Canada set to spend $9-billion on 65 US Fighter Jets - F35

[geogen]

bumtish:

Re your F-15K price quote of $125m?? Can you please list a source for that estimate? That's the most definitive price I've seen. And as usual, please specify... which price is this exactly? The Weapon system cost? The Total Flyaway? The REC flyaway? Thanks in advance. (note: I would quit all support for an F-15E procurement if it can be verified that an F-15K/F-15SG's REC flyaway was as much as LRIP-4's REC - I'm thinking more likely that would be the current Total Flyaway, or the initial Weapon sys cost from early 2000s).

Re: Partner purchases through the USAF, I can't find it the press release at the moment but recall reading of at least one Partner nation wanting to buy from USAF lots, at least during LRIP, it might have been RNLAF? That was the context in which the conjecture was made and if the case, that was the point which raised the question... 'who would pay the difference in such an arrangement if the DoD and Contractor were splitting F-35 cost overruns?'

Regarding that 2010 SAR sheet listing REC 'estimates'... we can already pretty much throw that SAR out the window as just about all estimates 'pre-Summer of 2010', are obsolete going forward. So unfortunately, those are old, pre-conceived Schedule and price estimates which will continue to see revisions in both orders and prices over the duration.

For one thing, even 2012's REC cost quoted there is a little shy of the likely final REC flyaway portion of the Total Procurement. Procurement costs have been HIGHER than originally estimated in 2008. If anything I've been conservative in my estimates.

I recall back in 2010 when awaiting Lot-4's released 'fixed + incentive' revision, I was stating $200m as the eventual PUC. Man, the heck I caught here for even speculating such an absurd and outrageous unit cost. Well, Lot 4's latest official PUC estimate is for over $220m!

For FY14? Expect reduced orders and substantially higher than estimated costs, probably still over $100m for REC. FRP? The whole definition of FRP will be fundamentally changed very soon, watch. Notional FRP, under austere budget environments going forward, will unfortunately be construed very differently than any current expectation is still promoting. Expect substantial revisions to both long-term total buys, annual rates by 2013

It's about acknowledging that the original and current estimates for schedule and price going forward are simply unsustainable and will not be hit - not on the front-end, not on the back-end... nada. Very unfortunate indeed, but it should be evident to any critical analysis - that's where I'm critical... on officials and policymakers missing it so bad and making policy based on miscalculated expectations.

[geogen]

To hb:

Sir, I appreciate you're working knowledge, competency and your professionalism. But you'll just have to trust geogen on this one... estimates from the past have been completely obliterated and proven widely miscalculated. If anything so far, I've been conservative in my assessments - so yes, I've been wrong too.

Regarding 'being proven right, or wrong', it can be assured that nobody bats a 1000 in accuracy on such discussions, well, maybe Spazs does, but I can hold my own and thank you and have a pretty keen understanding of the relevance to US appropriations of the PUC over the URF. Beyond that, we'll have to let history decide the rest as far as how closely the Program follows the current expectations.

I will suggest though, had Congress known back in 2008 what PUC costs would be for FY12 and the pertinent info we have today on the financial state, I can almost guarantee you the Program would have been cancelled by the end of that year.

Unfortunately, the current estimates and expectations are simply unsustainable under austere budgets not even beginning to take hold and as such the 'actual production and costs' will not look anywhere close to what they resemble on paper today and more so, compared to their respective original estimates.

Think about it: with a base budget of $530bn, the USAF is affording 18-22 jets. How many will AF be able to afford then, when the inflation adjusted base budget a few years out is under $500bn and not something like $650bn as was intended to be?? Now try to share budgets with Next-gen Bomber, Tanker replacement, legacy fleet (F-15/16) SLEP and upgrades, upgrades for F-22, increased maintenance for older legacy jets YoY, potential UCAV interest...

Speaking of which, and being serious, not jabbing at you... are there cost estimates for RCAF's upgrading and SLEP Programs required to sustain CF-18 until 2025 is it now? Have such budgets been funded and approved separate from the hornet replacement budget?

But with respect to the future CF-35, it must be understood that the current estimates for the 'REC' portion of Procurement will change according to organic Cost increases above current estimates as well as due to substantial reductions in total volume (less than 3,150) and annual buy rates (less than 180 +/- per yr FRP).

Very unfortunately and I truly wish it weren't the case... but there is just no evidence that I can see thus far to point at Procurement costs Canada is expecting. (be they REC flyaway or with rest of Procurement, ie non-recurring, ancillary, Peculiar ground support equipment for engine, airframe and avionics which are included in a procurement, tech pubs, or initial spares which come as part of a procurement).

