Joint Strike Fighter costs are soaring

The F-35 project is plagued by cost overruns. But Ottawa says it’s insulated from sticker shock.

by John Geddes

 

Costs are soaring too

Tom Reynolds/Lockheed Martin

 

The suspension of test flights of Lockheed Martin’s new F-35 fighter jet early this month sounded like bad news for Canada. The federal government announced its plan last spring to buy 65 of the so-called Joint Strike Fighters, giving Ottawa a multi-billion-dollar vested interest in seeing the radar-evading airplane cruise smoothly to market. Yet the discovery of a fuel pump software problem—just the latest setback in the troubled F-35 program—apparently can’t translate into a price bump for Canada. “The Americans basically have been covering the cost overruns in the system design and development phase themselves,” Michael Slack, the Department of National Defence’s manager for the F-35 project, told Maclean’s.

The notion that Ottawa is in a position to shrug as Washington sweats over F-35 costs is arguably the most unexpected aspect of this controversial military procurement deal. The U.S. government has seen the projected cost of each F-35 it plans to buy soar from $50 million a few years ago to at least $92 million this fall, and well above $100 million by some recent estimates. U.S. Defense Secretary Robert Gates has been aggressively managing the file lately in a bid to counter negative publicity. By contrast, his Canadian counterpart, Defence Minister Peter MacKay, has been sanguine throughout it all, saying Canada will pay a comparative bargain price of about $70 million per jet.

That deal sounds almost too good to be true. Yet Slack vows that’s the way it is. The dollar figure that ultimately matters to Canada, he says, is something called the “average unit flyaway cost.” As he explains it, that’s the narrowly calculated cost of manufacturing each F-35 in the years 2016 to 2022, when Canada negotiated for its 65 jets to be delivered. The price Canada has agreed to pay won’t include any of the pre-production costs now mounting. “The system design and development phase costs have mushroomed,” Slack says. “But the only thing that’s relevant to Canada is the average unit flyaway cost.”

The most up-to-date estimate of that manufacturing cost for a single F-35 is between $70 million and $75 million, according to the U.S. government. “The U.S. does a fairly good job of estimating what the unit costs are going to be,” Slack says. “What they don’t do a good job of is estimating the cost of research and development, and testing and evaluation, which is a tricky business when you’re dealing with sophisticated military equipment.”

Critics of the F-35 purchase question how the Conservative government can really be so sure there won’t be any sticker shock. “There’s no contract, so I don’t know how they can say that’s the price we’re going to get,” says Steven Staples, president of the Rideau Institute, a Ottawa-based research group whose analysis of government programs is often used by unions such as the Canadian Auto Workers. Like the opposition parties, Staples contends the government should have put the contract for new fighter jets out for competitive bids to ensure the lowest price, rather than taking the unusual step of sole-sourcing the purchase of Lockheed Martin’s fighter.

But Slack says the F-35 arrangement is solid and offers unique advantages. In 2002, Canada signed on to the Joint Strike Fighter partnership with the U.S., Britain, Italy, the Netherlands, Turkey, Australia, Denmark and Norway. By putting up $150 million at the outset, Canada essentially bought the right not to bear the burden of any future development costs. In the fall of 2012, Canada must, along with the other partners, put in a firm order for jets to be delivered in 2016. The final price to be paid to Lockheed Martin will be negotiated by a U.S.-led project office for the partner countries. One key variable is the number of jets sold—fewer than expected would raise the cost of each airplane, more sales would lower it.

Slack says the very real possibility of some partners deciding to buy fewer F-35s than originally planned is offset by the prospect of new customers placing orders. Of course, projecting demand for high-end defence hardware years in advance is tricky. It’s a safer bet that bringing that hardware to market will cost more than promised. In the unsual case of the F-35, though, that appears not to be Canada’s worry.




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Joint Strike Fighter costs are soaring

  1. Um…. no.

    Like anyone being sold a Ponzi Scheme like this, you better look again. All F-35 JSF partner nations have to sign up to a certain quantity or there won't be that nice price. Important because no one knows what it will actually cost to operate and sustain this aircraft. Other partner nations like Norway, Denmark and the Netherlands are starting to wake up. The U.K. MOD is in the tank and will never see their proposed numbers if-any.

    Little details like this are important because only around 3-4 percent of the flight test program is done.

    Then there is the whole issue of what the heck are you buying? The jet as delivered will be obsolete against modern threats over its supposed service life.

    So, by focusing on the fantasy unit cost of a flying question mark, the seller of the aircraft still has most of the gullible customers confused. And that is probably the way they want to lead the sheep to the slaughter.

    • You know nothing about what you speak.You are another one of these people who think you are some sort of expert and hope you will convince your left wing readers of your knowledge.This aircraft will be far from obsolescent when it is delivered.If we followed your logic then we would quit developing aircraft.Do you not think that our potential enemies have the same period when developing a top line aircraft or do they build it overnight.It seems to me we have yet to be lead to the slaughter only the gullible like you who would have us cancel this and go back to the tiger moth

      • Really? I thought our enemies were rifle-clutching terrorists who live in caves.

  2. The F-35 concept was ill conceived to begin with. Trying to make one aircraft serve three totally different missions is ill advised . The structural demands/differences between a carrier based aircraft and a land based aircraft are light years apart To compound this foolishness LM decided to design the carrier version, which was like asking a 3rd grader to write a doctoral thesis. Surprise, LM had to go back and redesign from scratch rather than subcontract to someone who has built a carrier plane . We the taxpayers get the bill for this supreme arrogance. Harper and his idiot cabinet should be brought to task.

