Is this what a ‘death spiral’ looks like?

Johan Boeder, a Dutch defense analyst and editor of jsfnieuws.nl, has compiled a chart showing how the Department of Defense’s planned F-35 orders have declined since contract award in October 2001.

The numbers illuminate one of the central challenges faced by Lockheed Martin and the F-35 industry team: preventing unit costs from skyrocketing as volumes plummet.

Learning curve theory posits that manufacturing costs decline by 12% each time output doubles. With each new delay that results in a further production cutback, the F-35′s affordability challenge becomes more difficult. If unit costs increase each time orders decrease, budget cuts become a self-perpetuating cycle — aka: the acquisition death spiral. How does the F-35 escape?


2001 Sep-06 Nov-06 Apr-07 Nov-08 Aug-09 Jan-11
FY05 10            
FY06 22            
FY07 49 5 5 2 2 2 2
FY08 82 18 16 12 12 12 12
FY09 108 52 47 16 14 14 14
FY10 156 70 56 30 30 30 28
FY11 170 98 64 43 43 43 32
FY12 170 133 103 82 82 82 32
FY13 170 143 135 90 90 90 42
FY14 170 157 157 116 110 110 62
FY15 170 160 160 130 130 130 81
FY16 170 160 160 130 130 130 108
 
Totals 1447 996 903 651 643 643 413

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18 Responses to Is this what a ‘death spiral’ looks like?

  1. Lawrence 7 January, 2011 at 8:14 pm #

    How does this spiral compares with other programs that goes through the same thing, historically? Can you put the cost along with the graph/table….

  2. Weaponhead 7 January, 2011 at 8:48 pm #

    Of course you should also factor in the insane number of LRIP jets that were planned in this program. The build as you test and fix model is tremendously flawed way to acquire. Is is any wonder the DoD 5000.2 would not allow such a program plan?

    I see this as a correction to the flawed acquisition plan. However, the impact on cost and availability may have it’s own impact still resulting in a death spiral.

  3. Lightndattic 7 January, 2011 at 10:27 pm #

    My thought is that there’s a way out, but it puts LM in line to need a bailout ala GM in 5-10 years.

    What’s keeping LM from building the numbers needed for economy of scale is the fact that they will only spend the money the government gives them for the program. The government won’t give them the money because LM can’t deliver an aircraft as complete as they promised when they promised in the original contract award.

    The way out of it is to spend their own money (and fight off the inevitable shareholder revolt) to build the airframes above the government contract needed to introduce the economy of scale. As the suppliers get their long term contracts from LM, their pricing gets lower which ripples up the ladder. Eventually LM will either go bankrupt and default on the supplier contracts or they’ll get the flyaway costs down to what they promised and soothe the fears of the taxpayer that they’ll end up with another B-2 program with a couple of squadrons of $500M fighters. LM will have to fix or recycle any airframes built before any needed modification, should something come up but the alternative is for the entire program to collapse all together.

    LM needs to slam the throttle forward and power out of this spiral.

  4. Dude 7 January, 2011 at 11:00 pm #

    Ditto with WP. Finish the flight test program before purchasing any more LRIP airframe.

    Reduce the overall procurement fleet size; LO/VLO is a first-day-of-war weapon; we certainly don’t need thousands of them to knock out even the most advanced IADS & C4ISR.

    Consider dropping one of the three variants. LO/VLO usually works poorly at close range; between UCAV and rotary gunships,does LO-STOVL really make sense in future warfare? The design compromises that come with the “B” variant is in danger of making the JSF both complex and kinetically inferior to emerging designs.

  5. Logan 7 January, 2011 at 11:12 pm #

    All of a sudden, Chuck Spinney’s pal Pierre Sprey’s arguements are making sense…

    http://www.flightglobal.com/blogs/the-dewline/2010/09/videos-dutch-tv-with-f-35-hate.html

  6. George Zip 8 January, 2011 at 12:32 am #

    …and it also explains the growing calls to deep-six the alternate engine.

  7. Bjørnar Bolsøy 8 January, 2011 at 1:36 pm #

    One thing to keep in mind is that these are not cuts, but a slower ramp up. The total number of jets have been unchanged since the 2003 rebaseline; 2443.

    B. Bolsøy
    Oslo

  8. SMSgt Mac 8 January, 2011 at 3:23 pm #

    LOL! Right on schedule.
    To answer an earlier question: yes we’ve been through this before: see http://photos1.blogger.com/blogger/2509/643/1600/slash-and-whine.jpg
    (Spinney is given WAY too much credit for something we in the industry have known and talked about for decades. It ain’t Spinney’s Death Spiral, it’s evertyone’s)

    To answer another question, yes this has been observed, and documented, and analyzed (ad nauseum). Best recent work from RAND has in the summmary:
    —–
    “Total (development plus procurement) cost growth, when measured as simple averages among the program set, is dominated by decisions, which account for more than two-thirds of the growth. Most decisions-related cost growth involves quantity changes (22 percent), requirements growth (13 percent), and schedule changes (9 percent). Cost estimation (10 percent) is the only large contributor in the errors category. Less than 4 percent of the overall cost growth is due to financial and miscellaneous causes.”
    —–
    from: http://www.randsolutions.org/pubs/monographs/MG670.html

  9. Tangoviking 9 January, 2011 at 9:19 am #

    Bjørnar, yes but in order to reach the planned large operative numbers within reasonable time the production levels would have to take a very steep climb something that would cause severe stress on budget and production capability.

