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Give or take a billion


 

The Parliamentary Budget Officer estimates a total price tag of $29.3-billion for new fighter jets.

The PBO has estimated the total program cost—including acquisition and ongoing sustainment—to be US$ 29.3 billion. Divided over 65 aircraft, this results in a cost of approximately US$ 450 million per aircraft in FY 2009 dollars.

There is continuing speculation as to the final average acquisition cost per aircraft. It would appear that Lockheed Martin remains confident that the average cost will come down. However, it is not immediately obvious, given the available evidence, how the cost can be reduced to estimates predicted by Lockheed Martin over 10 years ago. Not only do such figures not resemble the PBO’s costs estimates, but they are considerably lower than the forecasts issued by the DOD organizations, such as the CAPE and the GAO. The Selected Acquisition Report (SAR) published by the DOD shows an average unit production cost of US$ 91 million per aircraft. Being of the view that the program was in even worse shape, NAVAIR’s analysts under Vice Admiral David Venlet predict an average unit cost of US$ 128 million. Unless there is compelling evidence to the contrary, it is difficult to see prices reducing to their original estimated level.

More from the Globe, Star, Post and Canadian Press.


 

Give or take a billion

  1. “A billion here, a billion there, and pretty soon you're talking real money”.

  2. No doubt L-M are willing to honour their estimate by absorbing any costs above those quoted?

  3. I think part of the confusion is that the various groups are not comparing the same costs. It sounds like the average unit production cost is talking about the 'sticker price', whereas the PBO is talking about the life cycle cost, which may include sticker price+fuel+ammunition+spares+maintenance+disposal.

  4. Time for the Conservatives to quit plane around.

  5. So if we buy them but never use them, they're a bargain!

  6. But think of the cost of the mothballs.

  7. And the PBO has used a calculation base on 30 years of service, which may be reasonable, or even optimistic, given how long the forces keep equipment in service, but it is not the standard that has always been used in the past, which is to estimate costs over a 20 year life. The figures used to date by the government complied with standard procedures, and, given that difference, it accounts for much of the difference in costs as well.

    In any event, even at a cost of $30 billion over 30 years, that is about 1/250th of anticipated government spending in that time frame – even at current levels. Is that more than we can afford asa nation?

  8. Compared to what? That is the question.

  9. Exactly. Since there is no other comparable plane available within the time frame in which the CF-18s need to be replaced, the argument over the details of the cost are a bit moot.

  10. Your play on words will not fly here.

  11. Can we at least all agree now that the $16 billion number they first trotted out was ridiculous from the first moment they said it?

  12. No, because it is, in fact, an accurate statement.

  13. So is this one.

  14. "Since there is no other comparable plane available within the time frame in which the CF-18s need to be replace"

    Cool. I didn't know we'd called for tenders. Glad to know we looked around firs…what?

    We didn't?

    So, what are you basing your statement on?

  15. He needs to adjust his attitude.

  16. "The 16 billion dollar boondoggle" has a nice ring to it.

  17. So, you're still willing to say that these planes are going to cost us $16 billion? 'Cause I didn't believe that number the first time I heard it, and I believe it even less today.

  18. I know. My terrible puns usually bomb.

  19. It's a disease. It may be terminal.

  20. Common knowledge and the fact the air force has been involved in the development of this project for ten years. What other fifth-generation fighters do you think are available in the next five years? Do you think there is one out there the air force hasn't heard of?

  21. Why do you hate the troops and their ever more expensive planes?

  22. Where's the ice breaker promised by Mulrony and then Harper?

  23. I'm saying the cost estimates released by the government are not significantly at odds with those of the PBO. If you count all the costs over 20 years they are more than the simple acquisition costs. If you count them over 30 years, as Mr. Page has done, they are higher. If you want to estimate their costs over 50 years they will be higher still. That's simply a fact of life. Its the cost of defence. Either you have an air force or you don't. If you choose to have one, as Canada will, then you have to decide if you want the best you can obtain for your pilots, or something less.

  24. Ah, common knowledge. I feel better now.

  25. Do you think these up ahead of time, or do you just wing it?

  26. Does New Zealand have an air force?

  27. Harper is waiting for that global warming he doesn't believe in.

  28. Geez, I can't for the life of me figure out why the Conservatives think this Page guy is such a pain in the a**. He's a veritable fountain of handy dandy information!