    • Not that I disagree with any of your points, but is not redesigning a much more responsible way to go about it? Costs aside I would rather invest in the technology that was specifically designed for the operational means requested, not technology that had simply been adapted to serve a different process. I am not arguing in favour or against the F-35 canadian contract, merely hoping to point out that investing more in a plane that is being built from the ground up is in my eye favourable to purchasing an adapted aircraft that may or may not be functionally designed for the missions required of it.

      • on top of that, the design blew away the competition by a huge margin!

        The common platform is about saving costs on production and parts in the future, it is a compromise to reduce the cost and make production more efficient.

        • Wow, well informed. How did you find this out when the government went to sole-source bidding and asked for no comparisons. Evidently it is not cutting costs and making production more efficient. It is nice to think positively, but also not to be taken as a rube.

  3. John,

    I think you got played by this stack guy, he is being cute with the facts.

    No one has suggested that Canada would be responsible for further development of the aircraft.

    The concern is the rising estimated per unit cost, which has gone somewhere from 70 million to 140. The development costs are going to be built into the per unit cost.

    Now is this guy actually saying that the US has guarenteed a per unit price? If so, what is that price point?

  4. Leave it up to the Americans to play the war games. Canada should not be involved with multimillion dollar military expenditures like this.

  5. My gosh another left wing expert.we are so lucky to have you as it makes the rest of us with basic knowledge look like experts

    • My, we are impressed with ourself aren't we? And on what basis may I ask?

    • Feel free to share your knowledge, Dismissing critics as being left wing, is making you sound like a defensive partisan.

  6. The basics are these. Too expensive and perhaps not the right aircraft for use in countries as varied as the Netherlands and Canada. It can't be all things. It may be able to dissuade Russian turbo-props but both the Russians and the Chinese have technology that has moved on from this aircraft. We are about to get a surprise if we try to sneak up on their latest jets. Further, these are being sold to the Canadian public by public relations comparisons. I could go on, but not very much can be gained by arguing with the Prime Minister. Instead, go to ausairpower.net as a starting place to begin a serious dialogue on jets unsuitable for the type of conflicts Canada will be involved with (the F-18s have been noticably absent in Afghanistan). The government has it wrong. We are in deep trouble with no money left over for the army or the navy and no provisions for veterans. Jesus wept.

  7. This plane was conceived and designed in the mid-90's and won't be ready till when??? 2016????
    It's short haul – not suited to this country; in any case, we don't an enemy with an airforce except maybe the U.S.
    The plane is suited for quick and stealthy first strike deployment – say – as in an attack on Iran…ummm…

  8. The F18 hornets went through the same process as will this plane. What I think is that there is a money connection for all the critics of the F35, who gets the repair contracts and maintenance for these aircraft? Why are they slamming the most advanced plane in the world in this price range? Would they have us buy a russian Mig instead, which is an inferior plane.

    • There aren't any 5th generation Migs. But how would a Sukhoi PAK be inferior to the F35? Particularly for continental air defence?

      a)better stealth, b)twin engine, c)more maneuverable, d)much cheaper

      Basically, it's the kind-of ugly step-sister to the F-22. Which is to say that it is much better for Canadian purposes than the F35.

    • You are misinformed. No Migs out there but very superior Chinese and Russian craft that would beat us up in a minute. However, war with either of these nations is unlikely. Perhaps we could buy something for close air support for ground troops?

  9. There are critics because it is way early in the test program and every marketing gimick to the aircrafts supposed usefulness is being thrown at us. A PowerPoint presentation does not make a fully active fighter squadron with good tribal knowledge. It took 4 years after declaration of initial operating capability (IOC) before the USAF figured out how to properly operate and maintain the F-22 (learning curve with a new aircraft type and tribal knowledge).
    USAF–the supposed biggest buyer of the F-35 will declare IOC in 2016 (although all this program is consistant at so far is slipping schedules). So the best case is that USAF will have tribal knowledge on how to use the jet in an actual fighter squadron around 2020. That is the time when any intellgent buyer wants to make a purchase decision.

  10. Research and Development takes years to get anything operational. Has the time come for Canada to build and design its own aircraft? Thoughts?

    • I would love Canada to once again design and manufacture its own aircraft, get the old De Havilland and Douglas going but I fear another Avro Arrow fiasco with our Government bowing to US pressure to buy American.

    • Canada signed something after the Arrow died that states it (Canada) will never design and build its own millitary aircraft.

  11. The F-15 Silent Eagle is a nice machine as well.

  12. Well GAR just name one just one military procurement GAR that didn't have a vast overrun GAR just one GAR. I am sure you are are a real wealth of knowledge on the subject GAR. the right always has all the answers, sorry I forgot.

  13. If only the conservatives of the day had stood as firmly by the Arrow as the current ones do with the F-35.

  14. Designing a fighter aircraft with the comb characteristics of a fast interceptor + bombtruck + vertical take off and landing jet, well thats as smart as believing that you could combine a 18-wheeler truck with a Indycar and still win on the ovals. No can go? Who could have thought? But it looks good on Power Point! Ask the Norwegians, or maybe dont. They dont have a clue…

  15. I dislike planes whose dogfighting attributes are so abysmal the manufacturer feels it necessary to break out the tired old: "we're in a missile age" argument. After all, that's worked out so well every other time they've tried to go there.

  16. Nine billion dollars for 62 jets runs close to 150 million per jet not 70 million. Peter McKay, like most things about the f35, doesn't make sense when compared to our real needs military or otherwise. Our needs are totally different from Anerica's so it should be clear that a jet designed for them would probably not suit us. A public hearing laying out the case for the f35 as compared to other alternatives is totally necessary.

  17. Are we sure we have a Conservative (fiscally conservative that is) government? It sure doesn't seem like it with the G8-G20 fiasco, the huge deficit and this questionable purchase of an aircraft that has runaway costs. Oh right! WE DON'T! It is the CRAP in conservative clothing. hmmm

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