Australia can expect to pay no more than $75 million for each new Joint Strike Fighter (JSF) - substantially less than some estimates.

Dr Stephen Gumley, chief executive of Defence Materiel Organisation (DMO), said he regarded JSF as affordable.

"I would be surprised that we would be paying more than about 75 million Aussie dollars a copy for the aircraft, measured in 2008 dollars," he told a parliamentary committee.

Dr Gumley said a final decision on JSF numbers would be made in the new Defence White Paper to be released later this year.

But purchasing 100 aircraft would cost $7.5 billion, well within the total project upper limit cost of $12-14 billion, he said.

"As I sit here today, JSF is affordable. I don't have any significant issues with the cost," he said.

The Lockheed Martin F-35 Lightning Joint Strike Fighter is an advanced, stealthy, multi-role aircraft which in Australian service would replace ageing F-111 bombers and F/A-18 fighters from around the middle of next decade.

Australia is considering buying 100 aircraft but as yet has not signed a contract.

The aircraft remains in development and there's been considerable speculation from many quarters about possible delays and cost blowouts. A report by the Australian Strategic Policy Institute in May pointed to a possible 50 per cent cost increase.

Cost estimates have ranged as high as $120 million.

Dr Gumley said there was much confusion about the likely JSF price and it all depended on what variant of the aircraft Australia actually purchased in what year and at what foreign exchange rate.

He said Lockheed was now seeking to determine a fixed price for a consortium buy so that all aircraft cost the same for the first five or six years of production.

Unlike civilian aircraft programs where early buyers could expect a discount to get the production line running, military aircraft procured early cost much more, he said.

That could be up to three times the cost of an aircraft purchased a few years later, once the production line had achieved maximum efficiency.

Dr Gumley said that meant there was a commercial incentive for the 11 proposed JSF customers, including Australia, to rush to the back of the queue, a move which would mean more expensive aircraft for everyone.

"In Australia's case, if we delayed a couple of years and we don't get this consortium buying or level pricing, it's a half a billion dollars extra price tag to our taxpayers. We are not playing with small amounts of money," he said.

"This is a serious commercial negotiation we have to have."

Dr Gumley described this as the prisoner's dilemma.

"If you all act together, everybody saves money. As soon as people start breaking ranks, it costs everybody money," he said.

Dr Gumley said the development costs had risen and it was likely all partner nations would be asked to contribute.

He said in Australia's case that would be under $1 million per aircraft.

"So on $75 million (per aircraft) that is not a huge amount," he said.

Dr Gumley said he saw no problems with JSF on its delivery schedule or its ultimate capability.

He said the major delay added some two years to shed excess weight but that was now well behind.

Dr Gumley said the government's decision to buy 24 Super Hornets was the "master risk mitigator" against delays in delivery of the JSF.

"Just supposing a disaster happened - something blew up in the aircraft and back to the drawing board and you had another two year delay - Australia is getting a squadron of Super Hornets to cover a capability gap that doesn't exist now but could exist if something unexpected or disastrous happened," he said.

Opposition defence spokesman Nick Minchin said the DMO had confirmed what Defence Minister Joel Fitzgibbon would not - that the JSF would be part of Australia's future air combat capability.

"It is clear that Labor will support the coalition's decision to acquire the JSF and this confirmation from the DMO makes a mockery of Mr Fitzgibbon's junket to the US to talk tough with the JSF's prime contractor, Lockheed Martin," Senator Minchin said.

"Mr Fitzgibbon has been caught out - his public chest thumping on this issue has been nothing short of shameful and continues to create uncertainty for the RAAF and defence industry."

$75 million (Australian dollars) each for the F-35 Lightning II? Has the U.S. dollar sunk that low?

Dwight, just curious as to when that USD $48 million/copy production estimate was made? Of course, it will be interesting to see if this analysis is relevant according to the said 'estimate' being sound...

Either way, the so-called 'fixed' pricing is one helluva a deal for any buyer and unfortunately, candidate for WTO anti-dumping claims and even anti-trust challenges?? Just a defensive gut feeling, looking at the world trends today, nothing more.. We truly can't be surprised about anything up this alley though.

But US taxpayers will be once again picking up a pretty good tab to offset the deal-making? Hence, being described as 'affordable' is always relative and subject to further debate/interpretation.

