New F-35 Numbers Based on 40% Cut in F-35 Flight Hours, Still Hiding Billions of Dollars
I was almost tempted to let the matter rest, but then DND said this:
In 2010, the Department calculated that… the estimated cost for acquiring, sustaining and operating the [F-35] fleet… was $25.1 billion.
Ha! Here’s what their website says DND’s original public estimate was:
the total estimated cost and sustainment of Canada’s 65 F-35 Joint Strike Fighters is $14.7 billion.
They’re not lying, exactly. It’s just that the $25 billion figure was an internal one shared with the minister and Cabinet. $14.7 billion was the number which the Minister of National Defence, Peter MacKay, decided the pubic was better off knowing.
And sadly, with the latest round of reports, it seems that the government is still trying to play fast and loose with the numbers. I’m afraid this is going to get rather complicated, because we’ve had quite a number of different cost estimates for the F-35. A full analysis of all of them will have to wait. For today, I’m just going to concentrate on what’s happened between the Auditor General’s spring report, Replacing Canada’s Fighter Jets, DND’s new “annual update,” and KPMG’s independent review (which is basically just a re-analysis of DND’s new figures).
In deference to what is apparently a rather juvenile preference not to read detailed analysis, judging from the prattle that passes for professional media, I will give you the convenience of putting the headline figure up front. This is the bottom line: DND has severely slashed its service expectations for the F-35 in order to keep operating costs down to $45 billion, and it has still to account for billions of dollars more in costs.
The main glaring problem the Auditor-General identified in his report was that DND’s sustainment and operating cost estimate was based on a 20-year life cycle, whereas their internal planning documents showed they were planning on using the planes for 36 years — essentially, implying to the public that the last 16 years of service life on the airframes would be miraculously free of charge. That was the main rationale behind the official Sixth Estate estimate for the fighters, which had $48 billion looked almost dead on relative to the newest estimates.
Many of my readers weren’t convinced at the time, and still aren’t. They point out that we may well abandon the F-35 within 20 years due to steady technological progress. That may well be true — see this new Postmedia analysis for reasons why. But I have two responses. First of all, it’s not necessarily ridiculous to use a fighter for 40 years, keeping it alive through regular upgrade programs. The CF-18s will be around 40 years old by the time we retire them. The Americans have a 50-year plan for the F-35. Second, if the official plan is to use them for 36 years, then the official cost estimates have to reflect that. Anything less is naked deceit. Whether you personally think the F-35 won’t be around in 30 or 20 or even 5 years is irrelevant to that fact.
To that end, it’s important to note what’s happened in the costing estimates. Despite what you may have heard about the “42-year” life cycle plan used in the new analyses, if you actually read them, which I realize most journalists can’t do for one reason or another, the DND report makes clear that the new costing estimate is based on using the F-35 for 30 years, not 36 years. No explanation for the shortened life cycle is provided. However, assuming those extra 6 years cost the same, on average, as the preceding 30, which isn’t exactly how old cars work but I admit might be how old planes work, then that’s another $7 billion, at $1.17 billion per year.
Is Minister MacKay lying about the figures again, or has he just changed his mind about the F-35′s life expectancy and failed to tell anyone? The answer may lie in the details. The airframe is apparently expected to be good for 8000 flying hours. DND planning estimates are to fly each aircraft, on average, 15 hours per month. That comes out to only 5400 flying hours over 30 years. Even after 36 years, it’s still just under 6500 hours per aircraft. If DND really has switched from a 36-year plan to a 30-year plan, Canadians need to be told why. Otherwise, we’re left to wonder whether you’re just being fed yet another bogus costing estimate in order to make the numbers look a little less disastrous than they really are.
Moreover, the numbers have been played with just to make all of this possible, otherwise the real figures would be even higher yet. For instance, DND simultaneously claims that it is slashing planned annual flying time by around 25% “to reflect the increased use of simulation,” and that it will cut its simulator acquisition budget by 33% “to reflect current plans.” I’m not sure how both can be true, and so once again we must wonder whether we are being sold a bill of goods.
That cut in flying time raises another interesting question. Collectively, at the above rates, 65 F-35 jets are “worth” around 520,000 hours of flight time, but they will only actually fly for 350,000 hours. At the so-called original estimate of 15,800 flying hours per year, and building in the benefits of replacement aircraft starting their service “clocks” later on in the life cycle, the F-35s would probably start reaching the end of their expected service life around 36 years. Not 30 years. Once again we are left to wonder at the revised life cycle.
