F-35: Manufacturing costs dropping, efficiencies increasing

Another part of the GAO report that I wanted to highlight isn't very sexy, in terms of discussions of fighter jets, but it is very important because of the criticism the F-35 program routinely incurs when it comes to discussions of cost.   One of the points made repeatedly by the manufacturer is as the program matures and as the learning curve became less steep, we'll see efficiencies develop that would help bring down those costs.  That's exactly what the GAO found: 

Manufacturing Is Becoming More Efficient: Analyses of labor, parts, and quality data, observations on the manufacturing floor, and discussions with defense and contracting officials provide signs that F-35 manufacturing and supply processes are improving. The aircraft contractor is moving down a steep learning curve, which is a measure that the work force is gaining important experience and that processes are maturing as more aircraft are built. Other indicators of improvement include the following:

* The decrease in labor hours needed to complete aircraft at the prime contractor's plant as the labor force gains experience. For example, the first Air Force production jet was delivered in May 2011 and required about 149,000 labor hours at the prime's plant to build, while an Air Force jet delivered in December 2012 only required about 94,000 labor hours. Overall, the contractor reported a 37 percent reduction in direct labor during 2012.

* The improvement in the contractor's labor efficiency rate, a measure of how long it is taking to complete certain work tasks against engineering standards. Labor efficiency on the first production aircraft was 6 percent and improved to 13 percent for the 31st production aircraft. While still low, Defense Contract Management Agency officials stated that the rate should continue to improve with increased production due to work force learning and factory line enhancements. * The decrease in span times--the number of calendar days to manufacture aircraft in total and in specific work staging areas. The aircraft contractor is altering assembly line processes to streamline factory flow. As a result, for example, span time in the final assembly area declined by about one-third in 2012 compared to 2011.

* The increase in factory throughput as the contractor delivered 30 production aircraft in 2012 compared to 9 in 2011. During our plant visit in 2012, we observed an increased level of activity on the manufacturing floor as compared to 2011. The contractor had more tooling in place, had altered and streamlined processes, and had factory expansion plans underway. * The decrease in traveled work (work done out of sequence or incomplete items moving to the next work station), parts shortages on the line, and product defects. For example, traveled work declined 90 percent and the defect rate declined almost 80 percent in 2012 compared to 2011. Other quality indicators such as scrap rates and non- conformances also improved from prior years and are trending in a positive direction. These have all been major contributors to past cost increases and schedule delays. * The accomplishment of a schedule risk analysis to improve the contractor's master schedule and related schedules. A schedule risk analysis is a comprehensive evaluation that uses statistical techniques to examine the fidelity of schedule estimates and the likelihood of accomplishing work as scheduled. It provides better and timelier insight into program performance to help identify and resolve schedule roadblocks.

 * The improvement in aircraft contractor manufacturing processes, although not fully mature compared to best practice standards. The aircraft contractor is using statistical process control to bring critical manufacturing processes under control so they are repeatable, sustainable, and consistently producing parts within quality tolerances and standards. The best practice standard is to have all critical manufacturing processes in control by the start of production. Just over one-third of manufacturing processes are currently judged to be capable of consistently producing quality parts at the best practice standard. The contractor has a plan in place to achieve the best practice standard by the start of full-rate production in 2019. We have observed this quality practice on only a few DOD programs.

So as the program and production matures, we should continue to see increased efficiencies and decreased costs.  Just as promised.  Caveat: that assumes that the total buy promised is fulfilled.  Otherwise, we'll end up with much more expensive aircraft just like we did with the F-22 and B-2 and we'll be well short of the capability we need for the future.

Graff