Tuesday, February 12, 2013

F-35: Costs continue to come down - as projected

As has been stated here any number of times, it is a matter of simple economics:
As the Canadian government assesses alternatives to the Lockheed Martin F-35 for its next generation of fighters, mainly to address concerns about unit costs, Lockheed Martin announced it has managed to reduce the cost of an aircraft in “combat configuration” by 50 per cent, through supply chain and production line streamlining.

“When I hear things like the F-35 cost is increasing, nothing could be further from the truth,” said Steve O’Bryan, Lockheed Martin’s vice-president of F-35 program integration and business development, during a Feb. 8 teleconference.

He said the fifth stage of low-rate initial production (LRIP5) had yielded a unit cost 13 per cent below the $67 million, which was the official U.S. government estimate on orders placed in 2017 for aircraft to be delivered in 2020. The reduced cost worked out to just over $58 million, and includes the Pratt & Whitney F135 engine, as well as all the pods and sensors required for operations. Moreover, the LRIP5 price was some 50 per cent below LRIP1 aircraft.

Asked how that had been achieved, O’Bryan told Canadian Skies that Lockheed Martin and its suppliers had been “really driving down the learning curve” from lessons learned from legacy fighters such as the Grumman F-14 Tomcat, the McDonnell Douglas F-15 eagle, the F-18 and its own F-22 Raptor.

“We more efficiently put the airplane together, we more efficiently put the supply chain together, and we drive down the price,” he said. “We’re going to continue to do that and continue to add volume. We’re able to absorb the overhead rates, if you will, and we’re able to amortize that overhead . . . over a larger quantity of airplanes.” 
Production efficiencies and volume lead to lower prices.  The over-hyped "sticker shock" was a device used to try to ignore the laws of economics in an attempt to kill the program.   If you want examples of what not to do, just take a look at the F-22 and B-2 projects.  Then consider this:
The B-2 bomber, developed and produced in the 1980s, is the textbook case of poor management. Attempting to cut costs, planners reduced the buy from 132 to 21, driving up the unit price to $2 billion per copy. The result was a bomber that the military was reluctant to use. “If it does badly, and it crashes, you’d have a $2 billion smoking hole in the desert, which could be a bit embarrassing,” one Air Force official explained. 

Should such a thing happen to the F-35, it would be the third advanced program to be curtailed with huge consequences to the men and women in the field.  Yes, stop the program short of its projected output and each aircraft will cost more.  But the opposite is obviously also true. That's how laws of economics work. 

Somehow, most critics never seem able to quite wrap their heads around this truth.


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