Sunday, March 25, 2018

FY19 Weapons Procurement Costs

Here is an informational post about various weapon procurement costs to help inform our discussions.  Unless otherwise noted, the cost data is from the FY19 Navy Budget Justification Book (1) and is the quantity and cost for FY19 purchase requests.


Weapon         Qty   Cost  Unit Cost

ESSM            45   $98M    $2.2M
RAM            120   $96M    $0.8M
LRASM           25   $81M    $3.2M
LCS OTH (NSM)    8   $18M    $2.2M  (note 1)
Standard SM-6  125  $490M    $3.9M
Tomahawk       100  $234M    $2.3M  (note 2)
Mk48 Torpedo    45   $93M    $2.1M


note 1 – presumed to be the Kongsberg Naval Strike Missile as all other contenders have dropped out of the purchase competition

note 2 - FY18 qty and cost; no purchase request in FY19


This post has no particular point – just information to help sharpen our discussions!



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(1)Department of Defense Fiscal Year (FY) 2019 Budget Estimates, February 2018, Navy Justification Book Volume 1 of 1, Weapons Procurement, Navy,


27 comments:

  1. Raytheon Paris June 2017 announced restart of the SM-2 MR-SAM, production line, for SM-2 Block IIIA and IIIB missiles with active homing head for the Netherlands, South Korea, Japan and Australia, $650M for 280 missiles, $2.32 million each compared to the SM-6 LR-SAM $3.9 million.

    Raytheon received $119M contract to develop anti-ship Tomahawk cruise missile August 2017 for analysis and prototyping for new Tomahawk seeker head to hit moving naval targets.

    Burke loadout with 95 Mk 41 VLS cells, say 30 Tomahawk ($2.3M), 35 SM-6 ($3.9M) and 30 ESSM ($2.2M) total cost approx. $270M X 50 ships = $13.5 billion. If BMD SM-3 Block IIA fitted costs would jump as mention of $24M per missile.

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    1. A few corrections.

      1. Burkes have 96 VLS cells.
      2. ESSM are quad packed into a single VLS cell.
      3. Burkes also carry ASROCS too.

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    2. Thanks for correction

      Mk 41 VLS system for the Burkes, original included a crane which took up three cells for reloading at sea, six in total as one in each launcher group, in service proved impracticable so deleted to save weight, though cells remained unusable for missile launch. Not sure when changeover took place to all standard launch cells.

      Interesting to note that the new Raytheon SM-2 Block IIIA&B use the SM-6 active homing head as does the ESSM Blk 2 derived from the AIM-120C or D homing head. SM-2 has approx. three times the range of ESSM Blk 2 at ~ same cost, ESSM advantage you can pack four into single Mk 41 VLS cell.

      Note - newer SM-6s updated with Dual I and Dual II homing heads for terminal phase anti-ballistic missile capability in endo-atmosphere.

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    3. Nick, your overall point, that it costs a ton of money to fill the VLS cells, is valid and has to make one wonder how we could afford to fill every cell in the fleet when war comes. Further, our inventories are generally insufficient to fill every cell in the fleet and, even if we could, we'd run our inventory out in a few weeks of high end war - then what??? Our total manufacturing output per year for most of these missiles is on the order of a hundred to a few hundred. That won't sustain a war and we can't just magically add more capacity. Yes, we can build more production facilities but that takes years. This isn't like converting a WWII auto production plant to make tanks.

      Good point.

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    4. Yesterday, seven Iranian Burkan H2 missiles, a member of the Scud family, fired by the Yemen Houthi at Saudi Arabia. Three of the missiles were fired toward Riyadh, targeting the prestigious Yamama Palace hotel in the Saudi capital and King Khalid International Airport, two toward Jazan, and one each toward Khamis Mushayt and Najran. One dead and pictures of missile debris in street.

