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How insufficient budget cause lower F-35 numbers within the US forces?

By Guest contributors for CEOWORLD Magazine Updated:October 21, 2009

In the conceptual design stage of the F-35 the Cost as Independent Variable played an important role, trading off Key Performance Parameters and Non-recurrent Unit Cost. But one could consider the available yearly budget for tactical fighters also as a kind of “Independent Variable” with a trade off between procurement quantity and Program Cost.

And there is a deadly embracing between quantity and price within the F-35 Program. Cutting procurement quantities tends to loss of production efficiency, leading to higher unit costs. Higher unit costs are leading to lower quantities to be procured and a search for alternatives.

The Total Budget for the Tactical Fighter capacity may be considered as a constant factor.

A simple mathematical calculation learns:

Budget As Independent Variable: Budget = [Capacity 1 (qnt*prc)] + [Capacity 2 (qnt * prc)] + ………. + [Capacity n (qnt * prc)]

This means, when the Budget is an Indepent Variabel, that, when the quantity within one Capacity grows, there will be less money for other Capacities have to be lower. Also when the price within one Capacity grows, there will be less money for other capacities.

In the past (FY1975 until FY2007) funding for tactical aircraft -including the last Cold War period- has been about 10% of overall procurement budget or about (inflation adjusted) US$ 8.9 billion per year. With the current procurement top procurement budget line of some US$ 100 billion, the long term annual funding for tactical fighter jets some US$ 212 billion over the FY2009-FY2034 period, or US$ 8,1 billion per year.

Based on the latest 2007 long term F-35 procurement plan to buy all 2.443 F35s would require an average of US$ 7,45 billion a year over the FY2009-2034 period, assuming there is no further cost growth in the JSF Program. Given the fact that cost growth is likely, the US$7,45 billion will not be sufficient. The Pentagon Joint Estimated Team reported in September 2008 further cost growth . The US GAO reported in March 2009 that further cost growth and delays would be likely.

f35-budget

Given, the fact that from the US$8.1 billion per year several billions will be needed to funding AO-X, UCAVs, a possible new “B3” midrange bomber capability, upgrading early Block F-35s, upgrading F-22s and legacy fighters to fill the fighter gap, procurement of Super Hornets in FY2009-FY2011, etcetera., it is unlikely the 2.443 planned F35s can be procured.

It can not be assumed that the 10% of overall procurement budget, now used for tactical fighter procurement, will rise, because there is a need to replace or upgrade many other aircraft (B-52, transport, tankers, helicopters) and because there are budgetary pressures related to the growing total US government deficit.

Conclusion: Budget as Independent Variable has consequences: – The F-35 program has proved to have difficulties to be as affordable as promised. When we have a Budget as an Independent Variable a cost growth of about 40% means a decrease in quantity of 30%. In the next paragraph 5.1.6.4.10 some effects are illustrated for a minor cost growth of 5 to 20%.

- Once a quantity in a fiscal year has been made lower, later it cannot be compensated, because the budget money is a year by year struggle and will have been used for other budget priorities
- Moving money to fill the fighter gap with a higher quantity of legacy fighters means a lower quantity of F-35s
- Moving money to a higher quantity of Unmanned Aerial Vehicles means a lower quantity of F-35s
- Moving money to a new quantity of OA-X or a new quantity of medium range manned or unmanned tactical bombers means a lower quantity of F-35s

Program Unit Cost growth of 38% since 2001

The unit cost of the F-35 has already risen substantially over the past years, the program unit cost (inflation corrected) are 38,4% higher than projected in 2001.

The program unit cost growth of 38% since 2001 and total estimated procurement cost growth must effect the quantity. However since the QDR 2002 the total quantity to be procured is still the same. This would be unlogicial, assuming the Budget as Independent Variable. The solution (in early 2007) was found in extending the procurement period until 2035 and moving their requirements to a far and uncertain future, from Fiscal Year 2028 to Fiscal Year 2035.

The planned annual production of 160 F-35s (110 US Air Force and 50 USMC/USN) by around 2015-2024 was decreased to some 115 F-35s a year, however effecting the economy of scale.

Conclusion: the effect of the program cost growth has been shifted to a far future and negative effects on the economy of scale in short term are not recalculated.

Further cost growth may be expected

The Pentagon Joint Estimated Team reported in September 2008 further cost growth. The US GAO reported in March 2009 that further cost growth up to US$ 7.4 billion and new delays of another three years would be likely. Even modest cost growth will have significant consequences in terms of budget versus possible quantity to be procured.

With an average budget of US$ 7,45 billion, a relative small cost growth of 10% means some US$ 745 million or the equivalent of 7 to 8 F35s per year during 26 years.

Conclusion: Cost growth may be expected and with a Budget as Independent Variable, a higher price means lower quantities. Requirement of the Forces is not the same as available funding.

Current budget insufficient

The currently used number of 2.443 F35s for the US Forces is a “requirement”. But operational requirement (as used in JPO MOU-PSFD planning and suggested world wide) is not the same as available US Department of Defense funding.

The long term annual funding for tactical fighter jets some US$ 230 billion over the FY2007-FY2034 period, or US$ 8,1 billion per year. In the Fiscal Year 2009 Aircraft Procurement Budget (February 2008) we may find a total
planned budget of:

US Air Force : US$ 171,7 billion, 1763 F-35As, average procurement price US$ 97,4M
US Navy : US$ 89,7 billion, 680 F-35B/Cs, average procurement price US$ 131,9M
Total : US$ 261,4 billion, 2443 F35s, average procurement price US$ 107M

This means a total of about US$ 261,4 billion during the FY2007-FY2034 period for the operational “required” F-35s only, against an available funding of US$230 billion.

Considering the total budget of US$ 230 billion this means a hidden direct deficit of US$ 31 billion in funding (in other words: an equivalent of some 290 F35s). Assumung there is no any further cost growth. The reality: operational requirement is not the same as available funding.

By Johan Boeder (The Netherlands) started publishing about aviation in 1977 as a freelance author and publicist working for several newspapers. Since 2007 he advices Members of Parliament in several European countries as an independent expert on the F-35 fighter program and business case.

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