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  • Scooter
    Rank 5 Registered User

    F-35 price tag holding steady..........

    WASHINGTON (Reuters) - The cost of each Lockheed Martin Corp (LMT.N: Quote, Profile, Research) F-35 fighter jet has soared 38 percent since 2001, but costs have been virtually unchanged over the past year, according to a Pentagon document obtained by Reuters on Tuesday.

    The F-35 program is the most expensive weapons program in U.S. history. The Pentagon is developing versions of the fighter for the Air Force, Marine Corps and Navy, and to sell to other countries.

    The cost of each F-35 rose 38.01 percent to $69.3 million per plane at the end of 2007 from $50.2 million in October 2001, when the development program began; but that was an increase of just 0.25 percent from December 2006, according to a copy of the draft document.

    The overall program cost remained stable at $299 billion over the past year, after a 29 percent jump from 2001 to 2006 due to schedule changes, inflation indices, material cost increases and higher labor rates, according to the document.

    Estimated operation and support costs for the F-35 over the life of the program, though, rose 17.5 percent to $764 billion from the December 2006 estimate of $650 billion, it showed. The document did not explain the increase, but the cost of jet fuel zoomed higher during 2007.

    The overall program cost increase from 2001 may force the Pentagon to notify Congress but falls short of a congressional threshold triggering a Pentagon national security review that could lead to program termination.

    Stable costs would be good news for Lockheed and Northrop Grumman Corp (NOC.N: Quote, Profile, Research), a key subcontractor on the program, said Virginia-based defense consultant Jim McAleese.

    He said F-35 officials were now reviewing costs and seeking an independent estimate. Any notification to Congress would likely be delayed until September, he added.

    "If the program office maintains the $70 million cost per airplane, Congress would universally support the program," McAleese said. "This will create significant upside for Lockheed stock if this occurs."

    Lockheed shares were 1.83 percent higher at $101.12 in afternoon trading on the New York Stock Exchange. Northrop shares were up 0.68 percent at $78.34.

    Lockheed spokesman Tom Jurkowsky said the F-35 program was performing well and making good technical progress, given that it was the most complex aircraft ever built.

    "Affordability and cost-containment have been both the bedrock and the cornerstone of the F-35 program," he said, noting expenses were monitored "with unprecedented frequency and rigor."

    The Pentagon document also showed the per unit F-35 cost dropped about 1 percent over the past year, when all the development costs were included.

    That cost was $85.5 million, down about $100,000 from the December 2006 estimate but up 38.4 percent from the initial 2001 estimates of $61.8 million, the document showed.

    The Pentagon's acquisitions chief, John Young, and other senior officials on the Pentagon's Defense Acquisition Board examined the F-35 program in detail last week.

    Young is expected to sign a memorandum within the next two weeks to approve the purchase of a second batch of 12 low-rate initial production F-35 aircraft, according to two sources familiar with the issue, who asked not to be named.

    The deal would include six conventional takeoff and landing models for the Air Force and six short takeoff vertical landing versions to be used by the Navy or Marines.

    Young may also approve the purchase of long-lead items for a third batch of aircraft, one of the sources said.

    In a report released Monday, the Government Accountability Office said F-35 development costs had been stable since a 2004 restructuring largely because officials removed $2.8 billion in funds for risk reduction and an alternate engine program.

    Congress has repeatedly insisted on adding funding for the alternate engine to the Pentagon's budget, and lawmakers appear likely to do that again in the fiscal 2008 budget.

    A recent further restructuring cut the number of flight test aircraft and planned flight test sorties, the GAO said, saying that added further risk to the program.

    (Reporting by Andrea Shalal-Esa, editing by Gerald E. McCormick)



    Note: To put this into perspect of the Super Hornet cost ~$95 Million Dollars and the Raptor ~133 Million Dollars.
    F-35 Lightning II
  • Schorsch
    Severely Transonic

    #2
    The price is transferred money divided by procured aircraft.
    At the moment lots of money was procured and no aircraft is there.
    The current price is consequently infinite.
    The rest are projections, which by experience tend to be always wrong and too low!

