BlackFive

An F-35 Lightning II maneuvers overhead during its first flight at Eglin Air Force Base, April 23, 2009. The jet is a fifth generation, single engine, stealth capable strike fighter and can perform close air support, tactical bombing and air defense missions.

If you've been paying attention to the battle for US air dominance, you might be, like me, a little wary of the comparisons and the rhetoric.  Since there are numbers flying all over the place with regards to cost (mostly from PR firms), I thought we ought to take a look at what the REAL cost of an F-35 is...and we'll look at it in the same terms that the DoD/USAF use to evaluate the bids.

First, we need to talk in terms of 2010 dollars.  We’re talking about what is known as the Unit Recurring Fly Away cost (URF) for a conventional take-off and landing (CTOL) variant (the type the Air Force is buying).  In 2010 terms, it will cost about $65 million dollars.
 
Whoa, wait a minute, you say, I’ve seen costs as high as $110 million a copy!

I’m sure you have.  But they don’t reflect the URF.  Instead they may reflect the Total Ownership Cost (TOC) - the cost of everything necessary to operate the aircraft over the span of its service life - or any of a number of other costs used in the project for various purposes, but it won’t reflect the one we should be most concerned with, the URF.
 
Confused yet?
 
Think of buying a new car.  You go in, look at the sticker price and ask the sales person, “how much will it cost me to drive this car off the lot?”   He or she is going to give you a cost at or near the sticker price.  You’re going to negotiate it down and, if you strike a deal, you’ll drive it off the lot for that negotiated price.  That’s the URF in a nutshell.

With me so far?
 
But does that cost reflect the TOC? 

Of course not. 

Gas and oil.  Extra cost.  Maintenance.  Extra cost.  Extended warranty.  Extra cost.  Parts.  Extra cost. Labor.  Extra cost.   New tires.  Extra cost. Etc. In fact, if you take all of those costs associated with owning, driving and maintaining the car over the years you own it you’ll find that TOC to be significantly higher than the cost to drive it off the lot (URF).

Of course that’s the case for any fighter aircraft.  However, in the media, the price you see applied to the F-35 may reflect the higher TOC and not the URF.  When such a cost basis is used without identifying it, you end up comparing apples and pomegranates.  The TOC is not what it will cost to fly the plane off the lot.

As an example, imagine the original cost of the B-52.  Now imagine – with the aircraft having been in constant service for 50 years or more – the total cost of ownership.   The difference is going be huge.  We could easily see a difference of several hundred million dollars per aircraft between URF and TOC as fuel, maintenance, upgrades, modifications, parts, labor, crew costs, and basing costs are all added to the aircraft’s original price, correct?  Imagine seeing the TOC for a B-52 represented as the URF.  You’d say “no way, we can’t afford it”.
 
So, given that understanding, what will it cost us to fly the aircraft off the dealer’s lot (URF)?  Again, in 2010 dollars, assuming all the aircraft originally contracted for are bought (2,443) and production can begin in a timely manner, a CTOL variant F-35 is going to cost $65 million to fly away.  The Marine variant, the STOVL (Short Take Off Vertical Landing) will be in the $75 million range and the CV version (more robust frame/undercarriage built for carrier operations) for the Navy in the $70ish million range. 
I briefly talked about other versions of cost associated with this or any other defense project.  They are only meaningful within the government/defense procurement community and are used in reporting and monitoring each program within that community.  They have no real relevance to the URF but are sometimes quoted in the media as reflecting that price.  They provide another example of the wildly divergent costs we see.

As an example, one cost used is APUC or Average Process Unit Cost.  Essentially they take the URF and add some other costs to it (see chart) to arrive at that cost.  There’s another called PAUC or Program Acquisition Unit Cost.  Again, in the case of PAUC, URF has some selected costs added to it to arrive atthe particular cost. They’re not costs we should be concerned with as they deal more with program costs over the life of the aircraft (as well as some R &D costs) than the eventual cost per plane to fly away. If you see a cost of $93 million per copy floating around out there, for instance, it is likely the PAUC cost as reflected in the chart. Again, that’s not the cost per plane to fly it away (URF).