  29. Given how the plane's development has gone thus far, I wouldn't be surprised by 2016 there STILL isn't a fifth-generation fighter jet available to this country or any other.

  30. Something tells me we don't really need these planes.

  31. For those of you with kids: Can you thank them for buying me some sweet jetplanes? I hope they have fun paying them off!

  32. Media has distorted this information!!!

    Page based his figures on 30 years of maintenance costs, not the usual 20 years. Thus the "This figure is close to 70 per cent above the price tag estimated by the Tories." is an out-right lie!!!

    Now all those opposed are having a feeding frenzy based on BS!!!

  33. not to mention the smell, who wants to fly a jet that smells like Nana's closet? no awesome recruiting tool there!

  34. The CF 18's in our fleet are approaching 30 years of service. Historically, we've pushed planes much farther than that as well. To claim 20 years as the norm seems silly, especially when the Conservatives themselves are claiming the planes will serve us until 2050 (ie: ~35 years from the expected receipt date of the first plane)

  35. Russia's PAK FA will be coming off the line at the same time. Given historical design trends, would probably be cheaper to maintain too.

  36. Well, no it won't – the PAK FA – if comparable, won't likely be available to anyone for at least five years after that. And no, given the reputation of Russian engines in particular, it own't be easier or cheaper to maintain. Or inter-operable with NATO, or a rational choice.

  37. I hope he pulls up before he crashes and burns!

  38. More common knowledge, no doubt.

  39. It may be "silly" but it is also the standard by which estimates are presented to parliament so there is a possibility of an "apples to apples" comparison. The government can't be faulted for following the rules.

  40. It is the perception that is being created that is wrong. I heard it on the radio earlier, and at least they qualified the extra ten years.

  41. From what I have read, the only way to ascertain that is to hold a competative bid. Which was what the government planned until last summer.

  42. "The government can't be faulted for following the rules"

    You have a future in stand-up comedy.

  43. Why is it the Harper Government doesn't want to share information with Kevin Page?

    I trust his estimates more than the Conservatives numbers, despite their access to the actual figures.

  44. Nope, these puns come straight from the heart. Soul-sourced. You got to give me props for that.

  45. Never! If you want me to stop, you're going to have to chute me.

  46. No, we don't.

  47. Inviting who to participate? Planes that don't meet the basic requirements?

  48. But he's right.. they can't be faulted for following the rules. How often they don't follow them is a different story.

  49. Or at least an Aero bar.

  50. Actually, I didn't mean to say that the government's estimates are necessarily comparable to the PBO's estimates exactly. I don't think the government's estimates are wildly low because the PBO has a higher number (based on different assumptions), I've thought that the government's estimate was wildly low since they first said it out loud. I was simply hoping that the PBO suggesting basically the same thing that people have been saying since that low-ball $16 billion estimate first came out might mean that EVERYONE now realizes that the $16 billion is not an accurate estimate of what these planes will cost us. 'Cause it's not.

  51. Don't understand how tendering works, do you?

  52. US press notices. Fort Worth Star-Telegram (F-35's home town paper) blog: http://blogs.star-telegram.com/sky_talk/2011/03/c

    "Canadian report says cost of F-35s far higher than advertised

    The government has said the per-unit price of each plane is about $70 million to $75-million, while other estimates have pegged them at $91-million each. Government figures put the total cost of ownership at $17.6-billion.

    Mr. Page's report estimates the jets will cost nearly $149-million each but over their lifetime will run about $450-million per plane in support and maintenance."

    Lots more on Canada and the F-35 at the Canadian Defence & Foreign Affairs Institute's "3Ds Blog": http://www.cdfai.org/the3dsblog/?cat=20

    Mark
    Ottawa

  53. If there is no comparable product available, you don't waste money and time going to tender. We've been working on the F-35 as a partner for ten years. The air force is aware of it's capabilities and those of the other combat aircraft currently in production. If there were comparable planes for the required roles it would make sense to have a tendered process – although that takes years itself and costs millions – ask the Indians or Brazilians how efficient such competitions are. In this case, however, the air force has already concluded there aren't any comparable aircraft – hence no need for a tender.