Granted, Canada might very well separate out what's called the Integrated Logistical Support (ILS) portion of her aircraft Procurement which is normally included in the total Procurement Cost and add it to another cost line, I'll accept that. But truly, which other Procurement cost descriptions does Canada use other than the simplest REC? Is there some variation of Weapon system cost? Total Flyaway?

[hotrampphotography]

Speaking of which, and being serious, not jabbing at you... are there cost estimates for RCAF's upgrading and SLEP Programs required to sustain CF-18 until 2025 is it now? Have such budgets been funded and approved separate from the hornet replacement budget

For the record, in the post that I listed that information in, there were ZERO cost incursions for any potential upgrades as the upgrades are not necessary. The lifespan calculations were based on the upgrades performed through 2009 which will see some of the current fleet of Hornets - those procured in 1986 and later - to be able to remain in service until approximately 2025 as they will have their flying hours reduced as a result of the procurement of the F-35.

In all seriousness, I don't see why all of you decide to go around in circles about a per unit cost when the Government has allotted $9B to the purchase of 65 a/c + spares + weaponry + training. The cost per unit is a moot point.

As to those who think or believe that another airframe can meet our needs, even the PBO - the harshest critic of the program - admitted that the F-35 is the only plane that meets the criteria set out by the RCAF.

[SpudmanWP]

One thing to keep in mind is that the Canadian cost is in CY$2002 USD not BY$ USD. Given that, the quoted $75 is closer to $94 in 2014 and $100 in 2016.

[markottawa]

Follow the Canadian debate (and a lot more) at the Canadian Defence & Foreign Affairs Institute's "3Ds Blog":
http://www.cdfai.org/the3dsblog/?cat=20

Mark
Ottawa

[luke_sandoz]

nice blog Mark . . seems to be at least one side of the Canadian debate, but it sure looks like you have it in for the F-35.

What's your beef with the plane, other than cost & sched ?

[markottawa]

luke sandoz: Not much --other than our government's exceeding economy with the truth. Plus the RCAF is most unlikely to engage in "first day of war" attacks through and against heavy and effective air defences, the F-35's main rationale; and stealth is unnecessary for the continental air defence mission (our fighters' first priority)--incoming bombers don't use radar to detect approaching fighters as it would give their own position away.

And I do give the government's (pathetic) position in many posts, e.g. second comment here,
http://www.cdfai.org/the3dsblog/?p=590

and first comment here:
http://www.cdfai.org/the3dsblog/?p=583

Mark
Ottawa

[geogen]

Hotrampphoto:

Thanks for that info and reply. Understand, I'm only interested in trying to piece together RCAF's recap puzzle, as it has eluded me on some of these finer points and a few things just didn't seem to add up. I guess I'll just put a potential question mark on not seeing a requirement for further avionics upgrades for those birds now slated to operate until 2025. It would just seem that there might be some form of unintended modernization-gap perhaps between the 2016-2021 time frame given that the fleet was originally intended to be fully recapitalized by then?

(note: I'm assessing the buy year 2018 to include 9 units delivered in 2020 if correct(?) would form part of the first IOC unit by 2021?)

Regarding the 'Unit price' issue, I'm only 'going around in circles on it' because it's brought up all the time by the contractor as an estimated $65-$75m per unit jet for sale which, I'm sorry Spud, but I'll have to borrow your input there, would seem to be a bit misleading, given it might be closer to a $100m estimate in TY dollars (REC Flyaway). wouldn't you agree? Which could lead into a follow up query, if the supposed $9Bn Procurement budget is also in 2002 dollars? Or in 2011 dollars, or Then Year dollars, etc?

So for discussion purposes let's crunch some numbers... a best case REC flyaway (assuming few reductions in annual orders by the 2017-2018 FRP time frame) could be about $100m... add about 20% to give the Total flyaway at around $120... add for example only - about $11m for PGSE equipment, Peculiar Training equipment and tech pubs... and lastly say about $9m for initial spares? That would give a unit procurement of about $140m ea, assuming that the typically included ILS portion of procurement at perhaps $5mil per jet would be added to another line item expense in Canadian accounting practice. So Total conjecture as the costs would end up being priced in somewhere, but let's call it roughly $140m for Canadian Procurement sake, given that the officially 'estimated' costs are spot on going forward, and taking into account minimal changes to buy rates under FRP.

