Wednesday, December 5, 2012

FY2013 Budget Items

Here's a few FY2013 budget highlights as reported at the website of the Office of the Undersecretary of Defense (Comptroller), http://comptroller.defense.gov/defbudget/fy2013/FY2013_Weapons.pdf

JSF (Navy Carrier Version)
Qty = 10
Total Budgeted Procurement Amount = $2.58B
Unit Procurement Cost = $258M each

F/A-18E/F 
Qty = 26
Total Budgeted Procurement Amount = $2.065B
Unit Procurement Cost = $79M each

DDG-51 
Qty = 2
Total Budgeted Procurement Amount = $3.515B
Unit Procurement Cost = $1.75B each

Virginia 
Qty = 2
Total Budgeted Procurement Amount = $4.092B
Unit Procurement Cost = $2.05B each


Note the JSF unit cost.  The Air Force (conventional JSF) unit cost was considerably less at around $190M.  Look at the increase from the Hornet to the JSF.  I hope it's worth it!

8 comments:

  1. Things to keep in mind for the JSF costs:

    1. They are still LRIP
    2. It's only 4 F-35C and 6 F-35B, forget economy of scale
    3. They are the most expensive and complex of the versions
    4. It's only the 3rd year of F-35C production
    5. Much more is included in the overall costs due to LRIP such as base standup, Full Mission Simulators, Post SDD development costs, etc.

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    1. The costs were labelled "procurement". I don't know what was included in that. Regardless, while your points are valid, does it matter? The cost for those 10 aircraft are what they are. We're spending $258M each for those 10.

      Will future costs come down due to economy of scale or cessation of one-time costs? Perhaps. One hopes so. However, the costs have been steadily increasing since the inception of the program so it's equally possible that unit costs will continue to rise. We'll have to wait and see.

      The interesting point is the cost to capabilities ratio. Will the JSF provide enough capabilities to justify the cost? Again, we'll have to wait and see. Personally, I'm doubtful at this point. Most of the descriptions of capabilities make the JSF sound like a stealthy version of the Hornet. Nice, but not at that cost. The 360 degree viewing for air to air combat may prove valuable if it can be made to work.

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    2. I double-checked the numbers vs the FY2013 budget docs and yes, the "procurement" number is the complete acquisition cost (spares, simulators, tools, manuals, etc). All you have to do is look at the previous 3 years to see that as each year comes, the cost to produce the F-35 goes down.

      For example, take F-35C REC Flyaway costs --
      FY2011 F-35C (7 built) unit cost = $178 mil
      FY2012 F-35C (7 built) unit cost = $153 mil
      FY2013 F-35C (only 4 built) unit cost = $142 mil

      Even with the reduction in build quantity, the FY2013 F-35C are cheaper than the year before.

      Obviously as production ramps up the costs will go down. The real danger is that Congress, in a short-sighted attempt to save money, lowers the yearly build numbers in order to stretch the production over more years. They have done it once already (The original F-35A plan was 110 per year and now it's 80).

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    3. I haven't seen those flyaway costs. What source did you get them from? What does REC stand for?

      We can slice and dice the numbers any way we want but the fact is that ten planes, this year, will cost $258M each. Subtracting costs for tools, spares, or whatever, may be a valid exercise for comparing costs between different planes or different purchase blocks (years) so that all numbers are on an apples-to-apples basis but if those tools, spares, or whatever, are required as part of the purchase then the cost is what it is.

      The problem with subtracting out various types of costs is that it obscures the true cost of the program. It's as if the Navy were to buy a ship but subtract out the cost of weapons, electronics, sensors, computers, and basically everything but the bare hull itself so as to be able to say that the ship only cost a fraction of what it really did - that would be misleading and would obscure the true cost of the program. Ah wait... I think I just described the LCS cost accounting.

      Let me know about those flyaway cost sources. Thanks!

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    4. I pulled those numbers directly form the FY2013 Navy budget documents (pg 131).

      REC Flyaway is the Recurring Flyaway price represents the cost of the plane itself and not base standup costs, spare parts, future monies for development, etc. It's the best indicator of manufacturing efficiencies (aka learning curve) from year to year.

      The reason I use REC when gauging the year-to-year program health is that there are too many variables in the other costs to get a good idea of what is happening. Looking at only the final number can lead to confusion because people do not understand that so much is involved and can change from year to year (weapons, parts, simulators, a new base to standup, etc).

      Finally, there is the issue of LRIP. Many of the Partner nations will not be buying in an LRIP cycle and they will NEVER see the level of non-recurring costs that the US does (Simulators, bases like Eglin & Luke, etc).

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  2. Hang on, if two DDG-51s cost $3.515B, how does one cost $175M?

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    1. Economy of scale?

      OK, you got me! ComNavOps clearly has a defective calculator. I'll get it replaced and in the meantime I've corrected the post to show the correct $1.75B.

      Thanks for keeping me accurate!

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    2. No problem. Though I will admit I did one hell of a double-take.

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