  54. Aren't 20 year estimates a "rule" in the same sense that putting multi-billion dollar contracts out to tender is a "rule"?

    Can anyone point to the "rule" they're supposedly following here?

  55. If one takes the PM at his word, he DOES believe in climate change. He once called it the greatest threat facing humanity.

  56. Which day was that? And what time was it? LOL

  57. "Planes that don't meet the basic requirements? "

    Did we even undertake a proper requirements-gathering exercise? As I understand it, the requirements doc was developed after the announced decision.

  58. From the National Post:

    "Whatever National Defence's plan, continuing to fly the CF-18 much beyond 2020 is not an option, said the RMC's Lt.-Col. Allen. Notwithstanding a $2.6-billion modernization program wrapping up this spring, the fleet is scheduled to be retired starting in 2017. By that time some of the airframes will be 35 years old."

    It sounds like a 30-year service life is a more realistic estimate than 20 years, and might even be an underestimate. Why would the Conservatives assume a 20-year service life?

  59. Hard to know when the government won't release what the requirements are.

  60. The 20-year service life is a government stanard that has been used for budgeting purposes for years – long pre-dating this government. It might not be sensible in terms of how long we hang onto equipment, especially in the armed forces, but it is a standard procedure. To change it makes it difficult to do and apples for apples comparison – as Mr. Page's use of a 30-year period illustrates.

  61. Ah, fair enough.

    Though I don't think that makes Mr. Page's estimate any less valid than the government's estimate, in fact it's probably more valuable for the public to know the real-world number. Considering that no other aircraft are being considered, there's not really an apples-to-apples issue to worry about.

  62. I don't know about the specific day and time, but it was in 2007.

    The exact quote was that climate change is "“perhaps the biggest threat to confront the future of humanity today”.

  63. I was joking…hence the LOL

    I just meant he changes his mind on these things depending on the day, the hour….and his audience.

  64. So they were supposed to cost $16B for 20 years of service according to the government's quote, or $800M / yr. And according to Page, it's $29B for 30 years of service, or ~$970M / yr. an increase of 22%, not 70%? That's not nearly as impressive a punchline for Wherry though i suppose.

  65. Stephen Harper 2007 wishes to disagree with you.

  66. 2007 – in political time – that was the Edwardian period. We were so naiive then.

  67. And I thought Gordon O'Connor was a plant.

  68. This is a good point, although to be fair they are also disagreeing by a wide margin on the "sticker price," as nobody knows (even the Americans) what the per-unit price will end up being, and all the new info is very worrying (ie. everyone's cutting orders, which is raising sticker prices, which is resulting in less orders, etc.)

  69. There's no reason to necessarily hold this position. The belief is that the PAK will be way, way, cheaper than the F35, which is turning into a pretty solid disaster at this point. So while Russian engines might be perceived more expensive to maintain, it would have to be a huge discrepancy to make a big difference. Moreover, Russian planes have been modified to inter-operate with NATO in the past – that doesn't have to be a game-changer by any means.

    In the end, the argument against the PAK seems to be a bucket list of vaguely lame arguments. Russian planes aren't as good, except that maybe they are, as nobody's complaining about the last generation of MIGS and SUKs. Russian engines aren't good, except that nobody's impressed with the F35s engines, either. The PAK isn't ready yet, but then there isn't really a hard deadline on deliveries if we don't demand there to be. The Russians wouldn't sell to us, except that they'd loooove to sell to us and desperately need the cash. The Americans would be pissed, except that they'll learn to live with it and would frankly understand our bailing from a sinking ship. And it isn't NATO-interoperable, except that this could be fixed given the billions of dollars of savings.

    This isn't to say that the PAKs the best thing since sliced bread, but Canada's stuck in a messy situation. On the one hand there's the Super Hornet, and on the other hand there's the PAK. Each has problems, but each has big advantages. In the middle is the F35. It hits all the warm and fuzzy buttons that make politicians and Generals happy, but it's also an expensive dog that won't suit Canadian needs (not good at air superiority, short range, single engine). Frankly, given the poor quality of the total F35 package, I feel like we have to go out of the box, and consider either an ungraded 4.5/4.75 jet on the one hand, or the PAK on the other.

