Friday, June 24, 2011

F-35 costs: Chorus of dismay over $1,000bn tag

By Jeremy Lemer
Copyright The Financial Times Limited 2011.

Published: June 19 2011 16:19 | Last updated: June 19 2011 16:19
For years the F-35 programme, managed by Lockheed Martin, has been an easy target for criticism. Development and production costs for the combat jet have spiralled and delivery schedules set in stone one moment have been ripped up the next.
Since the start of 2011, though, Lockheed had adopted a more positive tone, arguing that efforts to reshape what is the Pentagon’s largest procurement project were finally paying off in better test results and improved performance.
But in recent weeks the company has come under pressure over a new issue. A fresh estimate of the total life cycle costs – the money required to operate and sustain the aircraft – has triggered a wave of angst among politicians and Pentagon officials.
According to the latest report on the F-35 programme prepared by the Pentagon, maintaining the fleet of jets through their entire working lives will cost more than $1,000bn, a number that several influential congressmen have described as “jaw-dropping” and “unsustainable”.
“If we live the estimates, we cannot afford to pay that much,” Ashton Carter, the Pentagon’s top procurement official, told a senate hearing in May, adding that “our objective is to make sure that those estimates do not come true”.
Vice-Admiral David Venlet, who manages the F-35 for the Department of Defence, has said that his unit will prioritise refining and reducing estimated sustainment costs in 2011 – in the same way it focused on fixing the development and manufacturing plans for the jet in 2010.
All of that could spell trouble for an aircraft that was pitched as a cost effective way to upgrade the US fleet. Lower maintenance and support costs were key to that goal as they regularly add up to 70 per cent of the total bill for owning a weapons system.
For years Lockheed insisted that the running costs of the aircraft would be less than equivalents such as the F-16. But those numbers have fallen by the wayside. The Pentagon now expects the F-35 to cost about 33 per cent more than the F-16s it aims to replace.
Lockheed has pushed back against those numbers, describing them as “sensationalised”. Executives point out that the $1,000bn figure is based on operating 2,443 aircraft over 52 years, from more than 50 bases and include adjustments for inflation and fuel costs.
“It is a big model that has come up with a big number,” Bob Stevens, chief executive of Lockheed, said in May. “But when you come up with a big number like that … there are sufficiently large opportunities to reduce that number by making streamlining decisions along the way.
“How much do the spares cost? How many aircraft are you buying? How many spares are you buying? How many bases are going to operate it? What is the staffing at the bases? Is the staffing … government – or contractor – supported? And really, on and on.”
For Lockheed Martin, the stakes are high. The F-35 is its single largest programme and will be the key driver of its revenues and profits over the next 30 years.
Still, Lockheed says that it will not be able to produce its own counter-estimates until about 2015, when it has collected about 200,000 flight hours worth of data, which will feed into “more realistic” assumptions.
In the meantime patience is wearing thin. Buying the F-35 was supposed to cost $233bn, or an average of $69m each, with delivery to the services starting in 2008. But cost estimates have soared to about $385bn, or $133m each, and the service entry date remains unclear.
Earlier in the year the Pentagon announced a new plan for the combat jet, adding extra funding and test aircraft to the development phase, slowing the speed at which production ramps up and placing one variant on “probation”.
Bill Sweetman, editor in chief for Defense Technology International, who has followed the F-35 for years, argues that whatever the eventual total, if sustainment costs do not come down it could spell trouble for the programme.
“These sorts of figures make the service chiefs go weak at the knees because they will have to reduce numbers to stay within budget, as there is no more money,” says Mr Sweetman. But if numbers are cut then costs per aircraft will inevitably spiral.
“People are waking up. This isn’t just another defence acquisition,” he says. “The $1,000bn dollar figure is an indicator that you have a spent a fortune and there are a lot of sunk costs but that is not that much compared to what you will pay.”
Senator John McCain concurs. “In my view, the program is now at a watershed moment,” he said in May. “With austere defence budgets for as far as the eye can see, the [F-35] programme must show now it can deliver [F-35] aircraft as needed on time and on budget.”
Both Congress and the Pentagon have limited options. “There are not good alternatives to the [F-35] for either our services or our international partners,” Mr Carter said bluntly last month. “We looked … We want the aeroplane.”

