US Defense is still getting less at higher costs and the F35 is still the loss leader

United States Government Accountability Office provides its latest 194 page report on US defence acquisitions. Over the past year, the overall size of DOD’s major defense acquisition program portfolio decreased, from 80 programs to 78, while the estimated cost has decreased by $7.6 billion. The size and cost of the portfolio is currently the lowest in a decade. The decrease in current portfolio cost is due primarily to significant quantity decreases on two programs—most other programs actually experienced a cost increase over the past year. The average time to deliver initial capability to the warfighter also increased by over 1 month. Forty-one programs in the portfolio lost buying power during the past year resulting in $5.3 billion in additional costs, a contrast to the buying power gains seen in GAO’s prior assessments. The F-35, the costliest program in the portfolio, epitomizes this loss in buying power as its costs have risen over the past year without any change in quantity, meaning it is paying more for the same amount of capability.

If the cost and schedule performance data of the F-35 is removed, the 2014 portfolio’s performance improves. Since joining the portfolio in 2001, F-35 has been the costliest program in the portfolio while also experiencing approximately $113 billion in cost growth, more than any other program in the current portfolio. The program has also experienced a significant loss in buying power as this cost growth occurred despite quantities dropping by more than 400 aircraft since the start of system development.

When looking at total cost, the F-35 currently accounts for almost one quarter, or more than $335 billion, of the total estimated development and procurement cost of the portfolio. In addition, among the 78 programs in the current portfolio, it has the largest amount of funding remaining for development and procurement. As we have previously concluded, there are risks facing the program which may result in additional cost growth and schedule delays.

Since starting development in 2001, the F-35 program has invested billions of dollars and procured 179 low-rate production aircraft for the United States. However, key gaps in product knowledge persist. One of the critical technologies—the aircraft prognostic and health management system—is not mature and the program continues to experience design changes. Developmental testing is progressing, but much of the testing remains, which will likely drive more changes. While manufacturing efforts remain steady, less than 40 percent of the program’s critical manufacturing processes are mature—despite the 110 aircraft produced—and problems with the aircraft’s engine have delayed aircraft deliveries and testing. Software development and testing remains a significant risk. Further delays in development may put future milestones at risk.

Canada breathes a sigh of relief that they decided to delay purchase of 65 F35s

Canada is happy they have a wait-and-see approach toward the F-35 stealth fighter.

Canada’s first F-35s were supposed to be delivered this year. But the government put the entire project on hold at the end of 2012 after Canadians discovered the planes would cost more than $45 billion to own and operate over the next three decades. The government had initially pegged the cost at $16 billion. In the fall of 2014, Canada decided to spend $400 million to extend the life of Canada’s CF-18 fighter jets past 2020, which is when they were slated to be retired.

Canada currently has six CF-18s patrolling against Russian forces actions in Lithuania and the Baltic States.

SOURCES – GAO, Ottawa Citizen

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