    I think the F-35 will be a good and reasonably affordable aircraft, but still the current projections will be ... wrong and too low.
    Publicly, we say one thing... Actually, we do another.

    Comment

    • Maskirovka
      Rank 5 Registered User

      #3
      Originally posted by Scooter View Post

      Note: To put this into perspect of the Super Hornet cost ~$95 Million Dollars and the Raptor ~133 Million Dollars.
      But these are fly-away prices right? IIRC SAABs offer to Denmark for 48 Gripen NG was less then 90 million dollars/ac and this included training, service, flight simulators, upgrades etc for 20 years.

      (and off-set deals in Denmark for at least 100% of the total cost)

      Comment

      • Scooter
        Rank 5 Registered User

        #4
        Originally posted by Maskirovka View Post
        But these are fly-away prices right? IIRC SAABs offer to Denmark for 48 Gripen NG was less then 90 million dollars/ac and this included training, service, flight simulators, upgrades etc for 20 years.

        (and off-set deals in Denmark for at least 100% of the total cost)


        True but the Gripen has been in production for years and its hardly as capable as the Lightning II......:diablo:
        F-35 Lightning II

        Comment

        • Scooter
          Rank 5 Registered User

          #5
          Originally posted by Schorsch View Post
          The price is transferred money divided by procured aircraft.
          At the moment lots of money was procured and no aircraft is there.
          The current price is consequently infinite.
          The rest are projections, which by experience tend to be always wrong and too low!

          I think the F-35 will be a good and reasonably affordable aircraft, but still the current projections will be ... wrong and too low.

          Well, considering the price of such types like the Rafale, Typhoon, Super Hornet, and Raptor. The F-35 will clearly be reasonable........(in comparison)
          F-35 Lightning II

          Comment

          • Maskirovka
            Rank 5 Registered User

            #6
            Originally posted by Scooter View Post
            True but the Gripen has been in production for years and its hardly as capable as the Lightning II......:diablo:
            ??? Did I say that? I was only comparing prices just like you did with the SuperHornet and Raptor. It may be interesting when Gripen is fighting for the same orders as F-35 and SuperHornet...

            (BTW, Gripen is about 1000x times more capable then the F-35 cause AFAIK the Lightning is still in development stage, are years from being operational and is not cleared for any weapons yet. Its like me saying that the 2050 SAAB Superplasma Stealth Crusier Jet Gripen Mk18 is more capable, just wait and see)

            Comment

            • Mick
              Rank 5 Registered User

              #7
              One of the major parts of the F-35 programme was to keep the unit and operating costs low. That figure in the "Pentagon memorandum" (this may actually be an unclassified DoD report that will be publicly available any time soon) is clearly for the F-35A CTOL with the other two models due to be higher, but I also think the unit cost will be higher by the time the thing is in full production.

              Comment

              • flex297
                Senior Member

                #8
                I have placed a bet few years ago and I am willing to lace more about the actual price of the F-35 being well over $120mil. These projections are made to make it look good, paper can handle pretty much

                Comment

                • Schorsch
                  Severely Transonic

                  #9
                  Originally posted by Scooter View Post
                  Well, considering the price of such types like the Rafale, Typhoon, Super Hornet, and Raptor. The F-35 will clearly be reasonable........(in comparison)
                  Scooter,
                  have you really looked into procurement processes? Have you ever seen one that started as very expensive delayed and finally below specified performance system? I guess not.
                  Now go and see, that most projects end as such.

                  Comparing an aircraft that is
                  designed, tested, certified, delivered and operational
                  with one that isn't anything of that is just white noise.
                  Each of the 5 characteristics is a major milestone.
                  The F-35 has optimistically passed the first ("designed"), while the final design is really set after completion of at least the basic test schedule.