  70. well, great, so maybe if the gov't had just provided the documentation like they were supposed to, that would be apparent, and if they'd actually gone through the motions of holding a Canadian (not vicarious U.S.) competition and negotiated the regional industrial benefits guarantees, they would have SAVED that 20%, and we'd all be on the same, er, Page.

  71. This from the report (p. 41) is very interesting:

    "The new aircraft was to reflect key lessons derived from the 1991 Gulf War. Stealth was seen as immensely valuable in the first day of the war; however, after the first day's operations, the Iraqi integrated air defense system never recovered, and Pentagon planners believed that stealth would be less vital as any campaign continued. In addition, operations revealed the high value of precision guided munitions. The Joint Direct Attack Munition80 program, the first full-production GPS guided bomb, was well under way by 1995. This meant that a combat aircraft could be lethal even with a relatively small weapon load. All this led to a ‘day-one stealth' concept, where the aircraft would carry a restricted internal load at the start of the campaign but then switch to non-stealthy operations with a larger load of external weapons afterward in order to deal with bigger target sets. This transformation in approach called for a versatile design."

    Does the Canadian Air Force need that initial strike stealth? If we on the other hand take part thereafter stealth is not critical–and is not demanded even of the F-35 with weapons on the wings degrading stealth severely.

    From the same page:

    "As the largest customer, the USAF had a strong influence on the basic operational requirement, which was expressed early on as ‘70 per cent strike and 30 per cent fighter'. In USAF service, the F-15 and, later, the F-22 are the primary air combat fighters, with F-16s in a fighter-bomber role. The strike mission emphasized ground targets, called for the ability to carry bombs (bulkier and heavier than air-to-air missiles), and required a built-in infrared/laser targeting system. Fighter missions stressed speed and acceleration, radar size and power, and agility."

    Are those our requirements in a fighter? Esp. since its main use in practice is Canadian airspace patrol and protection, a role for which stealth is not needed.

    Mark
    Ottawa

  72. There are, to date, exaclty two prototypes of the PAK flying, with unknown electronics. Given the history of development of combat aircraft around the world, it is extremely unlikely it can be in service within ten years from now – and if so, we have no idea what it's capabilities will be. The CF-18 will cease flying entirely by 2020. No reasonable government would abandon a defence program that it has been a part of for ten years in favour of hoping an unknown, unproven design will be available in time to keep our air force flying.

    Yes, the F-35 is a compromise. Since we can only afford one type of air combat jet and keep it in service for 30 or 40 years it has to be. The "short range" and "single engine" arguments are simply nonsense.

  73. What makes you think stealth isn't useful in airspace patrol? As well, when the CF-18s have been flown in combat their role in the Gulf was both air patrol and ground attack, and their role in Kosovo was primarily ground attack. The CF-18s replacement will be in service for 30 or 40 years. It would be irresonsible to buy an aircraft assuming its only role will be that for which the current fleet is primarily used today. The point is, we don't know what it may be called on to do – perhaps a mission such as establishing a "no-fly zone" over a country like Libya with potentially sophisticated air defences? In that case the F-35s combination of surveillane electronics and stealth will clearly be useful.

  74. Well, I agree that the PAK isn't perfect. But these arguments aren't ironclad, and the government should at least outline the pros and cons of the deals side by side, as they might in a competition.

    But closer inspection again suggests that the F35s advantages aren't impressive. The CF-18 in fact won't "cease flying entirely by 2020", since there are design nightmares at Lockheed Martin that have pushed everything back in line, such that DND is now admitting that there's wiggle room, as there is absolutely no chance that we will have more than a handful of new planes by 2020. So there is wiggle room, which we always knew there would be. So the question becomes such that, is 2021-2022 that much better than 2022-2224? It might be, but don't pretend that anyone's had a rational debate about this, and that it's settled wisdom, because it's all degrees of gray.

    Moreover, you can dismiss concerns about short range and single-engine design, but this line of engines are still basically new and undertested, and while Canada hasn't lost a single aircraft or pilot to enemy fire in 60 years, it has lost dozens of aircraft and aircrews to engine failure. I'm sure Lockheed Martin's got a lot of faith in their engine, but there's a good reason why almost all fighter jets (or, rather, most aircraft of any type) have had (at least) two engines, including the Lockheed Martin F-22.

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