Podcast: Explaining the F-35’s Cost and Programmatic Issues

After a blistering congressional hearing, Aviation Week editors break down some of the F-35 program’s recent struggles and cost issues to develop the program and maintain and operate the fighter.

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Rush transcript:

Jen DiMascio:

Hi and welcome to the Check 6 Podcast. I'm Jen DiMascio here with Defense Editor, Steve Trimble, and Pentagon Editor Lee Hudson. And we are here to talk a bit about the F-35 fighter jet. The F-35 gets a lot of our time and attention because it was supposed to be the cornerstone of the US Air Force's fighter fleet. And because it was going to really equip the fleets of our allies. And it still will, but it's costing the nation a lot of money and it looks like it will continue to do so in the future.

Last week, there was a pretty fiery hearing over on the house side of the US Congress. Lawmakers are really as fired up about the cost of the F-35 as they used to get about the Navy's Littoral combat ship. And several leading lawmakers say they only plan to fully fund the Air Force's request for F-35s this year. So Lee, how is that a change and what was really the tone of those hearings that you went to last week?

Lee Hudson:

Yeah. The democratic lawmakers, in particular chairman Donald Norcross, he's the subcommittee chairman for Tactical Air and Land Forces from New Jersey, and Democratic member John Garamendi from California were both really angry. In previous years, the Congress has put in an additional F-35 aircraft over the budget request, but this year they said that they're going to stop that. And Garamendi said, "If anybody suggests a pause up, there will be one hell of a fight and I don't propose to lose it," is how he characterized it. And that is a stark contrast in previous years when everybody was so supportive, helping with quantity increases to help with the production ramp of the aircraft.

Jen DiMascio:

Steve, we were talking earlier, this is really kind of a change in tone from past hearings on the Hill for the F-35. How do you see it?

Steve Trimble:

Yeah, it was a big shift from the last four or five years. I mean, it reminded me of, well, the good old days or the bad old days, depending on your perspective, when Senator [John] McCain [of Arizona] was chairman of the Armed Services Committee and just furious with Lockheed, with Pratt, with [the Joint Program Office (JPO)], over everything about the F-35. Really, as things started falling apart in 2009, 2010, and things had picked up for the F-35, really in the last latter half of the last decade. I mean, the production ramp got a lot better. Lockheed was hitting their production targets for the most part, the cost per unit were going down, you might even say impressively. By next year Lot 14 F-35As will be in the $77 million ballpark, which it's still not as low as they were supposed to be coming out of the gates in 2001, but still it's not a bad deal when you compare it to what else is out there in the market right now.

            But then of course, we've got a few issues going on. One, we have a budget that's leveled off. So, there's not a lot of room for continued growth. And that's what the F-35 program wants to do, not just for the Air Force, but for the Marines and the Navy. And competing against that is the fact that they're really struggling with sustaining costs. They're much higher than they should be right now, at least 25 to 30%, is the cost delta they want to close by 2025. Even then it's still pretty expensive to operate, but much more affordable than it is today.

            Plus, they've got this issue with engine shortages now, which has popped up out of nowhere. They've got a new problem with TR-3 hardware coming in late. This is a technical refresh three, which is the baseline computer and electronics upgrade that really enables the next big wave of hardware and capability upgrades, especially for the electronic warfare system in the F-35. So right now it's just a big pile up of issues and you're starting to see that reflected in much more combative hearings. And it makes it a lot more interesting for us to cover, I'd say. The hearings, the way they've gone in the last few years, but it was a definite change.

Jen DiMascio:

Well, would you say the program's cycling through some normal programmatic and engineering difficulties or is it out of the ordinary?

Steve Trimble:

You have to look at the F-35 as just a series of challenges. And every single time they feel like, “We got something contained that seemed to pose this existential threat,” then as soon as they contain it, something else pops up somewhere else. And it's like, where did that come from? I remember when the helmet was one of the biggest issues and the gun and all sorts of things. And those would fade away and these new things would pop up. And for a long time, it was the per unit costs. How are we going to afford buying these things when they're $105 million per aircraft? That's just for the simplest version of it. At least the least expensive version, which is the Air Force version.

And they got that pretty much under control, but as soon as that happened, then the sustainment costs just never came down the way they were supposed to. They remained at a very high level. And of course, as I mentioned, the engine shortage that just came out of nowhere. But I do think some of those are solvable issues.

Jen DiMascio:

And are they the kinds of issues that are cropping up just because of the nature of the F-35 program, because it is such a complex program and it's the first time we've ever done anything on that kind of scale in terms of numbers of lines of code?

Steve Trimble:

Well, no. I guess, for the last several months I've wondered where this engine issue came from because it did seem like it came out of nowhere. When they testified in 2019, when Matt Bromberg, the president, of Pratt & Whitney military engines did, things seemed to be under control. And the ramp up was going just as they thought. And they were setting up the repair depot, they had just done this for the F119 engine depot. They said they were going to take those lessons learned, bring it right into the F135 and have no problems. But then, what they are looking at is significant engine shortage, unless they fix it by 2030. The GAO numbers were stark and it's just amazing that 43% of the F-35 fleet could be grounded by 2030 for lack of engines. Because at current engine repair rates, they just can't turn them out fast enough.