F-35 fighter development has 'turned the corner,' manufacturer says

June 22, 2011

LE BOURGET, France — Lockheed Martin and its U.S. military partners are
attempting to counter at the Paris Air Show this week negative publicity
over cost overruns and technical delays that have plagued the F-35
Lightning II stealth fighter aircraft project.
Senior project officials told reporters and analysts at a well-attended
briefing here that they have "turned the corner" in the troubled
development of the strike aircraft.
Cost issues became a point of contention during the recent Canadian
election campaign because of the federal government's plan to spend $9
billion to acquire 65 of the aircraft, with delivery expected to start
in 2016.
Critics, including parliamentary budget officer Kevin Page, have argued
that Canada's Department of National Defence is greatly underestimating
the total cost.
Defence industry publications and aerospace industry analysts have also
been critical in the lead-up to the high-profile Paris Air Show this week.
The respected Aviation Week magazine, in its Paris Air Show preview
booklet handed out to visitors, said the F-35 project faces a price
"sticker shock" due to "delays and overruns."
It also acidly noted that the Eurofighter Typhoon plans to "aggressively
challenge the F-35, which they think is overrated and costly."
A Lockheed Martin official told Postmedia News Wednesday that testing
this year is well ahead of schedule.
"We've uncovered no significant technical issues, what we might call a
show-stopper issue," said David Scott, director of the company's F-35
international customer engagement office.
"Everything is fundamentally sound on the airplane."
He also supported the Canadian government's contention that it will
spend $75 million U.S. per aircraft for the "fly-away" price, which
excludes major cost items such as spare parts, support equipment,
training and maintenance.
Canada is paying for the aircraft during the 2016-22 period when the
per-unit costs are going to be much lower, he said.
Canada is also not covering the current development costs that have
soared due to various technical issues.
"The forecast is that when Canada buys, the airplanes will be
substantially cheaper than they are today as we move down that cost
curve, as we increase the production rate, so a figure of approximately
$75 million U.S. in the time Canada is buying is an accurate figure."
Industry observers were guarded in their response to the new optimism.
"They've got the flight testing ahead of the much-delayed schedule that
they switched to earlier this year," said Bill Sweetman, an editor at
Aviation Week and consultant to an Emmy-winning PBS documentary on the
F-35 competition.
"They've got a lot of things to sort out, and the single biggest problem
they have is affordability," he told Postmedia News Wednesday.
"They have to bring the cost down from where it's projected to be,
otherwise the U.S. air force can't afford the required number . . . and
then you get into the death spiral of (fewer) numbers and higher cost."
Industry analyst Richard Aboulafia, vice-president at Fairfax,
Virginia-based Teal Group Corp., said the new optimism "is refreshing
but very difficult to verify."
He noted that criticism of the version of the F-35 being acquired by
Canada — the least expensive of the three F-35 models — has been
Both Sweetman and Aboulafia said Lockheed Martin can get to the $75
million U.S. per aircraft figure for Canada's shipment only by narrowing
as much as possible the definition of "flyaway."
"Flyaway cost is like buying a car," Aboulafia noted in an email.
"You drive it off the lot after paying the driveaway cost. But imagine
the additional cost of setting up your own garage to maintain and repair
it, plus the cost of the spare parts and the future upgrades needed to
keep it going for 30 years. That's the life-cycle cost."
The U.S. and its "partner" countries in the F-35 project — Canada,
Britain, the Netherlands, Italy, Turkey, Denmark, Norway and Australia —
will together buy more than 3,000 of the aircraft, according to National