This is not a mild issue. The F-35′s expected service life is apparently a collective 520,000 hours. The Auditor General was apparently told they would be used for 570,000 hours, the discrepancy being made up for through procurement of replacement aircraft. The new figures claim the F-35s will only be flown for 351,000 hours. That’s an almost 40% cut in usage. If Canadians are only going to use the planes for less than two-thirds of the anticipated time, why aren’t we buying less than two-thirds of the anticipated planes?
KPMG noticed this too, and says DND will need to “conduct further analysis” about what happens after 30 years.
Speaking of replacement costs, more must be said about that. DND didn’t use to admit publicly they’d need to pay for any replacements. Last spring, they told the Auditor General they’d need 14 replacement aircraft. They now say they will need 7 to 11 replacement F-35s over its service lifetime. That, says DND, will cost an estimated $982 million. KPMG says it will be anywhere from $700 million to $1.3 billion. But that’s for 7-11 aircraft. Not 14 aircraft.
How is this possible? Buried in the DND report is an estimated loss rate of 2-3 aircraft per 100,000 flying hours, which, over 30 years, is 7 to 11 planes under the current reduced flight budget. At the original flying budget spread over the original 36 years, it’s a total of 11 to 17 aircraft, which is where the Auditor General got his 14-plane figure from. So in order to keep costs down below $50 billion, DND has not only reduced the plane’s expected service lifetime, it has substantially reduced the amount of flying the plane will do during that service lifetime.
We’re not done yet, though. In its new report, DND admits that the per-unit costs are creeping upward from the $75 million estimate, but it doesn’t know what the final tally will be. More seriously, it’s tacked on another $600 million in setup costs, for “sustainment set-up” (whatever that means) and a “reprogramming lab.” You won’t see that reflected in the overall acquisition tally, which remains mysteriously unchanged. The reason: they’ve compensated by slashing the amounts set aside for training, “initial spares” (by 50%), infrastructure (by almost 50%), and ammunition (by 80%). You can decide how realistic that is. Either way, that’s a total of$600 million in magic cuts to what sound kind of like necessary expenses, seemingly just in order to make the overall acquisition tallies match what they were six months ago.
This brings us to yet another issue. Government regulations require that major project budgets contain contingency allocations — money set aside to cover possible cost increases. Based on the current accounting rules and the cost estimate models, KPMG says that the contingency fund for the F-35 project should be $2.5 billion, but could be as low as $1.1 billion. But DND’s official contingency fund for the F-35 is only $600 million. KPMG asked DND about this, and was told that DND’s “risk mitigation strategy” is to “reduce the number of aircraft” it purchases, down to 55 planes if necessary. So why are we buying 65 planes, again, if 55 will do?
All this wouldn’t be complete without one final kick in the pants. Military procurement regulations require that producers commit to the Industrial Regional Benefits program, under which they spend the equivalent of the construction of the military equipment in Canada. It doesn’t mean they have to build the vehicles in Canada — they can choose to build the vehicles somewhere else, but then invest in a Canadian plant that builds something else. But the F-35 is exempted from the Industrial Regional Benefits program.
We were promised it wouldn’t matter, because Canadian companies would get to bid on F-35-related contracts spread out over the entire consortium. All told, we were told, we might even come out ahead. Of course, other companies were also told that their defence industries could come out ahead. You can decide for yourself how likely it is that the overall purchase price of the F-35 will somehow be less than the overall construction cost of the F-35. Maybe Lockheed Martin is just really, really generous?
Anyhow, Industry Canada has released a new report, too, on the anticipated industrial benefits of F-35 construction. So far, it says enthusiastically, Canadian companies have received all of $438 million in contracts. But there’s another $9.3 billion in opportunities waiting for them, which would bring us pretty much up to the construction cost. Thus Canada reaps the rewards of the Industrial Regional Benefits program, without actually subjecting Lockheed Martin to the regulations of that program.
Well, maybe. If you read far enough, you’ll see that what Industry Canada has actually done is identify $9.3 billion in contracts for which Canadian companies will be “eligible to compete.” Then it’s taken that as the assumed total. Now, I admit I don’t have much experience bidding on big contracts. But I assume it would be considered foolhardy to assume that you’ll win each and every contract you’re invited to bid on. Yes?
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mary
Hello and thank you for your piece. A sad look at how far Canada has fallen.