    Production was in 2001 planned to run through to 2025, later than that and we’re looking at added fighter gaps.

    To reach 2443 jets by the year 2025 production would have to jump from 108 jets in FY16 to 225 jets for every year after that point.

    Not very likely.

  10. D.XXI 9 January, 2011 at 1:11 pm #

    Johan Boeder is not a defence analyst, but a anti-JSF activist who is proclaimed specialist by being on the internet. In reality he develops software for agricultural applications.

    I don’t know who pays him and/or what motivates him, but considering the fact he links to interviews with himself in other media, talking about himself in the 3d person as if it was an independant source makes me question anything he says.

    however these numbers can be verified easily, anything else he writes is usually biased.

  11. nn 10 January, 2011 at 1:20 am #

    There was a cut of 400 JSF by the Navy in 2002. A Bolsoy says the total number has been unaltered since review in 2003, but with slower ramp-up due to allow production line to mature.

    As the only “cut” since 2001 was made 8 years ago, where then is this death spiral stuff coming from? Is this news or FUD from jsfnieuws?

  12. Mike 10 January, 2011 at 5:10 am #

    The -B STOVL version looks like it’s definitely in a death spiral, cutting it out would save a vast amount of money, and an LO+STOVL CAS aircraft never made much sense anyway. If the opponent is big enough and bad enough that you need LO, then the USN will be sending a big-deck carrier anyway to stamp on them real hard. So if you’ve only get a small-deck Marine carrier, you won’t be needing LO.

    OK, but …

    It seems to me that the -B is at least the main, if not the only reason for the current configuration: I’m sure the Navy would prefer a twin-engined design for blue-water operations. So if you kill the -B then maybe the -C goes away too. Hmm

  13. Phaid 10 January, 2011 at 3:24 pm #

    “The total number of jets have been unchanged since the 2003 rebaseline; 2443.”

    That number is completely meaningless; it does not represent committed orders, just a vague plan that may eventually align with the facts. The reality is that orders, both from the U.S. and other nations, have been delayed or reduced. This will necessarily impact the production rate, which will impact the price, which will, yup, cause further reductions in orders. The only number that matters is the one that shows real orders for real aircraft through 2016 have dropped by more than half since the 2003 “rebaseline”.

  14. mpgunner 10 January, 2011 at 6:50 pm #

    I remember when the politicians proudly patted themselves on the back when they canceled the F22 saying the “cheap option” of buying lots of F-35′s made such sense. I just knew I would see a chart like this. The pattern is always the same. The future stuff is cheap yet the current stuff is expensive (in some ways it is but in others ways it isn’t).

    Soon there will be a future plan on the drawing board and we will by 5 of them…

  15. m02 11 January, 2011 at 7:23 am #

    Its far past time to kill this fraud of the tax payers for a second rate air craft after a superior plane was already built and deployed. Shut it down, put what money is left over into starting the F-22 production lines back up. And while you are at it, go after everyone involved with promoting this monumental rip-off of profits at any price including our national security.

  16. br_dlf 11 January, 2011 at 8:28 pm #

    Wauw,

    Some people keep banging their heads against the wall (yes I am also talking to you energo!). You are soo maried into the heyho of the JSF that you keep ignoring the ever growing evidence of a disaster.

    True; Officially we are talking about only a ‘delay’. Fact is that if alternative jets are bought (F18′s) and units supposed to get JSF’s are closed this budget is not miraculeously comming back. so your words are rather deceiving. The argument that ‘in the future everything will be straightened out’ ignores the fact that oponents are acting too (PAK en J-20) and new developments may very well render the JSF a dudd. If the JSF is additionally not living up to expectations in combat performance and operation costs my bet is that the USA will cut its losses, stop the JSF production, opt for interim solution (F16, F15, F18 and F22!!) and directly go to a newer design that will not be having the STOVL millstone around its neck and can incorporate technical advances (e.g. better stealth that does not compromise other important combat parameters such as manouvrability, speed and ceiling).

    Around 2004 I said that I did expect the production run of the JSF to be around the 2000′s (total run, including units for stubornly vasal partners and giveaways to Israel) and I would not be all surprised if the production line would be closed before reaching the 1500 units. Seems more and more likely I am going to win that bet.

    For the way out it is not only imperative that that dreamed up number of ’600% more effectiveness’ than any competitor is going to be true (tough luck I would say), it also required that LM gets the costs under control pronto without new technical problems. Not bloody likely.

  17. Dfens 12 January, 2011 at 12:19 am #

    Wow, it’s almost like these defense contractors make more money off of development than they do off of production. Oh wait, they do make more profit off development than they do from production. Sure, we’d all like to believe the American taxpayer isn’t so stupid they’d let a contractor make a bigger profit off designing an airplane than they do from producing them, but, guess what, they are that stupid. Makes it hard to feel bad for them, doesn’t it? I mean, hey, anyone that’s not only stupid enough to pay a contractor a profit on weapons development is pretty damn stupid, but to pay them more for development than on actual weapons production, that’s the height of stupidity. Anyone that stupid does not deserve to keep their money. These contractors should steal it from them. They are doing these stupid people a favor by taking their money.

  18. Mark Collins 21 January, 2011 at 4:10 pm #

    Meanwhile, see the second part of this post at the Canadian Defence & Foreign Affairs Institute’s “3Ds Blog” for Canadian situation:
    http://www.cdfai.org/the3dsblog/?p=83

    Mark
    Ottawa

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