Well how bout it, forget a hundred mil, let's call that best estimate an even $9bn in 2016 dollars? But now, is that accurate info really as stated, regarding 'spares, training and weapons' also being included in the $9bn? Spares meaning longer-term spares in addition to the initial included in typical procurement/delivery? And Training in meaning multi-year pilot/crew training ? Weapons meaning war stock, or just initial AAM loadout?

I guess the open argument could honestly and fairly be debated then... whether accurate or inaccurate, I'd just have to support the notion that the $9bn price tag is definitely debatable especially when considering variables which might indeed alter pricing.

[spazsinbad]

geogen highlights (perhaps unintentionally) some 'peculiarities' about the F-35 training system and publications "...Peculiar Training equipment and tech pubs..."

There are stories (don't believe any have made it so far to this forum) out there about whether or not Canadian F-35A pilots/maintainers will train in FLA or not (no brainer eh). Yes they will have training equipment/simulators in CanukLand as highlighted about USMC F-35 new hangars & stuff recently.

I would suggest that most 'tech pubs' will be computer based for easy amendment etc. Not much cost there (compared to the mountains of paper publication pages/manuals in the past) methinks.
_________________

Fighter pilots to train in U.S., say documents
Move raises questions about the future of CFB Cold Lake, Alberta
The Canadian Press Posted: Nov 4, 2011

http://www.cbc.ca/news/canada/edmonton/ ... ining.html

"...Defence Department documents show that all countries buying F-35s are expected to use a training centre that manufacturer Lockheed Martin has set up at Eglin Air Force Base.

The Defence Department insists no final decisions on training have been made.

However, Air Force briefings obtained by The Canadian Press suggest there may be no pilot training in Canada..."

[hb_pencil]

Speaking of which, and being serious, not jabbing at you... are there cost estimates for RCAF's upgrading and SLEP Programs required to sustain CF-18 until 2025 is it now? Have such budgets been funded and approved separate from the hornet replacement budget

For the record, in the post that I listed that information in, there were ZERO cost incursions for any potential upgrades as the upgrades are not necessary. The lifespan calculations were based on the upgrades performed through 2009 which will see some of the current fleet of Hornets - those procured in 1986 and later - to be able to remain in service until approximately 2025 as they will have their flying hours reduced as a result of the procurement of the F-35.

Yes; data from other programs suggest that you can just use the low usage airframes and extend their life. However Canada is already doing that to a certain extent to their current CF-18s.

In all seriousness, I don't see why all of you decide to go around in circles about a per unit cost when the Government has allotted $9B to the purchase of 65 a/c + spares + weaponry + training. The cost per unit is a moot point.

Per unit cost is a very very important indicator for cost analysis. Its the basis or a key part of any estimate. You can extrapolate the costs of spares, support using it and a few other inputs.

[velocityvector]

markottawa: Carrier strike aircraft, ships and occupying land forces with SAMs all would use radar to detect and target approaching Canadian aircraft. Given prospective wars for natural resources, e.g., Falklands/Malvinas conflict, I urge you to take another look at a map of Canada and reconsider your view of Canada's continental air defense mission as you see it.

[hb_pencil]

To hb:

Sir, I appreciate you're working knowledge, competency and your professionalism. But you'll just have to trust geogen on this one... estimates from the past have been completely obliterated and proven widely miscalculated. If anything so far, I've been conservative in my assessments - so yes, I've been wrong too.

Regarding 'being proven right, or wrong', it can be assured that nobody bats a 1000 in accuracy on such discussions, well, maybe Spazs does, but I can hold my own and thank you and have a pretty keen understanding of the relevance to US appropriations of the PUC over the URF. Beyond that, we'll have to let history decide the rest as far as how closely the Program follows the current expectations.

You don't have estimates Geogen, at least not ones that would be recognized by any professional in this field. I wouldn't be able to stick anything you have provided here into a report and call it credible. As far as I can tell you "gut feeling" which is no different to me than going to a psychic and asking them what they think. The credibility of your assertions have already been questioned: In this very thread you claimed that Canada will buy less fighters on the VERY week that the CDS sat in front of a Parliamentary committee and hinted the opposite (and after RCAF documentation was released stating that planners want MORE aircraft.) That failure calls into question the entire credibility of your "guestimates."

Furthermore, stating that cost estimates have been blown apart does not mean your method of guestimates are any more right... they aren't. Part of my work involves understanding how events affect that learning curve. This was a program with ALOT of risk... particularly in avionics, an area that is notoriously riskier than other systems. That is partly where much of the large increases in program cost emerged from. Yet programs at this stage of development tend not to see major cost increases due to re-design. Two key parts of the airframe, the engine and structure are unlikely to see any major revisions and the physical avionics architecture seems to be stable.

