F-35 programme investigates $442 billion operations bill

Washington DC
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Understanding the drivers behind a projected $442 billion bill to operate and sustain the US-owned Lockheed Martin F-35 fleet is the focus of a sweeping new review.

Applying the same rigour as the year-long technical baseline review (TBR), which led to a restructuring of development and early production plans, the F-35 joint programme will complete a detailed design review of the stealth fighter's logistics requirements, says Vice Adm David Venlet, F-35 programme executive officer.

"The [armed] services see these estimates and it makes their knees weak going forward, as it does anybody's," Venlet told reporters in a press conference on 21 April.

A key target is reducing the $442 billion estimate at fiscal year 2002 inflation values for F-35 operations and sustainment costs. That cost projection was produced in late 2009 by the US Naval Air Systems Command (NAVAIR), which was then led by Venlet.

The NAVAIR study estimates that the F-35 will cost $30,700 per hour to fly, a 40% increase compared to $18,900 per hour for the Boeing F/A-18A-D and McDonnell Douglas AV-8B.

Venlet says all previous studies on F-35 operations and sustainment costs have suffered from not having "actual" values derived from operational aircraft. "Frankly, we're in that same condition today," he says.

The first low-rate initial production version of the F-35 is "on the threshold" of delivery to the US Air Force's training base at Eglin AFB, Florida, Venlet says.

In the meantime, the programme office can still use estimating models to analyse and illuminate the causes of the F-35's higher operating and sustainment costs, he says.

Venlet emphasises that the operations and sustainment review does not mean the programme is "walking away" from Lockheed's performance-based logistics system.

But programme officials will review the "balance of organic support in US depots with industry support", Venlet says.

The programme also will consider the cost of the F-35's existing basing structure, as the number of bases drives costs associated with simulators and maintenance infrastructure, he says.

Similar to the TBR, the new cost review will illuminate choices the services can make to lower the cost of operating and sustaining the F-35, Venlet says.

"We see that [cost] estimate," Venlet says. "We know that's not the right number. We don't know what the right number is."

Meanwhile, Lockheed has delivered the company's initial proposal for the fifth lot of low-rate initial production, which will set the price on 35 new jets, Venlet says. The submittal starts a potentially months-long negotiating process.

At the same time, the programme also is renegotiating the development contract, which is now billions over cost. A key issue in the pricing talks will be restructuring Lockheed's incentive plan.

Last year, the programme office withheld $614 million in incentive payments to Lockheed. Instead, the programme set five goals in 2010 with $7 million bonus payments attached to each goal. The F-35 achieved one of the five goals, which involved completing first flight of the CF-1 carrier variant.

About 60% of the $614 million withheld last year will be offered as incentive payments to Lockheed over the next few years, with the remainder in negotiation for restructuring, Venlet says.