link : More Doubts About F-35 Cost Reduction Promises
More Doubts About F-35 Cost Reduction Promises
Following the announcement of the handshake agreement for the 11th lot of F-35s for 141 jets, Pentagon acquisition executive Ellen Lord told Aviation Week in a statement, “With each production lot, the F-35 Unit Recurring Flyaway costs continue to come down across the board.”
Congressional sources point out that the 6% cost reduction for Lot 11 is considered average, given the number of aircraft.
Lot 11 is the final production buy before the Joint Program Office (JPO) and Lockheed Martin enter a block-buy contract for F-35 international partners and Foreign Military Sales (FMS) customers for production Lots 12, 13 and 14.
U.S. participation is constrained to economic order quantity (EOQ) procurement in fiscal 2019 for Lot 13 and fiscal 2020 for Lot 14 production contracts because Capitol Hill would not sign off. Congress is waiting for the aircraft to complete operational testing before authorizing the Pentagon to enter the block buy.
The JPO estimates the total U.S. and international savings from the F-35 EOQ is $1.2 billion compared to a traditional contracting construct. However, the Pentagon’s Cost Assessment and Program Evaluation (CAPE) office, in a report viewed by Aviation Week, notes the savings will be roughly $595 million, or about half of the figure projected by the JPO.
The disparity between the two Pentagon offices is sounding alarm bells in Congress. “While these savings are still significant, as certified by the Undersecretary of Defense (Acquisition and Sustainment), the Committee is dismayed by the inaccuracy of the initial JPO estimates,” reads the Senate Appropriations Committee’s mark-up of the fiscal 2019 spending bill. (end of excerpt)
Click here for the full story, on the Aviation Week website.
(EDITOR’S NOTE: Even for Aviation Week, it is extraordinary that an article on whether the F-35 will meet its cost reduction goal can ignore a July 18 report by the Rand Corporation on the “F-35 Block Buy: An Assessment of Potential Savings.”
This report looked at how much could be saved by combining three annual lots into a single, three-year Block Buy Contract covering 441 aircraft.
Rand found that “the combined [Block Buy] savings is approximately $2.1 billion, or 4.9 percent of the cost of annual contracting,” which translates into a reduction of $4.7 million per aircraft.
This is much lower than the savings that Lockheed Martin and the F-35 Joint Program Office have claimed for each successive annual lot; on Lot 11, for example, they claimed unit price declined by 6%.
It is difficult to reconcile Rand’s estimate of $4.7 million savings over the three years of the Block Buy, with Lockheed’s claim of a 6% reduction in a single year.
The planned Block Buy contract, which Congress has said it will not approve until the F-35 successfully completes its Initial Operational Test and Evaluation (IOT&E) scheduled to end in the fall of 2019, calls for buying 441 aircraft.)
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