I will suggest though, had Congress known back in 2008 what PUC costs would be for FY12 and the pertinent info we have today on the financial state, I can almost guarantee you the Program would have been cancelled by the end of that year.

Unfortunately, the current estimates and expectations are simply unsustainable under austere budgets not even beginning to take hold and as such the 'actual production and costs' will not look anywhere close to what they resemble on paper today and more so, compared to their respective original estimates.

Think about it: with a base budget of $530bn, the USAF is affording 18-22 jets. How many will AF be able to afford then, when the inflation adjusted base budget a few years out is under $500bn and not something like $650bn as was intended to be?? Now try to share budgets with Next-gen Bomber, Tanker replacement, legacy fleet (F-15/16) SLEP and upgrades, upgrades for F-22, increased maintenance for older legacy jets YoY, potential UCAV interest...

Actually, I don't think the price has had that much of an effect. For a defense program the F-35 has pretty strong political support. Its alternate engine got more support than in Congress than the F-22. Sure Congress defunded LRIP Lots, but that was an easy target and would not affect the long term production costs. Congress really takes their cues from the Service Chiefs and other military personnel, and they are unanimous in their support. Even comments by Leon Panetta to the NY Times this weekend suggest that the very last thing he wants to do is to cut F-35 production. Of the priorities you're listing, the F-35 trumps almost every single one of those except maybe UAVs and air to air refueling.

But with respect to the future CF-35, it must be understood that the current estimates for the 'REC' portion of Procurement will change according to organic Cost increases above current estimates as well as due to substantial reductions in total volume (less than 3,150) and annual buy rates (less than 180 +/- per yr FRP).

Oh would you give it up about the reductions in total volume? I've explained why it doesn't matter, and offered corroboration. However you haven't had an effective reply on this. Provide a real explanation or just stop repeating this falsehood. Its what I said before; misleading arguments and resistance to actually realizing when you are wrong.

Furthermore the government has a $5 million dollar buffer built into the REC costs. Thus Canada can have an average REC cost of $80 million, which I think is what it will be at.

Very unfortunately and I truly wish it weren't the case... but there is just no evidence that I can see thus far to point at Procurement costs Canada is expecting. (be they REC flyaway or with rest of Procurement, ie non-recurring, ancillary, Peculiar ground support equipment for engine, airframe and avionics which are included in a procurement, tech pubs, or initial spares which come as part of a procurement).

Granted, Canada might very well separate out what's called the Integrated Logistical Support (ILS) portion of her aircraft Procurement which is normally included in the total Procurement Cost and add it to another cost line, I'll accept that. But truly, which other Procurement cost descriptions does Canada use other than the simplest REC? Is there some variation of Weapon system cost? Total Flyaway?

This is frustrating. I've posted the same link three times that separates all the costs and you fail to read it. For the last time:

http://www.forces.gc.ca/site/pri/2/pro- ... on-eng.asp

[m]

To m:

Agree with you these costs have to be seen as different costs. Or, as you explained, sunk costs.
(Worth investigating, but a very difficult matter)
But one way or another, these costs still have to be paid by the industry, as well as by governments (taxpayers).
How many invested money will be paid by governments depends on percentage agreements with the industry.


Concerning my calculation development costs per country and numbers F35, this was just a view.

In stead of, based on ordered numbers by country, these costs for example can also be seen as invested money per F35, based on the total numbers F35 of the common project.

Just a “ fictive” number, making it easy. Production levelparners: 4000 F35:

o UK: $2.5 billion > $625,000 per F35
o Netherlands: $800 million > $200,000 per F35
o Netherlands: $1.18 billion > $295,000 per F35 ($800 million = €858 million > $1.18 billion, rate: 2011, nov. 6)
o Canada: $150 million > $37,500 per F35


FMS (Level partners don’t pay FMS)

FMS (when the F35 on the shelf): 4.4747% per F35, royalties included
Am I correct? Development costs to be paid, when on the shelf, by not level parters, in that case are within this % as royalties to partners?


URF and APUC & PAUC

Personally I got the impression PUC can hardly be used by other countries.
Not sure of Canada, while the situation of Canada differs, a close (also economical) American neighbor, as compared with for example European countries.

As also stated by the Dutch government, APUC (Average Procurement Unit Cost) and PAUC (Procurement Acquisition Unit Cost ) is not been used by the Dutch Government.
Because this concerns a common prize of all three types and mend for or in a specific (economical) US situation.

