Washington Watch

Dec. 1, 2009

F-35’s Death Spiral

No new costs have actually been added yet, but the Pentagon acquisition system may be procedurally required to estimate the price of the F-35 program at a level $15 billion higher than had previously been calculated.

That, in turn, could mark the beginning of a vicious cycle in which F-35 quantities are slashed, unit costs go up, leading to more quantity cuts, and then higher unit costs, in a kind of death spiral.

The potential F-35 cost increase was contained in an October report presented to Pentagon acquisition chief Ashton B. Carter. It was prepared by the F-35 joint estimate team, better known as the JET, which comprises experts in program analysis, engineering, and cost estimation from DOD, the Air Force, and the Navy.

Officials familiar with the report said that the JET revealed little progress in the F-35 program since the last such review, concluded in April 2008. However, the methodology of the review equates risk, and therefore cost, to proven aircraft flying qualities and capabilities, as demonstrated in flight tests. Lockheed Martin is behind schedule in accumulating F-35 flight tests, and the JET is obliged by acquisition rules to treat these delays as a symptom of deep problems and an indicator of future cost increases.

The $15 billion figure, confirmed by Pentagon officials, flirts with the $17 billion increase that would denote a breach of the Nunn-McCurdy acquisition law, which says that a program that exceeds its baseline cost by 15 percent or more requires certain certifications be made to Congress that steps are being taken to get costs under control.

If cost or schedule spikes over 25 percent of baseline estimates, the Secretary of Defense must certify that the program is essential, that there is no alternative, and that cost-cutting measures have been put in place. Otherwise, under Nunn-McCurdy, the program must be canceled.

Lockheed Martin officials have previously said the JET methodology doesn’t give enough credit for new techniques in risk reduction, such as verifying software and sensors on its flying avionics laboratory. The JET also assumes that the concurrency of building production aircraft before flight testing is complete will result in costly changes to production if problems are discovered. So far, that hasn’t proved to be the case.

“We disagree with their conclusions,” Lockheed Martin spokesman John R. Kent said in November, because they are “driven by pessimistic assumptions regarding the time required to deliver the remaining [development] aircraft, complete development, and conduct the flight-test campaign.”

While Lockheed Martin acknowledged “modest risks to our cost and schedule baselines exist, … we envision no scenario that would justify a substantial delay to completion of development or transition to production milestones. We are on track” to fielding the F-35, he said. Kent asserted that “engineering development is 85 percent complete and yielding outstanding results in early ground and flight tests, compared to legacy” fighters of the F-15 and F-16 vintage.

Flight tests have been delayed because of the need to redesign the way the F-35’s wing is assembled, creating a several-month gap in deliveries. Other causes range from small technical glitches to a run of unusually bad weather for testing.

Marine Corps Brig. Gen. David R. Heinz—the program executive officer and now a major general—told reporters in June that the wing fix is in and the program should be “caught up” in late 2011.

The Pentagon confronted the rumored JET results in a regular late October press briefing. Defense Department chief spokesman Geoffrey S. Morrell said that it is the JET’s “job to be pessimistic, and we appreciate that.” However, he said Defense Secretary Robert M. Gates would seek “the sweet spot” between the JET’s worst-case assessment and that of Heinz’s program office, “which is generally much more optimistic.”

No Handshake on C-17s

The Air Force should think about how it sets requirements and then coordinate how it communicates those needs to Congress if it wants to avoid confusion, according to the Pentagon’s inspector general.

That was the upshot of an IG report sent to the Air Force for comment in early October. The audit was requested by Sen. John McCain (R-Ariz.), who launched it two years ago because he thought the Air Force was sending mixed messages to Congress and improper messages to Boeing about how many C-17s the service actually needed. The Air Force has until early this month to comment on the audit.

McCain was upset because he felt the Air Force was lobbying Congress in late 2007 to add more C-17s to its spending plan, even though it was not formally asking for the aircraft in its budget. More C-17s appeared on the Air Force’s $18.7 billion “unfunded requirements list,” which subsequently went to Congress after the Fiscal 2009 budget request.

According to Senate Armed Services Committee staff and Pentagon officials, the IG audit, not yet released, concluded that the Air Force didn’t improperly communicate with Congress about the C-17 in 2007, although the IG noted that some briefings about the airlift situation, given to Congress, weren’t in harmony with the Air Force’s plans not to ask for any more of the airlifters. The Air Force discussed with members various mixes of new C-17s and old C-5s that would be upgraded, but no laws were broken, the IG decided.

McCain had openly wondered why Boeing had chosen, at its own expense, to keep the C-17 production line going in the absence (then) of any international orders or official budget requirement by the Air Force. He surmised that there had been a secret handshake deal with the company, and that it had been improper, and asked the IG to investigate. Then-Air Force Secretary Michael W. Wynne responded at the time that Boeing had simply sized up the political situation, concluded Congress would add more of the aircraft, and bet accordingly.

