A weapon or military vehicle can only go through so many service life extension programs before it becomes completely unserviceable. By creating falsely optimistic cost projections, weapon system proponents hinder good decision-making in Washington.
Unless the Pentagon and the defense industry mend their ways, the people charged with our defense will be without the equipment they need to effectively do their jobs.
Click here for the full story, with links and additional charts, on the POGO website.