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  • JSF Multi-Year Buy - Dead or Just Resting?
    Posted by Bill Sweetman 11:03 AM on Oct 05, 2009

    A plan for a five-year, eight-nation, 368-aircraft order for Joint Strike Fighters is dead, according to a senior Australian government official. According to Australian Financial Review (subscription site) Defence Management Organization chief executive Stephen Gumley has told Australia's parliament that a lack of interest among partners, plus US procurement rules, has killed the plan. (To "cruel" something, in Australia, means approximately the same as "kibosh" - its implication is terminal.)

    Gumley also told AFR that, as a result, Australia may defer its main JSF orders by two years, to 2015 (with delivery in 2017) to avoid buying high-priced low-rate initial production aircraft.

    Although Lockheed Martin says that the team is still working on the consortium buy, Gumley's statement - from a senior, pro-JSF customer representative - does not read like a negotiating position.

    The idea of a consortium buy was mooted in early 2007. It was designed to address an emerging problem:  many of the industrial partners need most or all of their aircraft early. As a result, many of their aircraft would be ordered under the Low Rate Initial Production (LRIP) phase rather than from the much less expensive multi-year production (MYP) stage - which can't, under US law, begin until operational testing has finished.

    The consortium buy would have leveled out the price over time, and would have given the international partners some reward for their contribution to stabilizing the early production program: unlike US buys, these would represent firm advance commitments for deliveries as much as seven years from the contract date.


    blog post photo
    2008 consortium buy plan

    The plan would also have included penalties. Any customer canceling or delaying deliveries would have to compensate the other members of the consortium for the increased unit costs that would result from their backsliding.

    The consortium buy plan has been through several iterations. An early plan foundered in May 2008 because partners did not like the idea that they were locked into penalty payments but the US was not. A revised plan that also locked US buys into place was scotched because Congress was unlikely to accept it. An August 2008 revision ran into the same problem.

    If the consortium buy does not go ahead, the next question is what impact it will have on costs. Gumley predicts that customers will delay their orders - reducing production rates and increasing unit costs in the later LRIP years. Some governments, including the Netherlands and Norway, have also promised low, fixed prices to their parliaments and voters, based on the multi-nation buy. Ministers such as the Netherlands' Jack de Vries may have some explaining to do.

    Tags: ar99, jst, australia

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