My comment is in regards to your last sentence regarding the assumption that one is unlikely to win every contract one bids upon. This is correct only in theory. I spent many years in government – here’s how it ACTUALLY works:
An RFP is created which limits who can bid. This is done by having the contractors who are already selected (i.e. those who have slipped bribes to the right people) write the specifications later used in the RFP. Vendors then respond, a vetting process runs in a committee of hand-picked people (picked not on the bases of their expertise, but rather on the basis of their willingness to play along), and a short list is created. The shortlisted vendors (cough, Lokheed-Martin’s Skunk Works, cough) fly the committee down to the pant, to visit other (carefully selected) clients, etc. – nice hotels, lots of flattery, expensive meals, and so on. A good time is had by all. Vendors know very well how to grease palms without paper trails. The committee then return home, meet, and select a winning vendor from the short list. Who just happens to be the one who wrote the original specifications for the RFP. What a coincidence! It does not matter in the least if the vendor’s product eventually works – this is utterly irrelevant. Because by the time the product fails ten or so years down the line (eg. F35′s) or meets huge cost overruns, those originally involved have long since moved on, take their giant pensions, or whatever. Accountability? Don’t be silly – there is essentially none. As the execrable Harper, Rona Ambrose, McKay and the rest of that sorry bunch and their carefully selected bureaucratic yes-people know very, very well. And if a few social programs, medicare, the Court Challenges program, environmental budgets, and so on need to be slashed to pay for their uncaring ineptitude, so what? Not their problem.
Sixth Estate
I won’t dispute any of that, mary, but my point was somewhat different. Effectively the Industrial Regional Benefits assessment is claiming that because Canadian companies are eligible to bid on $9 billion in contrats, we can assume they will actually get those contracts. Bear in mind taht most if not all of these contracts will presumably be with the American F-35 program office, not with our own government. (But I’m not exactly sure on this point where the chips fall.)
So my point is more on the company side, since that’s what Industry Canada is claiming to represent. I assume that any accounts manager who told his superiors that it would be safe to assume that the company’s revenue next year would be equal to the total of all contracts the company MIGHT bid on would be quickly moved to a less demanding line of work.
MoS
Excellent piece, 6E, thanks.
Why do we persist in branding the F-35 a fighter when it is a light attack bomber? It is not a fighter, not even close. It does not have the speed, climb rate, turn rate, weapons load that are key attributes in a fighter, the qualities that Lockheed built into the F-22.
In today’s world the F-35′s lack of supercruise is a crippling weakness. With its front-aspect only stealth it is plainly designed to be an intruder bomber, a high-tech A-6. The emphasis is to get to the target undetected and then to get back out quickly.
The F-35 doesn’t have the fuel capacity to loiter and engage attackers. It hs to hit and run. Without supercruise, however, it can only run fast in fuel-guzzling afterburner. When you’re being run to ground by a gaggle of SU-37s on your none-too-stealthy ass, the absence of both sufficient fuel capacity and supercruise is fatal.
The scenarios that Lockheed presents pits the F-35 against older vintage aircraft in a nose to nose engagement. The F-35, cloaked by its frontal aspect stealth, launches missiles and takes out the obstacle as it proceeds on to bomb its target. It never mentions what happens if the defenders are coming from the sides, above or beneath or behind where whatever stealth the F-35 actually has isn’t.
The scenarios also don’t contemplate what happens if the stealth has to go up against a true stealth defending fighter like the PAK-50 or China’s J-20. It’s unilateral stealth advantage, the one thing for which it sacrifices all other qualities of a great warplane, is overwhelmed.
This is a blunder of epic proportions. During the Parliamentary investigations the Air Force provided some eye-opening stats on the incidence of bird strikes and “engine out” situations with the CF-18 out of Cold Lake. These suggest that the attrition rates given in the KPMG study might be viable for a twin engine warplane but would almost certainly be higher for a far more vulnerable single engine plane like the F-35. On a sortie by sortie basis we can expect to lose more airplanes and more pilots to the single engine vulnerability.
Just this summer the testing programme for the F-35 was bumped back another three years. The testing won’t be complete now until 2019 and that’s barring further major glitches. We also don’t know how many aircraft the American military will buy. They freely admit they don’t know yet their buy, both in numbers and timing, will affect the unit cost for foreign customers. And until the testing is concluded seven years from now we can’t know what bugs will be discovered and how much they will cost to rectify. And there’s no way of knowing the F-35 won’t be operationally obsolete by the time we do know the final costs.
What kind of madness is this?
Mark Collins
MoS: Quite. But when was the last time our air force engaged in dog-fights? WW II.
In fact, other than the continental air defence role (for which dog-fight capabilities are not need, see Voodoo or, gulp, Arrow), operational use abroad of our fighters has been as attack aircraft–Kosovo and Libya.
