The newest disagreement between the Pentagon and F-35 prime contractor Lockheed Martin is over the stealthy, single-engine fighter’s estimate cost per flying hour.
CPFH is the sort of standard unit of measure to determine how much it will cost to own an aircraft and use it for its intended purpose. And, for the F-35, it is a critical number as customers estimate how many aircraft they can afford – a number dependent upon the estimated price to operate them.
But, as with the unit cost debates of years ago (remember the Pentagon’s per-unit cost versus Lockheed’s “unit recurring flyaway?) the discussion is not simple.
So, there are two numbers.
In January, Air Force Chief of Staff Gen. Mark Welsh said that his staff and Lockheed Martin were working to come up with a single cost-per-flying-hour figure for the F-35A. The company’s view of the ownership cost differed from that of the Air Force, he said. “It was characterized in a different way, a different format.” Air Force and company officials declined to release the numbers, because they say they are not finalized. Nor have they answered the question of how different the numbers are. The final number is slated for release in the annual selected acquisition report, which will come out in April.
At issue, Welsh says, is getting an “apples to apples” comparison between the estimated F-35A cost and the price of operating legacy aircraft, such as the F-16 and A-10, that it will replace. This is useful for the service to estimate whether and – if so – how much more money is needed to use F-35s than legacy aircraft or if procurement numbers need to be cut to reduce ownership cost.
Lt. Gen. Burt Field, Air Force deputy chief of staff for operations, plans and program, said at this month’s Air Force Association conference in Orlando that he assumes the F-35 is going to be a “little more expensive” than the F-16 to operate. This contradicts the marketing promise of Lockheed Martin. Company officials promised that customers could operate the new aircraft more cheaply than legacy fleets across their life.
Lockheed Martin’s CPFH cost estimate is different than the Air Force’s because the latter includes some items that the company omits. The company – in trying to have a true “apples to apples” comparison – did not include the cost of operating the electro-optical targeting system, for example, or the information technology systems used to support aircraft operations, this industry source says.
This is because the F-16 cost-per-flying-hour figure lacks data on the cost of operating its targeting pods and computer systems. Also skewing the numbers is that the Air Force’s legacy aircraft flying hour accounts are not fully funded, so the cost is below what an optimal value would be. With the F-35 estimate, the service assumes full funding for the accounts.
This is a “work in progress … We agree the cost per flying hour will exceed that of the F-16,” the industry source says, adding that the company expects the anticipated total lifetime cost will be below that of legacy aircraft.
Though the concept of an “apples to apples” goal is a noble one – and useful for customers looking to replace an old fleet, it is a bit of a false argument. If the F-35 cannot operate without the Autonomic Logistics Information System (ALIS) -- which supports part supply, mission planning and aircraft diagnostics – at some point the cost of it needs to be articulated for customers. Perhaps the CPFH number isn’t the right place, but operators are going to want to know what the true price of operating and maintaining their aircraft will be – information technology, targeting systems and all.
Once again, industry officials are arguing that the current “system” at the Pentagon – the one that accounts for developing, buying and operating aircraft – is not well suited to account for the attributes of the tri-service, multinational F-35 program. And, this may well be a valid point. In the case of the F-35, its advanced avionics, targeting systems and situational awareness aids are embedded in the aircraft and, thus, the Air Force includes them in the price. With the F-16 or A-10, though, the aircraft have been upgraded with new capabilities – radios, targeting pods, etc. – that have over time been paid for by other programs (typically – the right radio or targeting pod program). So, the bean counters at the Pentagon don’t necessarily “charge” the aircraft program for these items.
But, while the Pentagon and Lockheed Martin work to hash out an equitable solution to the CPFH conundrum, the issue of a total ownership cost should not be forgotten. Perhaps computers and targeting pods don’t belong in a CPFH line item, but they do need to be exposed and understood for customers – or they run the risk of buying a hot sports car they can only afford to take out on weekends.