Equipment Procurement

Next Generation Fighter Capability
Comparison of Costing

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F-35 Home Page

 

Department of National Defence
Program-based Analysis

Cost

Parliamentary Budget Officer
Estimates

ACQUISITION

 

Production
(1)

 

$6.0B CAD uses average unit cost of $75M USD per aircraft, acquired between 2016 and 2022 plus the following:

  • Accounts for predicted U.S. exchange rates
  • F-35A costs obtained from the 2009 Selected Acquisition Report and reflects 2002 dollars adjusted for inflation in the years of delivery.
  • Includes potential modifications such as an Air-to-Air Refuelling Probe and a Drag Chute (development, material and installation)
  • Includes two block upgrades (Block 4 and Block 5) estimated at 2% of acquisition costs per upgrade

2009 Selected Acquisition Report

  • Based on actual production costs
  • Annual validation by 9 partner nations
  • Economies of scale – takes into account high annual production rate
  • Reviewed by Joint Estimating Team
  • Validated by 120 experts - 2010 Technical Baseline Review
  • Actual contract cost of aircraft tracking below all estimates

Research & Development costs borne by US

Acquisition at lowest cost in production during years of maximum annual production of aircraft

 

 

 

 

$6.0B CAD

 

 

 

 

$9.7B USD

 

Unit cost of F-35 A is estimated at $148M USD per aircraft acquired between 2016 and 2022

  • Uses top down, parametric estimate
  • Primarily based on historical costs of fighter aircraft per pound/kilogram
  • Historical data not provided
  • Does not factor economies of scale due to high annual production rate
  • Assumes average unit cost of 2478 aircraft at $128.8M USD using their costing model.
  • Based on a learning curve model with only three data points including unsubstantiated average unit cost
  • No evidence of model validation
  • $1.5B error in the calculation of the learning curve which represents $200M in the calculation of the cost for sustainment

 

Initial Logistics
Set-up
(2)

 

Estimates from the JSF Program Office analysis of the Department of National Defence “Ground Rules and Assumptions” for the sustainment of the Canadian F-35A fleet. Includes detailed estimates for:

  • Initial consumable and capital spares
  • Maintainer and Pilot Training Devices
  • Canada’s contribution to stand up of Global Sustainment System

 

 

 

$1.3B CAD

 

 

 

$1.7B USD

 

Based on 18% of the Parliamentary Budget Officer’s cost estimate for acquisition of $9.7B USD, where 18% appears to be derived from a 2001 academic paper on life cycle cost simulation using a simplified case study presented at a conference

 

Project Management
(3)

 

Resources required to further the project:

  • Staff salaries
  • Office space/equipment
  • Travel

 

 

$0.2B CAD

 

 

$0

 

Not addressed in PBO report

 

Infrastructure
(4)

 

Facility upgrades required at:

  • Main Operating Bases
  • Deployed Operating Bases
  • Forward Operating Locations

 

$0.4B CAD

 

$0

 

Not addressed in PBO report

 

Weapons
(5)

 

Requirement to provide an initial combat capability to include:

  • Air-to-Air weapons
  • Air-to-Surface weapons

 

 

$0.3B CAD

 

 

$0

 

Not addressed in PBO report

 

Contingency
(6)

 

Approximately 10% of overall project costs

  • To manage unforecasted changes to the rate of  foreign currency exchange and the rate of inflation
  • To manage unforeseen circumstances or developments within the project

 

 

$0.8B CAD

 

 

$0

 

Not addressed in PBO report

 

TOTAL DND ACQUISITION COSTS

$9.0B CAD

$11.4B USD

TOTAL PBO ESTIMATES
MAINTENANCE

 

Operating and Support
(7)

 

Estimates derived from the Department of National Defence detailed “Ground Rules and Assumptions” for 20 years of in-service support to include:

  • F-35 sustained as a global fleet of 3000+ aircraft with unprecedented economies of scale including shared non-recurring costs
  • Annual sustainment costs of $250-$300M per year which is equivalent to other modern fighter aircraft
  • 20 years for in-service support, logistic support, software reprogramming

 

 

 

 

$5.7B CAD

 

 

 

 

 

 

$14.0B USD

 

 

 

Based on an annual cost (for 30 years) of 6.4% of the Parliamentary Budget Officer’s cost estimate for acquisition of $9.7B USD

  • The PBO states that “Although the data that is publicly available is not sufficient to form the basis of a model as that used to forecast acquisition costs, to the extent that the data is available, the percentages returned by this model are believed to be reasonable.”  However, the 6.4% is based on unspecified data and an unknown cost estimating relationship model.