                  The F-35 may well end as a much delayed, extremely over cost and below specified performance program. Actually, if it wouldn't it would be a major exception (purely from experience of previous projects).
                  Publicly, we say one thing... Actually, we do another.

                  Comment

                  • Schorsch
                    Severely Transonic

                    #10
                    Originally posted by flex297 View Post
                    I have placed a bet few years ago and I am willing to lace more about the actual price of the F-35 being well over $120mil. These projections are made to make it look good, paper can handle pretty much
                    Which year's $?
                    2001 equivalent?
                    Then you may get into trouble with your bet.

                    $100mil from 2001 are equivalent to $119mil today and to $131mil in 2012.
                    Publicly, we say one thing... Actually, we do another.

                    Comment

                    • swerve
                      Rank 5 Registered User

                      #11
                      Originally posted by flex297 View Post
                      I have placed a bet few years ago and I am willing to lace more about the actual price of the F-35 being well over $120mil. These projections are made to make it look good, paper can handle pretty much
                      Which price? Flyaway? Export system price? System price including fixed costs?* And, as Schorsch asks, in $ of which year?

                      *This price is getting close to $120 mn now, but in notional "then-year" $, including a forecast of inflation over the lifetime of production for the USA.
                      Juris praecepta sunt haec: honeste vivere, alterum non laedere, suum cuique tribuere.
                      Justinian

                      Comment

                      • flex297
                        Senior Member

                        #12
                        Originally posted by Schorsch View Post
                        Which year's $?
                        2001 equivalent?
                        Then you may get into trouble with your bet.

                        $100mil from 2001 are equivalent to $119mil today and to $131mil in 2012.
                        Flyaway at the time of delivery. What sense would it make to count in 2001 dollars in 2012?

                        Comment

                        • Otaku
                          Senior Member

                          #13
                          Originally posted by Schorsch View Post
                          $100mil from 2001 are equivalent to $119mil today and to $131mil in 2012.
                          I'll go with (a conservative) $80m unit cost @ 2001 prices- notwithstanding cost escalations from sub-contractors like BAE Systems due to the sliding dollar (with significant recovery unlikely in the medium term), and current uncertainties over second engine development.

                          I suppose with Reuters costing 'celebrations' a Congressional Review has been avoided, phew!!- can hold onto my Northrop shares for a bit longer.

                          Comment

                          • Portagee
                            Rank 5 Registered User

                            #14
                            I think what also has to be taken into consideration is that the overall costs are for the project, and the project is essentially made up of 3 different aircraft with some commonality.
                            Those airframes then have to go through some common but lots of individual testing and certification.

                            Given that, to then break the overall costs down to $70m a unit isn't actually that bad.

                            Especially if compared with the costs of 3 separate designs for the differing roles.

                            Comment

                            • swerve
                              Rank 5 Registered User

                              #15
                              Originally posted by flex297 View Post
                              Flyaway at the time of delivery. What sense would it make to count in 2001 dollars in 2012?
                              Because it enables you to compare the price of deliveries in 2012 with deliveries in 2022 or 2032. That's the standard, obvious, reason for using constant prices. Note that doesn't mean you ignore price increases, just that you adjust them by the general economy price index.

                              I repeat, which year? If you mean 2012 prices, please say so. And your guess at general US inflation (the GDP deflator is normally used, not retail prices) between now and then would add useful information.