      As you say how effective are any of these missiles, its said the multi billion $s Patriot missiles fired in defence missed, though Saudi claimed a hit, presumably with the latest PAC-3, and that's 25 years of development after Patriot failures in 1991 when Iraqi Scuds were missed targeting Saudi.

      https://twitter.com/adii_khaan/status/978012403513380865

      https://twitter.com/joshdcaplan/status/978009582525145090

      PS Foreign Military Sale to Sweden of Patriot Configuration-3 + Modernized Fire Units for an estimated cost of $3.2 billion.

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    5. "Patriot missiles "

      You'll recall that immediately after Desert Storm, it was claimed that Patriot missiles shot down numbers of Scud missiles. As time went on and the claims were investigated, the claimed success rate was reduced to the point that, depending on whose report/analysis you read, there may not have been any successful intercepts.

      I've always been highly skeptical about Patriot missile effectiveness.

      Similarly, I'm quite skeptical about the claimed success rate for Israel's anti-rocket system.

      The history of all anti-missile missile systems shows a documented success rate of 1%-25% whereas claims usually fall in the 95%+ range.

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  2. I guess they're buying those NSM's for testing since they're only eight.
    The cost of the RAM missile surprised me, i thought it was cheaper .

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    1. I wonder if the ram missile is the newer block II version or the older block I that could be the difference in the cost

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  3. Some of those missile per unit costs are a surprise to me. While I was hardly an expert on it, it's funny to see the cost is not a function of range, newness or amount of materials used. eg ESSM $2.2m per unit- range 50km, can be quad packed into 1 Mk 41 VLS, weight 280kg. SM-6 $3.9m- range approx 500km, weight 1500kg

    Also miffed at LRASM per unit cost. That will put off some navies from buying it. eg if Australia replaced all their Harpoons, that's 12 ships x8 = 96 units. Still, at least the LRASM is up and running now.

    Andrew

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    1. That LRASM number seems high. JASSM-ER was 1.39M per in FY15 and LRASM doesn't have any reason to cost significantly more and certainly not more than twice the price.

      Overall, it looks like there is a lot of profit being taken in these prices.

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    2. LRASM - i think its the seeker that drives the cost up

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    3. "miffed at LRASM per unit cost"
      "That LRASM number seems high."

      I wouldn't get too upset about the LRASM cost, yet. The purchase is still, essentially, developmental quantities and, this early in the program, may include some support equipment/services. Just uninformed speculation on my part. If the cost remains at that level two years from now, then get mad!

      Still, the LRASM is a do-everything missile. If you want everything then you have to pay for everything. Contrast that to the "simple" Harpoon or early Tomahawks. There's an argument to be made for more basic weapons that can be bought in greater quantities for the same price. It's a balancing act between quantity/price and performance. I think we often go for do-everything weapons that have capabilities we're unlikely to ever use. Example - the LCS speed is a great capability but no one has yet found a use for it. Example - mid-course retargeting of a missile is a great capability but it's very hard to imagine it ever being used - in the minutes of flight time are we really likely to suddenly see a new, higher priority target?

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  4. Where are the Capitalists? These costs for items that are or have been in production for a long time should see their unit costs coming down. As a data point wiki lists the ESSM unit cost as $960,000 in FY 2016.

    Costs SHOULD NOT be going up! At this rate empting a Burke's magazine will bankrupt us, assuming they even have a full load out.

    I am all for strong defense, but I am sick to death of the MICC claiming they never have enough money. ANd yet the MICC can't apply ANY of the business lessons that the smallest business understands.

    https://en.wikipedia.org/wiki/RIM-162_ESSM

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    1. I would caution you about accepting any costs that do not come straight from a U.S. govt budget line item accounting. For example, the publicly "documented" cost of the LCS is around $362M per hull according to Wiki but that is only a partial cost and does not include GFE, modules, or a host of other cost adjustments. So, you need to understand what that Wiki ESSM cost includes.

      The line item budget document is the closest we can get to true costs and even those are understated. For example, delivery of incomplete ships like the LCS, Ford, and Zumwalt have additional construction costs that are not captured by the budget line item.

