USAF Braces For NGAD Sticker Shock On Capitol Hill
The U.S. Air Force’s acquisition chief said Feb. 18 that he expects a congressional backlash over how a recent revamp of the Next Generation Air Dominance (NGAD) procurement strategy could drive up the average procurement unit cost (APUC) of a sixth-generation fighter.
But the Air Force remains committed to an acquisition strategy for an F-22 replacement that accepts higher upfront costs in order to save money during the sustainment phase of the program, said Will Roper, assistant secretary of the Air Force, speaking during an “Ask Me Anything” webinar for the service’s acquisition workforce. The Pentagon calculates APUC by dividing total procurement costs, including recurring and nonrecurring bills, by the number of units purchased.
“I already see that being the big discussion with Congress. [They would ask:] ‘The APUC is WHAT?’ And we’re going to have to have a really good analysis to show that by operating this way the total cost of ownership is better,” Roper said.
The Air Force initially planned to structure the NGAD program using a conventional procurement process, in which a contractor typically loses money during the design phase, breaks even at a program level during development and reaps profits over an exclusive, multidecade sustainment period.
But Roper, who was appointed in 2017, said in early 2019 that the strategy had changed. The details of the highly secretive NGAD program are murky, but Roper has compared the new acquisition strategy to the business model for the Apple iPhone. Apple does not sustain the iPhone beyond a few years, so it makes profits by charging a premium on the design at the point of sale. Although the upfront cost is higher, Apple’s business model incentivizes an external community of software developers to create applications for the iPhone at little to no cost.
Roper wants to apply a similar philosophy to the development of the next generation of combat aircraft. He wants traditional defense prime contractors to transition away from a sustainment model for profits and incentivize them to focus on design by offering them a premium.
“The next generation air dominance [program] is thinking what’s the new business model that really reward the companies that use the [design] tools well, but not the sustainment, locked-in paradigm,” Roper said.
Roper did not specify how much a sixth-generation fighter will cost to procure under the new acquisition approach. The Congressional Budget Office, which assumed a conventional acquisition process, estimated the average flyaway cost of a sixth-generation fighter in late 2018 to be about $300 million, based on a program of record for 414 penetrating counter-air aircraft.
The Air Force’s new acquisition takes a different approach to quantities compared to the “program of record” format, such as the one used for the Lockheed Martin F-35. Roper said he expects production quantities to fall somewhere between numbers generally associated with one-off X-planes and F-35-like production.
The new approach is currently applied to the NGAD program, but Roper said he intends to stay in his position as the approach becomes institutionalized in Air Force acquisition.
“I am not planning to go anywhere, anytime soon,” he told the roughly 1,000-member audience of the webinar, “because I learned so much working with all of you.”