                              [Edit]
                              BTW, currently predicted F-35 prices (derived by updating predictions in 2002 prices, average over whole US production run, using US budget office GDP deflator index) are. in million USD -
                              2007 2012
                              F-35A - 57.8 63.7 flyaway
                              F-35B - 73.7 81.3 flyaway
                              APUC - 85.1 93.9 (average of all versions)
                              PUAC - 99.5 109.8 ditto
                              Last edited by swerve; 3rd April 2008, 12:50.
                              Juris praecepta sunt haec: honeste vivere, alterum non laedere, suum cuique tribuere.
                              Justinian

                              Comment

                              • Schorsch
                                Severely Transonic

                                #16
                                Originally posted by flex297 View Post
                                Flyaway at the time of delivery. What sense would it make to count in 2001 dollars in 2012?
                                If you had said in 1969, that a B747 will have a Fly-Away price of 250 million USD, everybody would have said you're nuts. Finally, you did win though. But only after over 25 years of inflation (I think B747-400 was over 250 million list price mid/end of the 90ies). The late 70ies and early 80ies were a pretty inflationary time, though.

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                                Now, a 4% inflation might sound a lot, but remember that "the inflation" is an averaged value over house prices, oil, toilet paper, DVD-players and many other things. It is rather representative for normal peoples way of living, but might be a bad yardstick for very specialized products (like supersonic fighter aircraft).

                                At peak of production a single B-52 did sell for less than the F-35's radar.
                                Publicly, we say one thing... Actually, we do another.

                                Comment

                                • sferrin
                                  Rank 5 Registered User

                                  #17
                                  Originally posted by Schorsch View Post
                                  The price is transferred money divided by procured aircraft.
                                  At the moment lots of money was procured and no aircraft is there.
                                  The current price is consequently infinite.
                                  The rest are projections, which by experience tend to be always wrong and too low!

                                  I think the F-35 will be a good and reasonably affordable aircraft, but still the current projections will be ... wrong and too low.
                                  Look what tends to drive that though- orders always getting cut below what was planned at the outset. That means R&D costs get spread across fewer airframes and it's less likely anybody will invest in more efficient processes (as they would if they could depend on the originally planned numbers) which drives the cost up. It's about the worst way to purchase a thing ever invented and they do it time and again.
                                  A government that robs Peter to pay Paul can always depend on the support of Paul. - George Bernard Shaw

                                  flag@whitehouse.gov

                                  Comment

                                  • Schorsch
                                    Severely Transonic

                                    #18
                                    Originally posted by sferrin View Post
                                    Look what tends to drive that though- orders always getting cut below what was planned at the outset. That means R&D costs get spread across fewer airframes and it's less likely anybody will invest in more efficient processes (as they would if they could depend on the originally planned numbers) which drives the cost up. It's about the worst way to purchase a thing ever invented and they do it time and again.
                                    When contracts are fixed a development and procurement price is fixed. As you say the number of procured systems is often reduced to keep the package price in order to stay within the legislative price frame.
                                    However, in most programs the increased cost did not result from reduced numbers in the first place but an at least 50% increase in development price.

                                    A very nice example is the C-5 Galaxy. Not only then but also today with the C-5M upgrade.

                                    And to make one thing clear: this is no American problem and I am not blaming the US defence contractors of incompetence, it is a general problem existent when high-tech weapons are procured. The Soviets regularly blew up all cost and time estimations.
                                    Publicly, we say one thing... Actually, we do another.

                                    Comment

                                    • Schorsch
                                      Severely Transonic

                                      #19
                                      Originally posted by swerve View Post
                                      APUC
                                      PUAC
                                      Meaning?
                                      Publicly, we say one thing... Actually, we do another.

                                      Comment

                                      • swerve
                                        Rank 5 Registered User

                                        #20
                                        Originally posted by Schorsch View Post
                                        Meaning?
                                        "Average Procurement Unit Cost" and "Program Unit Acquisition Cost".

                                        APUC is the average cost of procuring each aircraft. Includes all recurring costs (but not weapons, which come under other programmes) but no fixed costs. Rather more than flyaway cost, but represents what is actually spent. It's roughly what an export customer should expect to pay.

                                        PUAC is the total cost, including all fixed costs (R&D, etc) divided by number of units. Dependent on how many are bought, of course.
                                        Juris praecepta sunt haec: honeste vivere, alterum non laedere, suum cuique tribuere.
                                        Justinian

                                        Comment

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