In the Netherlands mainly URF - Unit Recurring Flyaway - is or will be used. As far as I know, URF is specifically mend as costs of the “ basic - common - level partners” F35.
A stated by the Government, URF is the average prize of all CTOL F35’s to be produced (level partners)
As reported: URF in 2002 dollars

Concerning URF, in that case my interpretation would be, only basically the same F35 and thus also basically a same prize.


Canadian figures

I am not sure where you are right or wrong concerning Canadian figures, but there are some questions concerning Canadian figures.
This year the Dutch government did a request to Canada to explain their figures.
Have to search for what is/was not understood exactly by the government and the Dutch National Audit Office.


International cooperation between audit institutions

Since 2005 the supreme audit institutions (SAIs) of the countries participating in the JSF programme have held an annual conference.
The JSF SAI conference is intended to encourage the exchange of information
between audit institutions and identify topics for joint or individual audits.
The Netherlands Court of Audit was the initiator of this conference in 2005 and chair in 2005 and 2006.
The chair was held by the Norwegian SAI in 2007 and 2008, and the British SAI in 2009.

JSF SAI conference 2010

The sixth JSF SAI conference was held on 28 and 29 September 2010 and chaired by the Turkish audit institution.
Other participants were the audit institutions from Canada, Norway, Denmark, Italy and the Netherlands.
The American and Australian institutions did not attend. At the conference the participating audit institutions described the situation regarding participation in the JSF programme in their countries.

(2011: Chaired by Canada, sept.)



May be Canada has already audited replacement, but last year was not yet been done.

Quote: Report Dutch National Audit Office (2011, March)

The Canadian government stated on 16 July 2010 that Canada will procure 65 JSF aircraft of the CTOL variant.
The Canadian Air Force will bring the JSF aircraft into service from 2016 on.
However, the letter from the Minister of Defence of 7 January 2011 states that Canada has slowed down the orders (Ministry of Defence, 2011).

The Canadian SAI has not performed specific audits on the replacement of the current CF-18 Hornet.
The Canadian SAI is planning to perform an audit on the procurement of fighter aircraft

Report Monitoring the Replacement of the F-16 PDF, 1082 kB

[bumtish]

Geogen,

F-15K cost. There is no definitive official unit cost. Here's the circumstances from the 2002 contract for 40 F-15K at $4.2B = $105M (CY2002) ea, and $130M ea (CY2011, westegg). The contract was split to Boeing for the air vehicles ($3.6B) the engines in a separate contract and radars, helmet-mounted sights, with some other, unrelated, items. You can find some of the avionics in this DSCA notification (40 radars, 60 helmet sights), which is only a part of the notification.

http://www.dsca.mil/PressReleases/36-b/ ... 1korea.htm

It's probably possible to find the rest searching through FMS contracts awards and Boeing press releases to investors, but I'll be damned if I have the time to that! EDIT: A quick Google-foo on the KFX-2 and Singapore acquisitions suggest an 2011 F-15"E" UPC of c. $100M.

Korea runs their support and sustainment throught separate contracts.

In short, I submit that the $130M is an UPC - I shaved off $5M (initial spares, support) to compare to a F-35A Total Flyaway, you may disagree on this amount, but my point was that the unit cost curves are crossing.

As to the SAR - the learning curve models are widely used and considered a very reliable and established method. Of course there is variability from pace of ramp-up and rates, which you point out, however, this does not invalidate the principle and fidelity of the model. Cost variance is from a partner perspective mostly affected by ramp-up and currency exchange rates. What the model tells you, that despite the short-term fluctuations - outliers from external forcing (Ramp-up, concurrency blk1-bl3 fix) which you point to as proof, it will go down to the $60M REC, with more conservative $65M REC, both BY2002.

Post ramp-up and with 80/yr for USAF, 50/yr for USN and a minimum of 10-20 partner buys/yr at FRP, it is most likely to hit that mark. The model needs a rate of 140-150 to reach that goal. At this point, the REC/WSC(UPC is totally independent from concurrence type and other costs related to SDD/concurrency.

[SpudmanWP]

More clarification is apparently needed.

A. The Canadian CY2002 $75 quote is larger than LM's CY2010 $65 number for three main reasons:
..1. It is full Flyaway, not REC flyaway as in LM's number.
..2. It includes a 4% buffer that covers both the Blk4 and Blk5 upgrades
..3. It includes development and acquisition funds for both the P&D refueling and the Drag Chute options.

B. The last official DOC that I have seen says that Canada will plan on pilot training in Eglin.