General Motors would never try to sell you a Chevrolet by telling you how much it really costs.
Depreciation; fuel; insurance; maintenance; interest on your car loan; parking; taxes — all of it can mean the sticker price on your new car doesn’t approach what you’ll actually spend over the years you own it.
But GM and your dealer don’t want you to factor in those longer-term costs; they want you to buy it and pat yourself on the back for getting such a good deal. AT&T doesn’t show you what you’ll pay for your new handset and, let’s say, two years of coverage — it wants to sell you a new phone today.
So when everyone from Secretary Panetta on down continues to tell Congress and the world that DoD needs the F-35 Lightning II yesterday, no matter what, why did the Pentagon roll out another eye-popping total cost estimate?
Let’s take last week’s F-35 program estimate at face value — though you’d better believe that skeptics and industry advocates argue that it’s flawed: DoD already has a cost-shock problem with the F-35; at nearly $400 billion just for acquisition, it could start to rival the cost for the entire Afghan war. Why make things even worse by unveiling an even more astronomical figure for the total “lifecycle cost” of about $1.5 trillion?
UPDATE: Defense Department spokeswoman Cheryl Irwin said Monday the methodology here has been in effect for awhile, and she explained it this way:
[I]nitially, DoD provided only average annual Operating and Support (O&S) costs. Later, in 2001, the Department expanded the O&S cost section of the SAR to include total O&S costs in base-year and then-year dollars (the latter includes all anticipated inflation). These totals represent the planned expenditures over the entire sustainment period, or annual O&S cost times the useful life of the program. For the F-35 program, the total O&S cost is the estimated cost per flying hour times the flying hours per year for each type of aircraft times the useful life of the program.
And F-35 program spokesman Joe DellaVedova told DoDBuzz why this analysis had to cover 55 years’ worth of costs:
The expected service life of an F-35 is estimated to be 30 years. The last jet to roll off the production line is expected to happen in 2036. Add 30 years of service life to that last jet and you’re in 2066. Subtract 2066 – 2011 (the year the first production F-35 was delivered) and one gets 55 years of production F-35s in the skies — aka a “full life-cycle cost analysis.”
Still, the way it was ultimately done left congressional and industry sources scratching their heads. One veteran analyst said “bundling every conceivable direct and tangential cost together, from initial research to museum relocation expenses, is unprecedented.”
Lockheed Martin spokeswoman Laurie Quincy raised this point in her response to last week’s news about the F-35 costs:
“Never in the history of U.S. aviation has the Pentagon tried to project the cost of an aircraft program over a 55-year period,” she said. “The F-35 is the first aircraft program to undergo this type of review.”
The Defense Department could have neutralized this by releasing a comparable analysis for its existing fighters — Lockheed is set to deliver its 4,500th F-16 this week, for example. From first doodles to this week’s jet, how much has been spent on every F-16 ever built, including fuel, maintenance, shark-mouth nose art; glow wands for the ramp marshals, coffee in the pilots’ ready rooms, etc?
If the Pentagon’s number wizards had that breakdown, in fiscal 13 dollars, they could potentially have made the F-35 look like a bargain, or at least put it into context. But they didn’t, and the world’s largest defense program had yet another bad week in Washington.
There’s certainly a case to be made that, even though it could cost support and amp the ire of critics such as Arizona Sen. John McCain, DoD has a responsibility to be forthright with Congress and the public. It’s a lovely argument, one that you can almost hear Jimmy Stewart making to cigar-chomping profiteers in an imaginary Frank Capra weeper, “The War Department.” In the real world, as we’ve seen so many times, DoD goes to great lengths to conceal or at least obfuscate reality, from indecipherable sexual assault reports to perplexing explanations over which Air Force bomber or cargo aircraft costs more to operate.
The department’s change of tone is all the more remarkable when you read this excerpt from Tony Capaccio’s Bloomberg story from Friday:
[Deputy F-35 program manager Maj. Gen. John] Thompson said the F-35 program office estimates were close to those developed by the Pentagon’s independent cost-analysis office. The similarities make the numbers more credible, Thompson said. Congress created the independent office to improve weapons-cost estimates and help curb excessive cost growth.
When was the last time a DoD leader cited the office of Cost Assessment and Program Evaluation as a trusty benchmark? There’s every reason to believe it is, but compare this approach to the Army’s response when CAPE estimated its Ground Combat Vehicle would cost more than the Army thought it would. As so many service leaders have when CAPE delivered a pessimistic take, the Army brass shrugged it off.
Maybe the Pentagon and program officials hope their estimate will buy goodwill because it precludes potential critics from saying, ah, there’re more costs here they’re leaving out. Maybe they’ve reached the point at which they don’t care about bad headlines and grumblings on the Hill, so long as they feel the program is safe. Or maybe they want to set a benchmark so astronomically high they think they can come in under it — the old tactic of “under-promise and over-deliver.”