The Pentagon now expects to pay $480 million less than it had figured on only eight months ago for retrofits to the first 90 fighters, based on revised cost projections of changes predicted to emerge through the end of development in 2017.
The updated cost figures were sent to Congress last month in its second review of so-called concurrency costs for the Lockheed Martin F-35 program. Because the program was crafted in 2001 to conduct production in parallel with testing activities, officials are tracking the concurrency costs, i.e., the price of retrofits that must be made to bring early production jets to an operational standard based on findings in ongoing testing. One example is a fix to the fuselage station 496 bulkhead, which was found to experience unexpected cracking.
As of last year, Pentagon officials estimated the total concurrency cost for the first 90 aircraft, including all on contract in low-rate, initial production (LRIP) lots 1-5, at $1.71 billion. However, since the first report was issued to Congress on these costs last September, the F-35 Joint Program Office, in concert with experts from , have reviewed more closely the “actuals,” or costs already known from work on earlier LRIPs, as well as refined how models of retrofits from past fighter programs (the and /F, for example) are applied to the F-35 moving forward, according to an official from the F-35 Joint Program Office (JPO).
The estimates are projected out through LRIP 10, when the development — and presumably retrofit discoveries — will end. Across all 10 LRIPs, the projected estimates drop by $820 million.
These are, however, still projections. Only about 35% of flight testing is complete and Lockheed Martin still has much to do with testing the structural durability of each of the variants over multiple lifetimes of use.
For each LRIP lot that is on contract (lots 1-5), the estimates are clearer owing to the percentage of known issues that will be retrofit. The JPO and Lockheed Martin are nearing closure on contracts for LRIPs 6-7, though, so those do not yet have firm projections for such known costs. However, the report notes that 80 retrofits are already known to be necessary in the 36 aircraft expected for retrofit in LRIP 6.
A graph in the May 2013 report (see hyperlink, above) shows the estimate for actual retrofits and a figure to cover the price of unknown issues that could crop up in development.
However, even for the two F-35As in LRIP 1, long since delivered to the U.S. Air Force, not all retrofit costs are known. Estimators included figures for each lot for yet-to-be-discovered retrofits. They based these estimates on models of previous fighter programs and inflation estimates.
Below are the average per-unit estimates for the price of retrofits to aircraft in each lot last year and this year. Note that the actual cost in a particular lot would differ by variant, as the B and C models have some unique equipment.
LRIP 1 (2 U.S. aircraft): September 2012 - $25 million; May 2013 - $15 million
LRIP 2 (12 U.S. aircraft): September 2012 - $25.8 million; May 2013 - $ 16.7 million
LRIP 3 (14 U.S., 3 foreign aircraft): September 2012 - $22.9 million; May 2013 - $15.7
LRIP 4 (30 U.S., 2 foreign aircraft): September 2012 - $ 19.3 million; May 2013 - $14.7 million
LRIP 5 (32 U.S. aircraft): September 2012 - $14.1 million; May 2013 - $10 million
LRIP 6 (31 U.S., 5 foreign aircraft): September 2012 - $11.3 million; May 2013 - $7.4 million
LRIP 7 (29 U.S., 6 foreign aircraft): September 2012 - $7.9 million; May 2013 - $7.4 million
LRIP 8 (29 U.S., 16 foreign aircraft) September 2012 - $4.1 million; May 2013 - $2.8 million
LRIP 9 (44 U.S., 26 foreign aircraft) September 2012 - $2 million; May 2013 - $1.4 million
LRIP 10 (66 U.S., 34 foreign aircraft) September 2012 - $1.1 million; May 2013 - $760,000
The retrofit estimates include non-recurring engineering for the fixes. Though foreign F-35 buyers will not have to pay for these non-recurring costs (those are included in the U.S.-specific development contract), they will have to pick up the tab for the actual retrofits if they decide to install them on their aircraft, according to the JPO official. Additionally, the U.S. services have the discretion of which retrofits to install. The program office is categorizing them by those that are essential to operate the aircraft (such as safety or durability issues) versus those that are “nice to have,” the JPO official says.
Lawmakers requested these concurrency cost reports as due to concerns that these estimates were very high, adding significantly to the per-unit price of the actual aircraft. Based on the contracted target cost for LRIP 5 aircraft, the F-35 is estimated at $105 million, the F-35B is estimated at $113 million and the F-35C is estimated at $125 million. Based on the revised concurrency estimates, the Pentagon can expect to pay an additional $10 million per aircraft for retrofits; that is about 10% of the price of the F-35A.
Air Force Lt. Gen. Christopher Bogdan, F-35 program executive officer, said last winter he expects to be able to stabilize the price of the F-35A, the predominant model sought for export, at $80-90 million. At that point, in full-rate production, there should be virtually no retrofits required.
One program official said these revised concurrency estimates will be included in materials for a Defense Acquisition Board meeting this fall in which Bogdan is expected to ask Pentagon procurement chief Frank Kendall to formally approve downward revisions to the cost estimates for the aircraft and associated figures — such as sustainment — in preparation for next year’s F-35 Selected Acquisition Report (SAR) to Congress. The SAR is a sweeping report that includes costs related to the entire life cycle of a weapon system.