Lies, Damn Lies, and the Trillion-Dollar F-35

July 1, 2011

The F-35 Joint Strike Fighter’s development program may have reached its darkest hour. We hope that is the case, because even the program’s staunchest Pentagon advocates are now calling F-35 costs unacceptable and unaffordable.

Unfortunately, the Defense Department has painted itself into a corner with this program. The F-35 will soon be the only US stealth fighter in production, and DOD is counting on it to replace thousands of A-10s, AV-8s, F-16s, and F-18s for the Air Force, Navy, and Marine Corps. Despite its problems, there is no reasonable substitute to the F-35, and killing it to save money is only an option if national security is also optional.

According to Christine H. Fox, the Pentagon’s top cost estimator, even in its current state, the F-35 is projected to cost less to operate than the F-22 or the F-15. Compared to the F-16 and F-18, JSF costs are about 22 percent higher, but those legacy aircraft do not have the stealth, advanced avionics, or other fifth generation features of the F-35.

The F-35 is, in a word, better, so “it is not unreasonable that JSF costs more to operate and sustain than some legacy aircraft,” Fox noted.

But years of cost growth, development problems, and schedule delays came to a head at a Senate Armed Services Committee hearing in late May. “We cannot support programs that do not perform,” said top DOD weapons buyer Ashton B. Carter. “The per-aircraft cost of the 2,443 aircraft we want has doubled in real terms. … It is unaffordable at that rate.”

The take-away from this hearing was not how the F-35 got to this point, nor what the Pentagon intends to do about it. Instead, people wanted to talk about the cost to operate and maintain the strike fighter. On top of $385 billion to design and build the airplane, the F-35 boasts a round-number operating cost with tremendous shock value: one trillion dollars.

The F-35 certainly deserves much of the wire-brush treatment it has been receiving, but this trillion-dollar figure is misleading and deceptive. Since it is DOD’s own number, critics and the press immediately seized upon it.

The headlines were predictable: “F-35 Strikes Trillion-Dollar Mark for Maintenance Bills,” wrote Flight International. “The $1 Trillion Fighter-Jet Fleet,” said the Wall Street Journal. And in the damning with faint praise category, Bloomberg reported: “Lockheed Sees F-35 Lifetime Operating Cost Below $1 Trillion.”

Take a deep breath, everybody. The trillion-dollar operation and maintenance cost everyone is hyperventilating about is hardly worth the paper it is printed on. It counts every possible cost to operate and modernize the F-35 during a 25-year production run, followed by a 30-year operational life. It represents a half-century’s worth of fuel, parts, upgrades, and even related construction costs.

This time horizon extends until 2065. What makes the estimate particularly worthless is that it is computed in “then-year” dollars—an estimate that measures cost not by 2011 standards, but by what they will cost in the year they are spent. This includes 55 years of inflation at the tail end of the computation, an enormous multiplier that is especially damaging because all of these costs are still, psychologically, perceived as 2011 dollars.

All one has to do is think about the references to what a gallon of gas or a loaf of bread cost in some long-past year to appreciate the effect of decades’ worth of inflation. Just as 2065 is 54 years in the future, 1957 is 54 years in the past. The iconic 1957 Chevrolet cost roughly $2,500 at the time, while the average paid for a new car today is more than $28,000. Decades of compound inflation do amazing things, and anyone who claims to know what inflation rates or fuel prices will be 25 and 50 years hence is a fool.

The Pentagon’s most recent selected acquisition report for the fighter pegs its O&M cost at 1.005 trillion then-year dollars. A comparison using 2011 dollars was not available, but the same O&M cost in 2002 dollars (the baseline year used for constant comparisons) was $420 billion. This is far from cheap, but less than half the $1 trillion estimate.

Historically, Carter said, roughly 30 percent of a weapon’s cost derived from buying it, while 70 percent comes from owning it. “You should not believe them,” said Carter of the Pentagon’s own O&M numbers, because “we have not really begun to manage them yet. … Nobody is going to pay that bill.”

In fact, he added, “If you thought that was really going to be the bill for sustaining the airplane, we might as well all get up and … leave now.”

The expense is not in a vacuum: If the F-35 program were canceled and replaced by new F-16s and F-18s, to cite one common suggestion, those aircraft would also accrue massive expenses over more than half a century of use. Critics of defense spending, however, will naturally gravitate to the largest possible number in attempts to discredit weapons programs and brand them as wasteful and unaffordable.

The trillion-dollar number is undeniably a useful stick with which to flog the F-35 and defense spending in general. For example, longtime critic of defense spending Winslow T. Wheeler has already estimated the F-35 will cost $250 million to $300 million per aircraft.

The number will also be frequently misconstrued. In a graphic, the Wall Street Journal explicitly listed the F-35’s total life-cycle cost as $1.385 trillion in 2011 dollars.

Flight International’s Stephen Trimble said F-35 O&M cost estimates represent just 62 percent of life-cycle costs. “To correspond with Carter’s [70 percent] rule of thumb for weapons systems, the operations and support bill for the F-35 would have to rise to nearly $1.3 trillion,” Trimble helpfully adds.

None of this is to excuse the poor cost and schedule performance of the F-35’s development program to date. As Carter said, DOD’s objective now is to get the program back on track, partly by determining what the aircraft should cost. “Our objective is to make sure that those estimates do not come true, and that we have an affordable program,” Carter said.

DOD and the Air Force can’t afford otherwise, because the F-35 is too important not to get right.