The 2006 estimate on unit cost is $46 million from L-M,, $48.5 M from the GAO. L-M is sticking to that, F-35 is not and cannot be a $48M flyaway aircraft when you average the first say 800 or so in 2008 dollars?

Dwight, I guess first off, it's just a sense that the US-ordered F-35s will not be under such a 'fixed' pricing as is apparently being offered now to vital export markets. (Perhaps I'm wrong, will DoD/services contract under same fixed-price deal, over the course of US's procurement?)

Perhaps by now and say 2015-16 there could be much higher total R&D program costs than the current $40 billion figure (if so revised, will this be added onto FMS bill or figured into future life-cycle bills to partners)? Furthermore, Industry is basing these fixed-export prices to a large extent, based on at least 3,000 F-35 sales world wide?

I just don't see US/LM retro-billing partners in 10-15 yrs from now, if program cost estimates have gone up or estimated total procurement has gone down. Hence, US side will have to assume the bulk of such reformulated/recalibrated costs?

(I will take back my rather extreme WTO related comments; the portrayal of which, do appear over the top).

Thanks for the further break down of this explanation, Dwight. While I understand all this and it will always seem to make sense on paper, I'm just in the camp believing that in the F-35 specific case at least, we're going to see a willingness of Uncle Sam (if I can borrow that) to accept a lower proportionate, expected profit 'fee' from foreign sales, compared to the 'getting down to business US sales'. (Esepcially when the FRP comes into play). That's when the expected US-sale 'fees' will have to kick in to offset the calculated Foreign sale R&D 'peggings' et al.

Your $100 million early unit sale example, lends to this thinking imo. If there's so much confidence of everything working out as expected and estimated, then why not just make the equivalent fixed price deal in 2008 dollars for all US sales? I could very well be wrong, and will always concede, but just seems that Uncle Sam and industry are trying to have it both ways? (With US being the fixed insurance).

You can't because fixed pricing based on averaged costs means that somebody has to finance the losses on the early builds and recoup that from the lower than fixed price latter builds. Currently, that someone is Uncle Sam.

With commercial aviation products -- like an Airbus or Boeing passenger jet for instance -- the company finances the initial losses and profits from latter gains. In military projects, some state or another has to do that.

But basically, notwithstanding the actual, future FRP production costs, the whole 'pegged' $10 million per Foreign sale R&D tab (the total of which could ultimately go much higher than $40b) is a main point contended by the so called 'subsidy' claim. It was probably a bad term to use. Simply said, it should just be said that Uncle Sam will be paying more overall than our friends fixed bills.

It might go way over $40 billion, but there is currently no indications of that. The F-35 program is no cost and on schedule right now. Cost variance is within a few hundred million of budget which is very good considering it is a 40,000 million development program.

Uncle Sam will subsidized the early LRIP deliveries to export customers. But the fixed pricing is -- if they do it right -- lower than the costs in FRP so Uncle Sam will theoretically make money on the deals later on when the export price is higher than US procurement price. Basically, Uncle Sam may be paying $50 million per aircraft for the early 50~60 going overseas, but later on -- in FRP -- Uncle Sam gets about $3~4 million back per aircaft. Doesn't sound like much, but it adds up since there will be a lot more than 50~60 birds going overseas from FRP lots.

(Not saying that's unacceptable or necessarily bad... just trying to raise awareness of this issue for more honest public/govt debate now and supporting the camp that demands more transparency and discussion than seduced F-35 chest thumping).

Like I said and I totally concur with you on this point (and I think were missing each other mostly on our respective level of support/expectation for the total program as currently advertised), i.e. that the foreign customers getting a fixed, early-market price are getting a pretty darn good deal (for those who take it up), compared to what the early-buy (market+) price US taxpayers will be paying for, to cover the subsidized financing of costly up-front production and R&D. (that USA financing Inc will float in order to enable the entire program in the first place).

So the main point (to summarize this often broad debate) is that it's truly premature and incorrect to be calling the F-35 program at this early stage - 'affordable'. We have to wait at least 8 yrs to get a better, more informed analysis. (And on this point is where I have a couple wagers running with a couple members here )

It is just a premature to call the F-35 as very expensive as many F-35 Critics do almost daily................