Tuesday, June 21, 2011

This Week at War: The Jet That Ate the Pentagon

Topics include:
1) Policymakers get 11th-hour second thoughts on the Joint Strike Fighter
2) Defense cuts will mean more risk. Is the Marine Corps the Pentagon's best hedge?
Policymakers get 11th-hour second thoughts on the Joint Strike Fighter
The troubled and long-delayed F-35 Joint Strike Fighter program came under renewed scrutiny this week. The Air Force, Navy, Marine Corps, and many foreign partners plan to buy thousands of the fighter-attack jets over the next two decades to replace a variety of aging aircraft, but the development schedule of the stealthy fighter has slipped five years to 2018 and the projected cost to the Pentagon for 2,457 aircraft has ballooned to $385 billion, making it by far the most expensive weapons program in history.
The Government Accountability Office reported that although Pentagon management of the program is improving, developers have only completely verified 4 percent of the F-35's capabilities. The program received another blow this week when the Senate Armed Services Committee learned that the Pentagon will likely have to spend $1 trillion over the next 50 years to operate and maintain the fleet of F-35s. Evidently reeling from sticker shock, Sen. John McCain demanded that "we at least begin considering alternatives." But is it too late to prevent the F-35 program from devouring the Pentagon's future procurement budgets?
Air Force officials themselves may now doubt the wisdom of the size of the commitment to the F-35. According to a recent Aviation Week story, Air Force Undersecretary Erin Conaton placed new emphasis on the importance of the Air Force's next-generation long-range bomber. With procurement funds sure to be tight in the decade ahead, Conaton hinted that the Air Force may have to raid the F-35's future budgets in order to help pay for the new bomber.
The rapidly changing strategic situation in Asia and the western Pacific should compel policymakers to reexamine the size of the commitment to the F-35. Yet another critical report on the F-35 from the Pentagon's acquisition office dated Dec. 31, 2010, revealed that the Air Force version of the attack jet would have a combat mission radius of 584 miles, just short of the original stated requirement of 590 miles, and significantly less than a recent expectation by program officials that the jet would be able to strike targets 690 miles away without midair refueling.
A combat radius of 584 miles leaves planners with few options when contemplating operations over the vast distances in the Asia-Pacific region. As I discussed in a recent column, China's growing inventories of ballistic and cruise missiles are already capable, according to the U.S.-China Economic and Security Review Commission, of striking the U.S. Air Force's main bases in the region. These missiles are also putting the Navy's aircraft carriers increasingly at risk, which could compel the Navy to move the vessels out of the F-35's strike range.
The solution is combat aircraft with much longer ranges, which would operate from distant bases less vulnerable to missile attack. This would explain Conaton's increased emphasis on the new long-range bomber and the Navy's interest in a long-range combat drone that would launch from its aircraft carriers and some of its amphibious ships.
There are still significant roles for the F-35 and many of its leading-edge stealth and electronic capabilities. The F-35 can defend against enemy aircraft, can collect and distribute intelligence from over a battlefield, and can attack heavily defended targets within its range. In any case, the program is "too big to fail," or at least "too big to kill," and it is far too late in the day to now consider alternatives. But it seems increasingly likely that the Air Force and Navy will eventually truncate their planned purchases and redirect those savings into new long-range platforms. Doing so would cause the unit cost of the F-35 to spike even higher which would likely lead many foreign partners to drop out. But that regrettable consequence may be necessary if the Air Force and Navy are to have the money to buy capabilities that will actually be useful in the vast stretches of the Pacific.

Tuesday, June 7, 2011

Norway Has Second Thoughts

Fight takes off over new fighter jets

June 7, 2011

Opposition politicians have grown increasingly uneasy over the unclear costs of Norway’s plans to buy a new fleet of fighter jets from US contractor Lockheed Martin. Defense Minister Grete Faremo was called in to an open hearing in Parliament, to answer tough questions on the project, and some claim she ended up resorting to defensive maneuvers.

Norway needs new fighter jets to replace its F16s, and has opted for the US-built F35, a model of which was on display at an air show in Rygge two years ago. Since then, the F35 program has been restructured and concerns are flying over the jets' ultimate cost. PHOTO: Forsvaret

Faremo, from the Labour Party, admitted that the price of the F35 jets has increased, but “only” by an estimated NOK 1 billion (about USD 180 million at current exchange rates). NewspaperAftenposten reported Tuesday that actual cost estimates for the fighter jets won’t be put forth until half a year after the first aircraft have been ordered, a process that confounds the opposition.

