US Joint Strike Fighter (F-35) Hits Afterburners on Cost Overrun

The US Department of Defense officially announced that the Joint Strike Fighter aka F-35 Lightning II will breach a Nunn-McCurdy Amendment critical threshold on 1 April - an appropriate day, I think.

The Nunn-McCurdy Amendment says that a major defense program is considered to have incurred a "critical breach" if it exceeds the current baseline cost estimate by more than 25% or the original baseline cost estimate by 50%.

Defense officials told the US Senate Armed Services Committee in a hearing yesterday that the estimated cost per F-35 aircraft had risen from $50.2 million to somewhere between $80 to $95 million in 2002 constant dollars. The program has also slipped its schedule by at least two and a half years as well for the USAF and Navy versions of the aircraft (it was slipped by 2 years in 2004 as well).

As a result of the breach, the DoD must certify to the US Congress that the program is essential for national security, which it will, of course; and Congress - which is very unhappy with the program's management (the government's program manager was recently fired) - will continue to fund the F-35 because there is little other choice.

The other eight nations participating in the program - Australia, Canada, Denmark, Italy, the Netherlands, Norway, Turkey and the U.K. - aren't going to be happy about the cost increases either. I suspect some sweetheart deal will be made to make them less unhappy.

The F-35 program, which has a total life cycle cost of over $1 trillion dollars, was promised to be a "model acquisition program" which would avoid the cost overruns and schedule slips of past aircraft programs like the F-22 Raptor and provide an "affordable next generation strike aircraft."

The JSF website says that, "The focus of the program is affordability -- reducing the development cost, production cost, and cost of ownership of the JSF family of aircraft."

They may want to now amend that sentence.

In this 2003 article in Honeywell's Avionics Zone magazine, Lockheed Martin, the F-35 prime contractor, said that the objective was to develop an aircraft for "half of what today’s airplanes cost" and that this was possible because it was going to leverage existing F-22 systems.

Lockheed now says that the cost increases are, surprise to surprise, primarily due to government requested changes. However, the primary engine program has a new cost to complete estimate of $7.28 billion as opposed to an original cost of $4.8 billion - which is an increase of some $600 million in the last year alone. Don't think that overrun was because of any major government change requests.

In addition, the F-35 program's software has slipped a year in the past year, but the head of DoD's operational testing and evaluation Michael Gilmore says this doesn't matter much since the program as a while is slipping anyway, or as he put it in his testimony yesterday, "The late delivery of test aircraft has, so far, masked the effect of delays in software development."

Looks like software developers win another game of chicken over the system developers, just like the software folks on the Boeing 787 did.

This is interesting since in February, Lockheed insisted that the software was only three to six months behind schedule.

Christine Fox, Director, Cost Assessment and Program Evaluation, in her testimony yesterday said, "Development delays such as the ones the JSF program is currently experiencing have been experienced by other aircraft programs. These programs ultimately produced aircraft that are valuable to the DoD. For example, the C-17 program experienced significant development problems beginning in the late 1980s and continuing through the early 1990s."

In other words, all's well that ends well, and maybe ten years or so from now, if the F-35 performs okay, no one will remember the massive cost overruns or schedule slips.

The GAO in its 2005 report as well as its most recent one has repeatedly warned that the F-35 was embarking on a high risk approach, but its warnings generally have fallen on deaf ears.

I wrote a 2008 IEEE Spectrum article on the problems plaguing defense acquisition that you can read here.

Plus ça change, plus c'est la même chose.

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