In Gulf War I our Hornets did fleet air defence, escort of other planes, and a bit of ground attack at the end. Which the (Conservative) government of the time did not really welcome, might kill people don’t you know?
http://www.richthistle.com/aviation-articles-mainmenu-41/74-cf-18-hornets-in-the-gulf-war
Mark
Ottawa
Sixth Estate
David Bercuson makes some excellent points (and a couple of less persuasive claims) in today’s Globe & Mail, which respond to some of your concerns, MoS:
http://www.theglobeandmail.com/commentary/f-35-fighter-more-dangerous-to-governments-than-any-potential-enemy/article6299878/
He makes the point that when the F-35 was on the drawing board, there really weren’t any modern interceptors it was being designed to contend with. (In practice there still aren’t — the likelihood that there will be a war between a U.S. Air Force flying F-35s and a Chinese or Russian air force flying those respective planes for the foreseeable future is nil.) The result was that instead of a genuine exercise in establishing the requirements of a fighter, what they ended up with was a “development project” in which all the services chipped in with some ideas of the sorts of technologies they thought might be useful one day.
The smart thing would probably be to cut our losses before matters get any worse, take the items that were particular breakthroughs (some must be, with respect to the computer operations for instance) and put those lessons to use in a new fighter, if a new fighter is actually necessary. The realistic thing would be to assess how long we think we will even want manned fighters for, and use that as a guideline for how much we want to spend on the whole thing.
MoS
@ Mark. Hi. I think we need to bear in mind that the future could usher in a resumption of peer-on-peer conflict. The Americans certainly recognize the possibility. This led them to conduct the Operation Chimichanga exercise in Alaska last summer. It simulated a surprise attack by B-2 bombers, F-22 fighters and F-16s (representing F-35s) against the Chinese mainland to take down its air defences and missile sites.
If not to attack a nation with sophisticated air defences what is the F-35 for? Stealth isn’t needed to whack the Taliban or a gaggle of Somali insurgents. Being far too expensive and vulnerable with limited loiter time, it’s not suitable for ground support. Absent supercruise and with modest fuel and payload it’s hardly fit for defensive patrolling in our far north. If it’s not designed to attack a country with sophisticated defences what else is it for?
China, likewise, is preparing for a limited war conflict with the United States over Taiwan and, potentially, the South China Sea, China is developing a variety of capabilities aimed at area denial to eliminate any land-based facilities and any carrier battle groups capable of attacking China and defending Taiwan.
The F-35 is an offensive weapon. It’s not a ground support fighter-bomber. It’s not an interceptor/patrol aircraft. It’s a nuclear-weapons capable, light attack bomber purpose built for interdiction.
The arms races underway from South to East Asia ought to be enough to dispel any notions that a major war isn’t possible that would drag in America and her allies. Any time you have these major shifts in balances of power – economic, political and military – you have the fuel for conflict.
Pakistan is rapidly growing its nuclear arsenal and building a short to mid-range missile capability. India is constantly modernizing its air force and deploying a true blue water navy. It has announced its intention to dominate the sea lanes all the way to the Kamchatka peninsula, effectively containing China. China is likewise rapidly modernizing its air forces, navy and space force while simultaneously preparing for cyber-war. Everybody affected in that region, as far away as Australia, even including Singapore, are building up their submarine forces. Now Japan is rearming, claiming that China has left it no other choice. Meanwhile Chinese military leaders speak openly of taking revenge for their country’s “century of humiliation.” Come on, you can’t make this stuff up.
Obama has decreed America’s military “pivot” from the Middle East to Asia and America’s aerial Foreign Legion, the F-35 buyers, are invited along. Our own MacKay was talking about basing rights in Singapore and elsewhere and maintaining a permanent and sizeable Canadian force in that theatre. This is all about one thing – containment of the future biggest economy in the world, a country that considers itself deeply aggrieved, disrespected and dishonoured.
You can write it off if you like but, in my opinion, you’re whistling past the graveyard. The facts on the ground don’t support your contention.
MoS
@ 6E. I agree that it would be foolish to throw the baby out with the bathwater.. There are some terrific innovations in the F-35, particularly its sensors and targeting system, that ought to be transferable to a more robust, higher-performing platform. Unfortunately getting Lockheed to give up the good bits is more than Canada could hope to accomplish.
I found Bercuson’s remarks unconvincing. His suggestion that the Liberals made “down payments” on the F-35 is laughable. His contention that there is no “real enemy” that the F-35 could be used against is even more fallacious. He should check with the Pentagon on that bit of foolishness. He doesn’t even appear to recognize that the F-35 wasn’t run-of-the-mill Pentagon buffoonery. It’s the first time a warplane has been ordered into production at the outset of testing. It is the first time the horse has deliberately been placed before the cart. It is why the Pentagon’s current procurement Czar has called it “acquisition malpractice.”
