And the cost continues to go up....
Ares:
A Billion Here, A Billion There
Credit where it is due for Steve Trimble's reporting of overruns --
now estimated at $1.15 billion, or $40 million per aircraft -- on the first three low-rate inital production (LRIP) batches of Joint Strike Fighters.
A billion here, a billion there, you might say, but these disclosures, while not unexpected, are very important.
Since March 2010 -- after SecDef Robert Gates fired program director Maj Gen David Heinz, and a Senate hearing disclosed new cost estimates for the fighter, Lockheed Martin and its supporters have been arguing that the Pentagon's estimates are too high.
Their principal weapon in this fight has been a chart showing, purportedly, that "actual" JSF costs have consistently been lower than government estimates.
But as I reported last May, the "actuals" weren't actuals:
And the LRIP contracts with Lockheed Martin are only part of the answer. They don't include the engine - responsible for a large part of the CAPE increase - and none is fixed-price and none has been completed. (The LRIP-1 jets are due to be signed over in September, the LRIP-2 contract is 65 per cent complete and the LRIP-3 has 70 per cent left to go.)
It was already clear by then that the LRIP jets were late and getting later. Even in September 2009, the first two LRIPs were promised in mid-2010 (and, of course, the September 2010 date went by the board and the LRIPs are only now starting to be delivered. And delays mean overruns, both because the jets accrue overhead just sitting on the ramp, and because they reflect the fact that they are taking more work hours, and more redesigned parts, to complete.
Warnings were sounding inside the program.
In March 2010 we cited Bob Cox's report on manufacturing, based on Defense Contract Management Agency reports:
They portray a manufacturing disaster, with tasks running months behind schedule and suppliers unable to meet deadlines because they were not given final designs in time. To get airplanes in the air, parts were removed from airframes further back on the production line - which in turn have to be repaired in the same time-consuming out-of-sequence manner. And the delays are already rippling into low rate initial production, with the first two deliveries slipped into the last quarter.
And so, today, we're looking at actual costs that are much more closely aligned with the estimates produced by the Pentagon's Cost Assessment and Program Evaluation office.
Next question: Why did Lockheed Martin bosses compare contract numbers with CAPE's estimates of actual costs, when they already knew the the early LRIP jets would cost far more than the contract value?
Small wonder that even mild-mannered Sen John McCain is showing signs of impatience. Meanwhile,
The Economist has started to go negative on the program...
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DefenseNews:
Senators Question Move to Shift Funds to JSF
The top two senators from the U.S. Senate Armed Services Committee are threatening to oppose the Pentagon's request to shift $264 million from other areas of the defense budget to cover cost overruns in the F-35 Joint Strike Fighter program.
"Based on the current information submitted to the Senate, I intend to oppose the Department's 'reprogramming request' to transfer $264 million for unacceptable cost overruns on the F-35 program," Sen. John McCain, R-Ariz., said in a statement.
In a July 14 letter to Defense Secretary Leon Panetta, McCain and Senate Armed Services Committee Chairman Sen. Carl Levin, D-Mich., said they need more information before they approve the request. They even want to know how much it would cost to terminate the F-35 program right now.
In addition to the $264 million, the Defense Department has told the Senate panel it needs to find an additional $496 million to pay for the remainder of the cost overruns on the first three lots of production aircraft, the letter said. "The Committee is concerned about three quarters of a billion dollars in increases in these three contracts since last year," the senators wrote.
The proposal to shift funds to the F-35 program was part of a $5 billion reprogramming request signed June 30 by Pentagon Comptroller Robert Hale and sent to Congress for approval.
For starters, McCain and Levin want to know whether the government is legally bound to pay for these cost overruns. If they do not approve the reprogramming request, they want to know what the consequences will be. The senators also want know if there are any alternatives to reprogramming for covering these costs. "How does the Department intend to prevent excessive overruns in the future and how will the Department ensure that taxpayers will not have to pay for them?" McCain and Levin wrote.
Their letter is not the first sign that the Senate panel is fed up with the growing costs associated with the Pentagon's most expensive weapon system. The 2012 defense authorization bill passed by the Senate committee in June included language that would require prime contractor Lockheed Martin to absorb 100 percent of the cost overruns for the next buy of F-35 aircraft.
It would also require the Pentagon to use a fixed-price contract for Lot 5, the buy currently being negotiated. Although the Pentagon is already using a fixed-price contract for Lot 4, it still shares the burden of any cost overruns with the contractor.
During the committee's markup of the bill, McCain put forward an even stricter amendment that would place the program on probation if costs rose by 10 percent. And, if costs continued to rise at that rate for more than a year, the program would be terminated.
The amendment never made it into the bill as the committee failed to pass it by a vote of 15-15. But McCain has promised to introduce it again when the full Senate debates the bill later this summer.