 

Overhaul and Upgrade
(8)

 

F-35 approach to upgrades and follow-on development:

  • Software upgrade every two years and hardware upgrade every four years
  • Upgrades undertaken collectively and applied to global fleet with non-recurring engineering costs shared amongst F-35 operators achieving economies of scale when sourcing/contracting equipment

 

 

$0
**already included in acquisition costs at (1) and Operating & Support (7)

 

 

 

$3.9B USD

 

PBO using traditional approach to upgrades and follow-on development:

  • two major overhaul and upgrades (10 and 20 years following delivery)
  • Undertaken by nations individually, thus each nation pays 100% of non-recurring engineering costs and  sources/contracts equipment individually

Based on $30.4M (+/- $5M) per aircraft  X  65 aircraft X 2 upgrades

 

TOTAL PROGRAM COSTS - DND

$14.7B

$29.3B

TOTAL ESTIMATES - PBO

Next Generation Fighter Capability – Project Scope

The objective of the Next Generation Fighter Capability project is to acquire 65 next generation fighters to replace the CF-18 fleet on its retirement so as to maintain a manned fighter capability necessary for the defence of Canada and North America, and for Canadian Forces collective expeditionary operations.

This project will:

  • Acquire a replacement fighter aircraft for the aging CF18 Hornet.  The Department of National Defence will acquire 65 operational aircraft in accordance with the Canada First Defence Strategy, fulfilling a commitment to defend the sovereignty of Canadian airspace, remain a strong and reliable partner in the defence of North America through NORAD, and provide Canada with an effective and modern air capability for international operations;
  • Secure Logistics and Global Sustainment Support.  The Department of National Defence will secure sufficient spares and support equipment, and will participate in the Logistics and Global Sustainment Support concept;
  • Secure Training.  The project will provide initial on-aircraft training for aircrew and maintenance personnel in order to ensure a smooth transition to the new equipment;
  • Secure Documentation.  The project will secure access to all documentation, technical data and licenses required for operations and maintenance;
  • Support Infrastructure Requirements.  The project will support infrastructure enhancements directly attributable to the new fleet, such as upgrades to hangars, maintenance shops and supply stores.  Most enhancements will be related to the security nature of the project;
  • Obtain Upgradeable Simulation Systems.  The project will acquire on-ground aircrew and maintenance training systems to support training requirements for the life of the aircraft; and
  • Acquire Weapons.  Where possible the project will use existing inventory to support assigned missions.  To ensure that the Canadian Forces maintains a capability for high precision target standoff engagement with minimized collateral damage, the Canadian Forces will purchase additional weapons for the fleet, including advanced, network enabled precision weapons.

Definitions

2009 Selected Acquisition Report
All major US defense acquisition programs, including the Joint Strike Fighter Program, report annually to Congress via a Selected Acquisition Report.  These reports include key cost, schedule and technical information.   The Joint Strike Fighter Program Selected Acquisition Report information is summarized and provided to Joint Strike Fighter Program participant nations in a presentation format.  The most recent Selected Acquisition Report information received by Canada is 2009 Selected Acquisition Report which is dated 24 March 2010.     

2010 Technical Baseline Review
In support of a requirement for Nunn-McCurdy Certification, VAdm Venlet was appointed Joint Strike Fighter Program Executive Officer and directed to conduct a Technical Baseline Review of every detail of the program.  The Technical Baseline Review involved 120 technical experts across the full spectrum of activities associated with a program of this size and nature (including manufacturing, aircraft production, flight test, etc.).   The impacts of the Technical Baseline Review on the Joint Strike Fighter Program were announced to the public on 06 January 2011.

Joint Estimating Team
The Joint Estimating Team is a composite of the Secretary of Defense's cost analysis improvement group and estimating teams from each of the US Services.  To date, there have been two (2) such cost reviews of the Joint Strike Fighter Program, JET I and JET II. 

Ground Rules and Assumptions
In order to guide the cost analysis of the Next Generation Fighter Capability project, a set of Ground Rules and Assumptions has been prepared "FOR DISCUSSION AND COSTING PURPOSES ONLY".  The Ground Rules and Assumptions are reviewed and updated regularly.  In due course, the Next Generation Fighter Capability Ground Rules and Assumptions will guide the development of concepts of operations, sustainment, training, security, infrastructure, etc.