Lawmakers want to expand Super Hornet buy (aka It's only money)

[unhappycamper]

Lawmakers want to expand Super Hornet buy
By John Reed - Staff writer
Posted : Tuesday May 18, 2010 17:03:53 EDT

Fresh on the heels of the Navy’s move to buy 124 new F/A-18 Super Hornets and E/A-18G Growlers, Missouri lawmakers on Tuesday announced a renewed push for the Pentagon to purchase additional Super Hornets and C-17 Globemaster III cargo haulers.

Calling last week’s news of the Super Hornet buy “an important first step,” but just a first step in addressing the sea service’s looming fighter gap, Sen. Christopher “Kit” Bond, R-Mo., and fellow Missouri lawmakers held a news conference on Capitol Hill to announce they will urge the Pentagon to buy additional fighters using savings garnered from the multiyear Super Hornet buy.

Bond was joined by Sen. Claire McCaskill, D-Mo., who added that she will insist the Navy use the nearly half a billion dollars in savings from the multiyear buy to “go right back into” buying more Super Hornets to address the Navy’s fighter gap.

The pending Super Hornet deal, unveiled last Friday, is worth about $70 million per airplane, according to Rep. Todd Akin, R-Mo. Akin and McCaskill called out the Navy for issuing “perplexing” estimates regarding the size of the fighter gap, which have ranged from 243 jets to the current estimate of 100.

McCaskill also said that she is trying to get enough votes in the Senate to allow the Air Force to retire its 50 oldest C-5A Galaxys and purchase additional C-17s in the 2011 defense authorization bill, which the Senate is expected to mark up May 25.



unhappycamper comment: I call bullshit on the $70 million dollar number for an F/A-18. Each one of these bad boys cost $100 million dollars from the factory.

If we didn't have 11 daily cargo flights from Charleston to Afghanistan, we wouldn't be wearing out all this expensive hardware.

P.S. New C-17s cost somewhere between $200 ~ $220 million dollars each. And there's another anomaly in the OP.

[old mark]

1. The navy has a "fighter gap" - compared to WHO? We have such a large

carrier based navy we could easily mothball 5 or 6 carrier task forces and have more than enough planes and maybe a few bucks left over.

The Cold War is long over, and the Taliban doesn't have much of a navy....

It is time we got out of the business of policing the whole world at the expense of the people of our own country.


mark

[Statistical]

2. I call bullshit on the $70 million dollar number for an F/A-18. Each one cost $100 mil"

Where do you get that from?

http://www.finance.hq.navy.mil/FMB/11pres/APN_BA1-4_BOOK.pdf

(pg 27)

FY 2011 unit cost of 014500 F/A-18E/F (FIGHTER) HORNET /Y1CF
$60,336,675

With all support equipment, spare parts, maintenance training, logistical spares, freight, transport, wash & wax, etc
$1,828,354,000 for 22 aircraft = $83,107,000 ea.

Don't worry the doc is unclassified I am not violating are rules or regulations by posting it in public forum.

[unhappycamper]

3. It's buried somewhere in my Journal.

I got the $100 million from a military rag. I'll dig it up and post it later today.

[Statistical]

4. The APN is better source.

It is the Navy justification for payments.

Anything beyond that number requires separate Congressional approval. So unless contractor and Navy come hat in hand and explain they can't get a nickle more than the APN price. Now on new weapon systems you can pad the estimates a "little" (millions) bit but not so much on decade long proven platforms like F/A-18.

The Navy since inception (and prior to 2009) has purchase 426 F/A-18 (look at first column) for total flyaway cost of $24,618,183,611 giving a per unit cost of $57,789,163.41 (inflation adjusted 2010 dollars).

If you want to look at total price (including all spare parts, maintenance equipment, etc):
Total cost 34,235,925,880 for a per unit fly cost (including all spare parts, maintenance equipment, etc) of $80,366,023.19 (inflation adjusted).

I'll bet you a dollar if we look back in 2012 that FY 2011 the US Navy didn't get F/A-18 for $100 mil. Likely the $100 mil figure quoted in magazine is total project cost (including R&D, testing, modifications) however R&D costs are sunk. Going forward acquisition is based on flyaway cost for FY2011 that is $60.3 million ea.

[unhappycamper]

5. Sir, I stand corrected and apologize.

I have absolutely no clue where the $100 million dollar price tag came from, so I'm guessing out my ass. I looked over every page in my Journal and even went googling for a few hours (more on that later).

If you have the time, I have a few questions for you.

1. Who pays for R&D? Should it be included in the delivered price of systems?
2. (Stupid question} What is the APN and do you have a link?
3. Do you have tips on the best way to aggregate costs for a particular weapons system?


Later:
While googling, I ran across another nutbag holding pen called the Lexington Institute. This gem caught my eye:

http://www.lexingtoninstitute.org/the-f-35-will-cost-about-what-an-f-16-costs?a=1&c=1129

The F-35 Will Cost About What An F-16 Costs
Author:
Loren B. Thompson, Ph.D.
Date:
Tuesday, April 13, 2010
Issue Brief

With the best of intentions, Congress and the Obama Administration have implemented a series of acquisition-reform measures that are making the problem worse. Efforts to clarify the cost of programs are sowing confusion. Efforts to reduce risk are raising costs. Efforts to restore confidence are undermining political support. In short, acquisition reform is backfiring.

