Lockheed Martin and the Pentagon had been mulling the latest Selected Acquisition Report numbers in advance of their public release late Monday afternoon, and responded Tuesday with a press conference and news release.
For JSF, the big good news was that there was no big bad news. The fighter dodged the incoming Nunn-McCurdy missile that everyone had predicted, and in fact the overall program cost declined by $981 million, which is a lot of money even though it is only 0.3 per cent of the total.
The program managers took the opportunity to slap the Government Accountability Office around a bit, since the GAO's last report on JSF had projected big cost overruns and delays.
Now, let's take our eyes off the top line for a moment and look at the first level of detail in the SAR. This, as Ian Dury and the Blockheads would put it, is what we find:
The small relative shift in the total cost is the sum of two larger changes: $11 billion in increases, more than offset by $12 billion in savings. But there is a difference between the two numbers. The savings are mostly in the medium-to-far future while the increases are here and now.
About $6.6 billion in overrun is in system development and demonstration (SDD) cost. $2.8 billion is attributable to added costs in propulsion, due to the problems with the F135 engine and increased cost with the lift fan. Another $3.8 billion goes to "SDD flight article costs" - that is, building the prototypes. (Program boss Maj, Gen. C.R. Davis alluded to this in February.) These two alone add up to a 15 per cent jump in SDD, based on the $45.9 billion SDD bill (in 2008 dollars) quoted by the GAO.
In fact, those increases are not far off what the much maligned GAO predicted in March. So there.
(But wait, there's more! The SAR numbers, based on the 2008 budget, take credit for the cancellation of the F136 engine, which Pentagon acquisition chief John Young said in March would cost another $3.5 billion in SDD and procurement. That would make SDD 20 per cent up.)
The savings as listed by the SAR are in procurement and support. They include $7.5 billion in support costs and lowered estimates for labor rates, materials and escalation. Some of these represent the clawing-back of increases in prior-year SARs, and some are attributable to good management, for which congratulations are in order if they are achieved.
However, there is a big wrinkle in a small footnote, which notes that $9.15 billion in JSF money has been shifted from support to non-recurring procurement costs. (Most of this has to do with bringing low rate initial production airplanes to the initial service standard, and installing state-of-the-art electronic components to replace pieces which, by then, will be obsolete.) Without that switch, support costs would have been up and non-recurring procurement would have been down. What emerges, therefore, is that savings in procurement are projected to offset the increases in SDD.
If the savings are realized it is important news for non-US customers. They have typically planned to take all their aircraft in a few years. They want to know that the JSF unit cost is under control, because it would otherwise blow out their national budgets in those years. These numbers say that is the case: and actually that's more important for the JSF than the top-line number.
But there's a big difference between SDD dollars and procurement dollars. If the schedule holds we are more than half-way through SDD (started November 2001, with operational testing of Block 3 due to end in late 2013).
Procurement started in May 2006 with the award of the first long-lead contract for low-rate initial production (LRIP) aircraft: we're two years into a 30-year effort. The crunch for procurement is ahead of us, where the A380 and 787 ran into trouble: as LRIP rates accelerate rapidly year to year while adapting to lessons learned from SDD.
So the picture is not as simple as the press release suggests and (like the title) reflects the sunny optimism of Mr Wilkins Micawber. But it also brings to mind the observations of Mr Dury, a Londoner like Dickens, on the hope that springs eternal, and where it springs next.