I have no confidence in this gentleman and serious doubts about any organization that would put him forward as a senior research fellow.
Sixth Estate
I’m not denying that the geopolitical future isn’t exactly rosy, but any notion of a limited conventional war between heavily armed nuclear powers is absurdly dangerous. I don’t dismiss the possibility that this was a major part of the planning for the F-35, mainly because I don’t know what WAS a major part, but it seems to me that the main target of such a plane would be developing countries that have cobbled together a respectable air defence system with imported parts and might be able to shoot down some American planes. Pretty much by definition, any country capable of spending on par with the Americans can defeat a countermeasure system (like stealth, say) for less than it takes to design in the first place. And then you’re into a conventional arms race.
But if it’s an arms race that the Americans had in mind, I can’t see them taking such a byzantine path towards building their new weapons system. Of course, if they were starting the process over today, which presumably they are behind the scenes even if they haven’t announced it yet, they might decide to streamline it just a tiny bit more.
Sixth Estate
Sorry, I wrote that in response to the last post.
Sixth Estate
Well, you won’t find me defending CDFAI very often (I’ve spoken quite strongly on this subject in the past), and I’d definitely lump the down payments remark into the less persuasive section. That part’s disturbing, both on Bercuson’s part and on teh part of the Globe’s editors for letting him say something that could embarrass him and the paper. And I wasn’t speaking of Canada “liberating” the F-35′s key components. I was thinking more along the lines of what might lie in future for this so-called consortium of F-35 countries. If they have an ounce of sense between them. Surely you agree: the smart thing to do here is to salvage what can be salvaged and then start over.
With respect to the rest of it, though, I do think Bercuson’s point is a valid one. The U.S. has both stealth bombers and stealth fighters already. The F-35′s role appears to have been a light attack bomber that was stealth-capable but less expensive than B-2s. What it became was an opportunity for everyone to demand their own slice of the pie — in terms of what would be in the plane, for the military, but more importantly (and he doesn’t really discuss this part) who would build it. The notion that this plane needs to be cobbled together from production lines in a dozen countries and all 50 states is asinine. It’s the kind of thinking you get when you’re building the fighter as a political project rather than as a military one. Which is why I cannot imagine that a profile of an actual hypothetical enemy for this fighter to be deployed against has been particularly important to the planning process for a long time. What we do have is an alarmingly large number of people in many different countries, including our own, who presumably feel they’ve invested so much political capital in this design that they can’t back out now.
Rab
Can we not just arrange to send money directly to U.S. corporations on an annual basis and not pretend we really need really fast airplanes that can shoot at bad people?
Why the mad rush to get military expenditures as % discretionary budget up to US levels?
Also wanted to mention that as soon as I read about “platforms” and voluminous details and “specs”, “capabilities” etc. (did anyone say “theatre” yet?) I think it just shifts discussion away from more important questions like “do we really need these fucking planes”?
If planes are going to be flying over Canada to drop bombs can we not buy some really good missiles to shoot them down? And who would fly over Canada to bomb it and why? And if the planes are supposed to be flying over some other country, why are we supposed to be ok with this?
It’s late and I’m tired but when I read the detailed military analysis it makes me nuts.
Why do we need planes in the first place?
MoS
I agree, 6E, it is “absurdly dangerous.” Don’t confuse that with inconceivable. Those who served during the Cold War know too well how absurdly dangerous that standoff was for three, nearly four decades. That didn’t stop it from happening. I suppose we were lucky to have had leaders who had experienced the nightmare of WWII and weren’t prepared to test those waters again. Where is that same experience today? It’s not in Washington or Beijing, Moscow or London, and it’s sure as hell not in Ottawa.
In my time I had to study the theory of nuclear escalation and, once learned, you grasp how the absurd can be transformed into reality almost reflexively. We’re still running around pointing nukes at each other while we pretend we’re at peace with the world.
All of us would be well served to focus on the forces destabilizing the greater Asia region virtually from the Middle East to Japan, from Pacific Russia to Australia. That’s where Cold War II is setting in.
Mark Collins
Just to continue stirring the debate:
“No More (Big) War?”
http://www.cdfai.org/the3dsblog/?p=1668
And see comment 4.:
“As for deterrence and other things, perhaps we need more thinking about the unthinkable…”
http://www.cdfai.org/the3dsblog/?p=1668#comment-3470
Mark
Ottawa
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