Finally, just because it is interesting, let’s talk about something else associated with cost and also not properly compared.

So, I think we can agree that we can fly an Air Force F-35 CTOL away for about $65 million (2010 dollars). But I can fly a 4th generation fighter away for, say, $50 million – why not build a whole bunch of those for less money?

Two reasons – they’re significantly inferior in technology and not very stealthy at all. And that $50 million really doesn’t reflect the true cost – not if you want to do anything with the aircraft other than just fly it around. The F-35 as delivered is mission capable. That means it comes with everything already on board to fly missions in combat. It’s combat ready. The 4th generation fighter? Extra cost is required to make it combat ready. You get a basic 4th generation fighter for the quoted price and then have to buy, at extra cost, what is necessary to configure it for combat. Once you pay to configure a 4th gen fighter to be mission capable, i.e., buy what it needs to do its mission in combat, its cost is pretty close to the same as a CTOL F-35 and it is still an inferior aircraft.

Bottom Line: The actual cost to get a new Air Force F-35 into service is about $65 million (2010 dollars). Claims of higher costs for an Air Force F-35 are usually misleading attempts to include years of operating and maintenance costs (costs applicable to all aircraft across the board regardless of generation) in the purchase price.

Just thought that you should be aware of that.

Let's hear what you think about this in the Comments.

Update 1:  Just heard from the House Armed Services Committee on this post:

Just to piggyback, the Committee is expected to pass an Amendment to the National Defense Authorization Act today that authorizes GE-Rolls Royce to self fund  their F35 engine. Since the F35 contract will last 3 decades, the Pentagon originally planned for an annual competition for sustainment and procurement costs. The short term cost of developing the GE engine was deemed too high by the Defense Department, and they canceled the program, ignoring the hazards in handing a $1 billion engine contract to a monopoly. With the Pratt & Whitney engine is already $3.5 billion over budget and wrought with thrust and nozzle problems, the General Electric proposal to pay out of pocket couldn’t have come at a better time.

So in the spirit of your post, today Congress is in a unique position to significantly mitigate the costs of the F-35 program, with no further financial obligation from the Pentagon. We get taxpayer free competition for JSF engine contracts, avoid the pitfalls of a $100 billion Pratt & Whitney monopoly that’s already taking Congress to the bank, keep thousands of employees working, and finally will start to reap the rewards of industry-led acquisition reform. In short, the precise type of reform that the Pentagon and Congress have been pleading with the defense industry to institute for years.

John Noonan
Speechwriter & Deputy Communications Director
U.S. House Armed Services Committee

Update 2:  Got a question about how much the ball park cost for upgrading a 4th gen fighter to combat mission capable?

$10-15,000,000 which makes it about the same cost as the F35.  But you don't get the next gen technology, weapons, capabilities, etc. for that price.

 Update May 14:  I respond to criticism from Bill Sweetman at Aviation Week.

Update May 15:  I have received a few emails about the chart being incorrect.   Here is one good post about the perceived error.  I don't believe it is an error.  I could be wrong, but here is why I think some folks are misunderstanding it.

In my opinion, APUC and PAUC both contain exactly what they should.

What some people reading the chart don't seem to understand is if you take you finger and run it along the line of a particular cost - where the line stops is above the column that particular cost adds to what's already to its left.

In other words, if you look a PUAC, it adds RTD&E plus MILCON to the APUC, weapons system cost, total fly away cost and URF costs to its left.   The cost structure builds as you go to the right.  TOC then adds the things in the final column to everything (cost) to its left.

PAUC is defined as:

PAUC (Program Acquisition Unit Cost) = RDT&E $ + Procurement $ + unique MILCON $ (in program base year dollars)/Total procurement quantity + RDT&E prototypes that are production reps used for IOT&E (if any)

Run your finger over the PAUC line and it stops right above the column that says "RTD&E" and "MILCON".

I hope that helps.  It's a difficult issue and I am trying to explain costs as clearly as I can.

I know that doesn't matter to some who are against the F35 for various efficacy reasons, but let's all be clear about the cost.