“What makes this so difficult is that so much is being postponed until next year,” said Ivar Kristiansen, a Member of Parliament for the Conservatives(H√łyre). He complained that total cost estimates now vary from NOK 145 billion to NOK 200 billion. The pending fighter jet order, aimed at replacing Norway’s current fleet of F16 jets, will regardless amount to the single largest public expenditure in Norwegian history.

Faremo claimed she would gladly have been able to provide more detailed numbers. “But with the accounting we have underway, including a full examination of the air force and placement of air force bases, chances would be great that I would be presenting figures that would have to be revised next year,” Faremo said.

The government simply doesn’t know how much the new fighter jets will ultimately cost. The government plans to order four of the F35s this fall for training purposes in the US, with delivery set for 2016. Then the government will put forth a long-term plan for the military next spring including fewer air force bases and costs over the life of the new jets. The first new F35 isn’t expected to land in Norway until 2018.

By 2023, all of today’s F16s, several of which currently are active in bombing raids over Libya, will be replaced by the new F35s under current plans that call for up to as many as 56 jets. The price per jet will vary according to how many are ordered by other countries because of economies of scale.

Media reports in both Norway and in other countries evaluating the jets, not least the US itself, have detailed major cost overruns and higher prices for the F35s. Even Republican senators in the US, known for being pro-military and supporters of defense spending, have questioned the prices, while Faremo has categorically denied reports of a major price hike. Nor has she been willing to express worries over the project.

Aftenposten reported that it was only after Peter Skovholt Gitmark of the Conservatives claimed the military hasn’t acknowledged any worry that Faremo acknowledged that there is some reason for concern. She linked it, though, to a restructuring of the fighter jet project initiated by US officials last year.

She claimed that prospects for the project “remain good” and that Norway must order the first four jets this fall in order to secure them by 2016. Some opposition parties have threatened to vote against approving the orders, until costs are better known.

Views and News from Norway/Nina Berglund

Wednesday, June 1, 2011

Lockheed Security Crumbling.......... Are F35 Jet Secrets at Risk..??

Lockheed cyberattack exposes flaws

By Joseph Menn in San Francisco
Published: May 31 2011 00:35 | Last updated: May 31 2011 00:35
A hacking attack disclosed at the weekend against the largest US defence contractor suggests that government and private efforts to protect military secrets are struggling with cybersecurity.
Lockheed Martin and US officials confirmed the attack after media reports linked it to a breach in March at RSA, the company that provides tokens authorising computer access by remote users at Lockheed and many other companies and agencies.
Lockheed did not confirm that the raid on its data built on the attack on RSA, but many analysts said that it was likely, because one of Lockheed’s first acts had been to disable the remote logins.
More disturbing, they said, was the fact like others in the defence industry, Lockheed had previously acted to make itself less dependent on the rapidly-changing numeric passwords the RSA tokens produced.
The RSA breach began with e-mails sent to its staff with an attachment that contained a hidden remote-access program that took advantage of a security flaw in Adobe’s Flash software for viewing content.
Without saying exactly what had been taken, RSA warned that the stolen information could be used in future attacks on its SecurID token customers.
Analysts said it appeared the hackers had obtained the “seed” numbers used to generate passwords. If they combined that with administration information kept by customers associating tokens with specific employees, the passwords could be duplicated.
The National Security Agency went further, declaring not long after the RSA attack that the tokens should no longer be deemed sufficient to grant access to “critical infrastructure”. Defence contractors including Lockheed began requiring employees to put in extra personal passwords.
Although Lockheed said its programs and customer data had not been compromised in the attack, the breach suggests that the extra passwords were not sufficient to repel hackers, an ominous sign for remote-access systems in defence and other industries.
Richard Stiennon, a former Gartner security analyst and author of a recent book on cyberwar, said: “If there is a direct connection between the RSA breach and the subsequent attacks on Lockheed Martin and other defence contractors, this will be one of the most sophisticated sequences of attack events ever”.
Neither the RSA nor the Lockheed breaches have been blamed on any hacking group or country.
However, senior US intelligence officials have repeatedly accused China of orchestrating a campaign of cyber espionage aimed at stealing defence secrets, and the trails from many of the most recent sophisticated intrusions in recent years at leading US concerns have led back to the mainland.
Copyright The Financial Times Limited 2011.