A REVIEW BY THE US Office of the Secretary of Defense (OSD) has concluded that cost overruns on the Lockheed Martin/Boeing F-22 programme could exceed US Air Force projections by $2 billion.
An Air Force Joint Cost Estimating Team (JET) reported in December 1996 that the F-22 programme could overrun its budget by $15 billion - $2 billion in development and $13 billion in production. The OSD review says that the overrun could be as high as $17 billion.
The USAF maintains that an agreement with the contractor team, approved by the US Defense Acquisition Board in January, will eliminate the $13 billion in production overruns by reducing F-22 unit price through initiatives, including production improvements and multi-year procurement. The development shortfall is to be covered by delaying the production ramp-up. "The $15 billion overrun is if we did nothing," says Lockheed Martin.
A USAF Affordability Improvement Model (AIM) team was scheduled to report on the cost-reduction initiatives at the end of February. The AIM team was appointed after the JET report to look in detail at the initiatives proposed to eliminate the $13 billion production-cost growth. These were previously termed "Tier 1" and "Tier 2" initiatives, and were intended to cut $6 billion and $7 billion, respectively, with Tier 1 being "-the easier things to do", explains the USAF. These have now been combined under the cost-reduction initiatives studied by the AIM team.