            It's taking them 220 days at the depot Tinker to turn around an F-35A engine. And it's just not fast enough. They're trying to get it down to, I think it's about 120, 130 days. And so, a lot of this is, where did that come from? What Bromberg explained was it didn't help that they lost a depot when Turkey was removed from the program. Obviously there were bigger issues involved with that. The COVID pandemic hit right at the year where the depot was being activated at Tinker for the power modules, which is the core and the big part of the engine. You have to remember with F-35, they moved from level three maintenance to level two maintenance. So there's not an intermediate depot repair capability out in the field. Everything is either frontline maintenance, which is very basic type maintenance or it's going to the depot.

            So anytime anything is wrong with the power module, they can't take it to an intermediate level depot. It all has to go to the big depot. And so, if that depot isn't set up to handle all that, there's not a lot of spare capacity in the system to absorb it. On top of that, they had this issue with engine removals. Nine engine removals alone during the operational deployment to central command, to the Middle East, where we've heard a lot about this issue they were experiencing with the high pressure turbine blades getting exposed to dust that was significantly eroding, or it was eroding the coatings on the blade significantly faster than they were expecting. So those engines got added to the pipeline, going to the depot, which was already going way too slow. So probably he's trying to fix it.

            They're trying to beef up capacity. They think they can double output. They said they have doubled the output in the first quarter of this year and they expect the full year we'll double output compared to last year. That's on a very low level. And then it will double again by 2023. So he thinks they're making progress, but we don't know what the baseline, how many doublings still have to happen for them to avoid this 2030 nightmare of 43% of the fleet grounded without engines. But it does seem like they are catching up a little bit.

Jen DiMascio:

And then since we're talking about sustainment, I thought that the F-35 had the ALIS, now ODiN predictive maintenance system? Is that even operating yet? I know that's had some problems along the way, Lee.

Lee Hudson:

Yeah. So it was a surprise for everyone to hear at the hearing and the written testimony by F-35 program executive, Lt. Gen. Eric Fick, that the transition to the new logistics system is on hold. He disclosed the reason for the pause is because of lack of funding for ODIN. And the big difference between ALIS to ODIN is the government will own writing the software code and Lockheed Martin is responsible for the hardware processing. But the idea is to give the government more flexibility in terms of owning the cloud versus everything being proprietary under Lockheed Martin.

            But right now it's still unknown when that transition will occur. And general Fick did disclose that it will be more of an evolution instead of just a quick replacement. Turn off ALIS today and turn on ODIN tomorrow. He said, it'll be more gradual than that. But I think this potentially could be a really big deal for the F-35 program, just because ALIS has had so many problems. And so Fick acknowledged that they do need to invest in improving ALIS while they're waiting to make the transition to ODIN. Some of the recent updates they've done to ALIS, they upgraded it from Windows 7 to Windows 10. That just is an example of the outdated system that the military maintainers were using.

Jen DiMascio:

And remind me where we are contractually on the F-35. I think at the end of the year, they were in the throes of negotiating the next Lot of aircraft to be purchased. Did that ever happen?

Steve Trimble:

They're in the process of negotiating Lot 15 orders for the F-35, If you remember, they had that three years agreement that set up pricing for Lot 12, 13, and 14. So now they're at Lot 15, and this is a big year because a Lot 15, those are the aircraft that get delivered in fiscal year 2023. Those are the first aircraft to actually have the technical refresh three upgrades, hardware upgrades in them. Remember when Lockheed started setting up TR-3, what they did was they went back and re-competed a lot of the suppliers for those hardware; for the core processor, for the memory unit, for the displays, for the display computer, and for the distributed aperture system. Some of the companies still won those, in other cases, they changed hands like Raytheon winning the distributed aperture system.

            But in all of those competitions, they were supposed to bring much lower prices. So I think that's probably increased the pressure in the negotiations for the government expecting lower prices while at the same time, the issue is that the volumes don't appear to be going up that much when they get there. So you're not getting what was the huge ramp that we saw, or the ramp down in price between LRIP say, 10 or 11, and LRIP 14 was coincident with this huge ramp up in production. So you could just ride the economies of scale to bring down the costs. Now they actually have to buckle in with these supplier type agreements, immature production systems to get the same effect. And we'll see when it comes out of the negotiations, but it's going to be really hard for them to get lower than $77 million than that level they achieved in Lot 14.

Jen DiMascio:

Now, you mentioned earlier that the cost of operating the F-35 is still pretty high and that the costs are misunderstood. There are a lot of numbers flying around, and I think the last week has given you some clarity on that point, Steve. Can you explain?

