F-35 Program Production Costs Rise $7.4 Billion
The cost to develop and build the Joint Strike Fighter fleet rose 1.88 percent over the past year because of delays in the production line and failures of the engine producer to bring down costs, said Lt. Gen. Chris Bogdan, F-35 Program Executive Officer.
The cost of the program rose by $7.4 billion to $398.58 billion in 2012-year dollars, according to the Pentagon’s Selected Acquisition Report that is released each year to Congress. The increase in costs means tax payers will end up paying $162 million for each fifth generation fighter jet by the end of the program at the current rate.
Bogdan blamed the increased costs on the decision to push back production of the F-35 and failures by Pratt and Whitney, the company building the fighter jet’s engine. The costs of the JSF engine increased by $4 billion, Bogdan said.
“We had a price curve for the engine. We thought we knew how much it would cost to build the engine. Pratt is not meeting their commitment. They told us years ago that the engine was going to come down at a certain rate in terms of price and they haven’t met it,” Bogdan said.
In the Pentagon’s 2015 defense budget proposal, the Navy and Air Force pushed back the purchase of 37 F-35s out of the next year window within the Future Years Defense Program. Bogdan said the services were forced to do this because of budget cuts associated with sequestration.
The F-35 program’s top officer explained that the cumulative effect of these delays increased the price per individual airplane. However, the Pentagon found that total JSF program costs including acquisition, operations and support for the F-35 dropped $15 billion to $921 billion in 2012-year dollars.
The U.S. plans to acquire 2,457 F-35 planes to include operational and test aircraft, Joint Program Office officials said.
Even though the Pentagon will spend $162 million per aircraft based on current estimates, it doesn’t cost that much today to roll an F-35 off the production line, Bogdan said. Instead, it costs $112 million and he’s hoping to lower the price per jet to a range of $80–84 million by 2019 when full rate production increases to larger numbers of aircraft.
This year’s increase in production costs is a set back to that goal.
“For every dollar that we save in production costs on this airplane, 80 percent of it can be attributed to economies of scale, buying things in bulk. Instead of buying ten titanium forgings we now buy 100 and we get a good price deal,” Bogdan said. “The supplier knows he is in business for a number of years so he can reduce the price. 20-percent of that dollar comes from efficiencies in terms of building the airplane better or smarter and building the engine better and smarter.”
Bogdan’s harsh critique is hardly the first time he has publicly chastised a defense contractor working on the program. When he first took over the program in 2012, he called out Lockheed Martin for having a poor relationship with the Joint Strike Fighter program office.
On Thursday, Bogdan cited improvements made by Lockheed on construction plans for the aircraft’s canopy as evidence of ongoing cost-saving measures.
“Today the canopy is manufactured with manual labor involved. The variability of that manual labor produces some re-work and costs more than if you automated some of that canopy build,” he said. “Lockheed has a cost reduction initiative including the mechanization of building the canopy. This will drive the cost of the canopy down and drive the cost of the airplane down.”
Bogdan said this was one of many cost saving projects being implemented or planned for the near future that will contribute to the goal of lowering the per-plane cost.
“We are making steady progress in a lot of areas. We have got to get the price of this airplane down because as good as it will be – if it is not affordable – people will not buy it,” he said.
Overall, Bogdan said he was thankful the F-35 program was relatively spared from the budget crunching associated with sequestration. He said the Pentagon’s handling of the program would encourage contractors with the program to enter more multi-year deals that will help cut costs.
“We went through two years of sequestration and this program basically came out unscathed. You’ve got the senior leadership of this department and all of our customers saying we’re going to stick to this program so the business risk is much less than it was a few years ago,” he said.