A case in point is the F-35 joint strike fighter, a program that will replace the Cold War tactical aircraft of three U.S. military services and at least nine allies with a stealthy, multi-role fighter. According to the Pentagon's most recent Selected Acquisition Report on the F-35, it is meeting all of its performance goals, passing all of its tests, and "setting new standards for quality." The program has progressed more smoothly than any other fighter development program in modern times -- even though it is considerably more complicated.

But that is not the message Congress and the public are hearing. Instead, they are awash in a continuous stream of misleading information about rising costs and schedule delays. The high-water mark in this flood was reached last week, when an anonymous defense official told the web-site InsideDefense.com that each F-35 would end up costing between $133 million and $158 million. Those numbers are ridiculous, and the resulting news story omitted several key details:

1. The estimates are based on historical data from the F/A-18 and F-22 programs.
2. The prices the military actually is being charged for the F-35 are far below such estimates.
3. The estimates are based upon assumptions about the future that are unknowable and untestable.

The most basic measure of military-aircraft program cost used by the Pentagon is the "unit recurring flyaway" cost, because it is the foundation on which more inclusive measures are based. Unit recurring flyway cost is the amount it will cost to produce each plane, not counting sunk costs such as R&D and service-life items like spare parts and training. Those ancillary items typically are not included in the price-tag for a production plane, so they have little impact on the behavior of prospective buyers.

Based on what the prime contractor has actually charged the government to date for three successive lots of fighters, the unit recurring flyaway cost for the most common version of the F-35 will be about $60 million in today's dollars. That's roughly what the latest variants of the F-16 and F/A-18 fighters cost, and less than half what an F-22 costs. The Pentagon estimates the F-35 will cost some higher amount, but its estimates have consistently been well above what the contractor actually charged.

In fact, in the current negotiations for the fourth production lot, Lockheed Martin is proposing a price far below Pentagon estimates, and government negotiators in turn are trying to get a price below what Lockheed Martin is proposing. That implies that the government doesn't take its own estimates seriously when the time comes to negotiate a price. But then, why should it when everybody knows that customers won't be willing to pay astronomical prices for a single-engine fighter? The whole point of the program is to develop a low-cost fighter, so that's what the F-35 program will produce -- a fighter that costs about what existing fighters do.


-------

What do you think about Lorin's position about the F-35?

[Statistical]

6. No problem and no need to appologize.

The APN is the link I provided in post #2.

As far as R&D it is included in the original project cost but you don't "re add" it to each additional plane because it is a sunk cost.

Let me give you a hypothetical scenario:
Say Congress wants the F-100 fighter. So early R&D, testing, design costs $20 billion. After all that my company says we can build production planes at a price of $60 million each. Congress decides to order 500 = $30 billion in production cost.

Now the project to date has spent $50 billion and delivered a total of 500 working units thus per unit cost is $100 million.

Now here is where some understanding of economics or statistics helps. That money is sunk. You can never get it back. Even if we ended the F-1000 smashed all the planes, burned down the factory, and destroyed all the plans the money is already gone.

So say 10 years go by and Congress decided they need to expand the F-1000 fleet. How much will MORE fighters cost:
a) $60 million (adjusted for inflation)
b) $100 million (adjusted for inflation)

If you said A you are right. A is the "flyaway cost". The total project cost ($50 billion or $100 mill per plane) is already sunk each new unit will cost $60 million more. The irony here is the more planes you buy the more the R&D and upfront costs are amortized. They are spread over larger number of total units.

Say before the plane becomes obsolete we have 3 different build outs
Original 500 units: $20B + $60M * 500 = $50B / 500 = $100M ea
Expanded 500+200 units: $20B + $60M * 700 = $62B / 700 = $88M ea
Super Expanded 500+ 1500 units: $20B + $60M * 2000 = $140B / 2000 = $70M ea

Now there is no way that the US could use 2000 fighters right? But the entire world could.....
That is why the US is the largest exporter of arms in the world. Producing more units brings down total cost per unit.

----------------------------------------

As far as the F-35 analysis there is some merit to it however he is looking at apples and oranges. Flyaway cost of F-35 is about $90 mil ea. However this assumes a total of 1763 are built and is the average cost of all planes built between 2008 and 2020. There is nothing to support that the price will fall by 1/3rd.

http://www.saffm.hq.af.mil/shared/media/document/AFD-100128-072.pdf (pg 47)

This claim is unsupported:

Based on what the prime contractor has actually charged the government to date for three successive lots of fighters, the unit recurring flyaway cost for the most common version of the F-35 will be about $60 million in today's dollars.

He makes it but provides no evidence it is valid. Not only is it unsupported but it is 100% false.

To date the flyaway cost has been MUCH higher (once again pg 47 in link above)
$229M ea for first 8 units
$208M ea for FY09
$191M for FY10
$148M for FY11

Remember the $90 mil flyaway number isn't the current cost but rather an estimate (over entire production lifecycle through 20020) on what total production cost will be when all units are finally built. So yeah contractor is showing significant price reductions each year but that is already planned & accounted for in the flyaway cost.

I would use the link I provided you to show him that to date the F-35 has a flyaway cost of roughly $200 million not $60 million and that even accounting for all future cost reductions the flyaway cost will still be $90 million over the entire lifecycle.