In the new audit, the IG said Boeing’s unsolicited proposal for 30 more C-17s was just that: unsolicited.

McCain told Bloomberg News in October that, at the time of his request for the probe, the issue had raised enough questions to warrant an inquiry, but that he would accept the IG’s conclusions.

Air Force Secretary Michael B. Donley in November was reviewing the audit and would make any necessary response by early December, a spokesman for Donley said.

Members of the Senate at the time complained in a letter to Defense Secretary Robert M. Gates that the Pentagon was gaming Congress, failing to add C-17s to its budget because it knew sentiment in Congress was strong for adding more of the aircraft. The Senators warned that the Pentagon was on thin ice if it expected to keep doing business that way.

Nevertheless, while the Pentagon in 2007 said that 190 was an adequate number of C-17s, Congress has authorized 213 of the aircraft so far, and 205 are under contract. Depending on the outcome of the House-Senate Fiscal 2010 defense appropriations bill, between three and 10 more may be approved for the next fiscal year. That could bring the C-17 total as high as 223 aircraft.

Between 2001 and 2005, when he was head of Air Mobility Command and US Transportation Command, Air Force Gen. John W. Handy (now retired) maintained that the Air Force’s C-17 requirement was 222 aircraft. The original requirement, set in the 1980s, was for 210. It was reduced to 120 in then-Defense Secretary Richard B. Cheney’s “major aircraft review” in 1990, but has been revised upward ever since, as the C-17 has proved useful in a wide variety of airlift missions.

The Air Force, at Gates’ direction, is no longer allowed to offer Congress an “unfunded requirements list.”

Empty Drawing Board

The number of new starts in military aircraft has fallen dramatically in recent years, leading to a potentially dangerous atrophying of the American aerospace enterprise and raising concern about its ability to provide the Air Force with cutting-edge technologies in the future.

“We need to understand the risks” of putting the aerospace industrial base on less-than-subsistence diet, according to Rebecca Grant of the Mitchell Institute for Airpower Studies. Right now, “it’s impossible to assess” the long-term effects of focusing only on aircraft that meet the needs of “the wars we’re in.”

Presenting a paper, “The Vanishing Arsenal of Airpower,” Grant said in an October speech in Arlington, Va., that the industrial base has little to work on that pushes the state of the art in large combat aircraft. The design phase of the F-35—“the only game in town” in fighters—is over, and while there is new design work being done on unmanned aircraft, the other new starts of the 2000s have revolved around military conversions of commercial aircraft. A new bomber is on hold, and the Air Force is focusing on modest adaptations of civil airplanes for counterinsurgency work. There has been a dearth of experimental and new operational aircraft programs to sustain design capability in industry, as well as the workforce necessary to keep it vibrant, Grant said.

The new starts may be “dwindling to the point where they will unravel the process,” she said.

She noted that in the 1950s, there were more than 50 first flights of new experimental or operational fixed-wing aircraft, leading to an explosion of know-how and technical capability in the American aerospace industry. Moreover, there was public “consensus” for obtaining and preserving a technology edge over US aerospace rivals. In the 2000s, though, thanks to slashed budgets and a declining US share of world economic output, the US will only have made nine first flights. Of those, two were F-35 prototypes, one was an electronic warfare variation on the F/A-18E/F, three were unmanned aircraft, and one was the upgraded version of the 45-year-old C-5 Galaxy.

Looking ahead to the 2010s, Grant said, “the prospects are … simply very bleak” for new aircraft programs. There may be a new aerial tanker, a light strike aircraft, and a stealthy unmanned air vehicle, and the Navy plans to seek a replacement for the F/A-18, but that could easily slip into the 2020s.

“This is the first time anyone can remember … that there are no new programs going forward,” Grant said.

Moreover, a large percentage of the design workforce in the industry is graying rapidly, with most engineers either within five years of retirement or already eligible. Without new projects to offer, it will be tough to attract a younger generation to take up the profession, Grant said.

“We can’t turn this around quickly,” she pointed out, saying it will take many years to develop new experienced designers, and even then, they won’t have the benefit of having worked on a variety of programs.

Grant said it’s necessary to preserve a “nucleus of manufacturers” that can keep combat aircraft know-how advancing, even when there is no perceived imminent threat to the nation. She also recommended that the military services—and not the broader Defense Department—be the keepers of “core industrial policy.” The Navy, she noted, already has a significant basis of policy to preserve shipbuilding facilities and workforce in the nation, but there is no similar body of policy regarding aerospace technology.

The Air Force and the Navy should “resume an active role in assessing the health of the industry” and take steps to keep it going in periods when program efforts slow to a crawl. There is a precedent, she observed, in that the government “deliberately” threw work on the nascent technology of stealth to both Lockheed and Northrop, hoping to stimulate competition and create a new industrial base for the technology. It worked, and created the stealth systems on which the nation depends today.