Steve Trimble:

Yes, yes. Well, I'm going to try. There's a lot of numbers here and a lot of math, not a lot of math, a little bit of math, just enough to make my head explode. But for the last few months, we've been bombarded by these numbers and with especially representative Adam Smith, who's chairman of the Armed Services Committee saying that the F-35A hourly operating cost is $38,000 on average. Whereas the Air Force and the JPO and the DOD is saying it's $33,000 per hour. And trying to figure out, which one is the right number and to just use in our stories. We could never get a straight answer, but we finally got it during the hearing. And that they're both right. They're actually the same number, but calculated with different inflation. So the $38,000 that representative Smith is referencing relates to the dollar as we understand it today.

            And the value of it, as we understand it today, that's current year values. Whereas $33,000 reflects the fiscal year 2012's baseline. So it's basically as if inflation hasn't happened for the last nine years. Now, the Air Force is using that baseline, that fiscal year 2012 baseline, they're using that because the cost target for the F-35A is $25,000 cost per flight hour by fiscal year 2025. That's also in baseline 2012 dollars. So again by 2025, that'll be 13 years old in terms of inflation and wouldn't have been adjusted for inflation. I did some calculations, some rough calculations, and that would actually translate to about 32 or 33,000, assuming standard inflation increases over the next few years, which who knows. I mean, there's been some talk about whether or not that will actually go much higher.

            So, that's the actual math that we're playing with. And you can get a lot deeper in that if you want, in what Lockheed shared, that is on what Air Force and Pratt & Whitney suffices to say. Lockheed thinks they've got a path to getting there by 2025. And if you really look into the numbers, you can sort of see it, but it can't just be Lockheed, the Air Force and Pratt & Whitney also have to contribute for this to work. And Lockheed's cost reduction efforts actually have to work. And so we're going to see how all that plays out, but then at the end of the day, is that still affordable? Because when we were talking about that $25,000 cost per flight hour in 2025, what we're really talking about is a $33,000 cost per flight hour in 2025 once you adjust it for inflation.

            Is that too much when you're trying to buy 1,763 of these aircraft for your Air Force to fly, which is the program of record. And there's going to be some interesting questions about that. And of course, this doesn't just apply to the US, it applies to everyone who's operating the F-35A. F-35B and C of course are more expensive than the F-35A. The F-35C because there's lower volume and F-35B because it's a more complex system with the short takeoff and vertical landing capability that's embedded into it. So, that's the story on the inflation.

Jen DiMascio:

And so that's how you get to Gen. [Charles] Brown's, the chief of staff of the Air Force, his comments about flying a Ferrari.

Steve Trimble:

Right. So the Ferrari that you only drive on Sundays, as Gen. Brown said. I wouldn't know, I don't have a Ferrari. And if I did, I'd probably would drive it more than just Sundays.

But yes, that is the issue. How much can you operate this aircraft? And maybe he's even baking that into his assumptions. We know that the F-15 costs $30,000 today to operate compared to $38,000 for the F-35A in current year dollars. The F-16 is more like $20,000 in current year dollars. I haven't done the inflation trend calculation to find out what that would be like nine years ago, but that's the difference. And that's the differential that they're talking about.

Jen DiMascio:

And then on development. I want to just look ahead for a second. We have to wrap up here soon, but the Air Force is targeting a next generation fighter program. Are they going to be able to develop something that won't take as long to develop, and would be affordable to use?

Steve Trimble:

Well, it's the $1.7 trillion question, because that's the F-35 program of record lifecycle cost estimate in these selected acquisition reports. The Air Force has this plan with Digital Century Series. And it's very interesting with the Digital Century Series and that plan, because all this talk we're having about the sustainment costs and how much it costs once it goes to the depot and all that kind of stuff. You kind of get rid of all that. You still have an hourly operating cost, but you don't have a heavy check, heavy program depot maintenance period, because you get rid of the jet before it's old enough to be eligible to enter program depot maintenance. The whole idea of Digital Century Series for the next generation or dominance program is to buy the aircraft, get it designed using this digital engineering accelerated design approach, get it into the field within eight years and then retire it 16 years after it enters service.

            And retire the entire fleet and then replace it with something else that's coming. The Air Force tried this before. The F-16 was actually designed to not go through program depot maintenance with a similar idea that maybe we can get away from it this time, and maybe we can develop and iterate the next light fighter. But then, of course, that never happened. And it requires a long-term vision and a long-term commitment to a fighter force structure that you can't change every four years or eight years as you get a new group of people taking over the program or taking over Congress. It's a really interesting idea and it's a really ambitious idea. It's unproven in how the government actually works so far. So to make it work would be amazing to see, but it would be the first time. That's why it would be amazing. It would be the first time we've ever seen it.

Jen DiMascio:

Thank you. That's a good point to end on. So thanks everybody for listening to Check 6, which is available for download on iTunes, Stitcher, and Google Play. Tune in again next week for another edition of check 6.