      Supporters of every weapon system claim that costs will come down as production ramps up but that is rarely the case.

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    2. I agree with your caution as after 35 yrs doing Defense Acquisition I think I have seen most of the games. I heard straight from the PMS head that the LCS Mission Module Program(s) agreed to do a one time buy for Hull Equipment to keep the cost down. That said Wiki is pretty good and certainly quicker than trying to resea4rch the Budget documents.

      The BIGGER point here, and I am interested in your take, is why aren't these costs coming down? Why isn't the Navy establishing teams of manufacturing experts (NOT Defense Contractors) to analyze these programs to get the costs down? I don't expect missile to see the price drop that computers have seen, but we should, at a minimum, EXPECT increased functionality for the SAME Price.

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    3. "why aren't these costs coming down?"

      As you would imagine, there are a variety of factors that drive costs up and down. Increased production rates and maturity of the manufacturing process DO drive costs down. However, the magnitude of that decrease is generally swamped by the magnitude of the factors that increase costs. Those factors include:

      -Minimal competition - We've dropped production levels to the point that there are only a few manufacturers left. That doesn't promote competitive pricing and, in fact, they tend to act as an informal monopoly to keep everyone's prices high. For example, the LCS OTH missile competition has only one bidder left (the Kongsberg NSM). What do you think that's going to do to pricing? There is no alternative so they have no incentive to decrease prices.

      -Changes - The military can't leave a product alone. They constantly insert changes into the middle of a production order which drives up costs significantly.

      -Concurrency - We start production before the design is complete and then wonder why the prices continually increase as the design is finalized.

      -Regulations - We are bound by govt regulations to perform all kinds of worthless programs and paperwork (minority set asides, green initiatives, enviornmental impact regs, emission controls, endless worker notifications for various govt mandated programs, mandated excess health insurance requirements (pregnancy benefits for men???), hordes of safety inspections and regulations, etc.) that drive costs up. Taken in reasonable moderation, some of these are good things (like safety). None are good in the extreme which is what we have today.

      -MilSpec - Excessive use of MilSpec drives up cost.

      -Quality control - Poor manufacturing QC results in endless reworks which drives up costs and, incidentally, makes the manuf quite happy since he gets to perform and charge the work twice!

      -Warranties - There are no warranties so not only is there no incentive to do the work right the first time, there is a perverse incentive to do the work wrong so that it can be done and charged again!

      I can go one but you get the idea. The cost-increasing factors swamp the cost-decreasing factors so all we see is constantly increasing costs.

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    4. "Why isn't the Navy establishing teams of manufacturing experts"

      Do you see the irony in this? The Navy/military does exactly this. For example, "deep dive" teams have been established to determine the "true" costs of the F-35. The reality, though, is this drives costs up! The manufacturers have to spend untold hours documenting every nut and bolt in exquisite detail. Well, that time doesn't come free. The costs are passed on to the Navy/military and costs go up!

      This is what happens when the military gives up its in-house design expertise to industry. The military no longer knows what the design is, what components could be used, what the component costs are, etc. Then, they either have to trust the manufacturer (not a good idea!) or do these "deep dives" that only serve to further increase costs. The solution is to take back design control and generate your own costs as a baseline, then bid out the production with a solid baseline cost understanding already in hand.

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    5. "I agree with your caution as after 35 yrs doing Defense Acquisition I think I have seen most of the games."

      One of my areas of interest that I'm attempting to research is the in-house versus industry design/cost issue and the impact that has had, good and bad, on procurement. For example, the Spruance class was the first design that the Navy threw entirely over the fence to industry. As it turned out, the design was pretty good but there was no guarantee. It could have been a bad design and then what would the Navy have done? The other end of the spectrum was the LCS which was a bad industry design (two companies that had never build a warship before - are we really surprised?) and the Navy had no alternatives or recourse.

      Is this an area you have any interest in commenting on?

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    6. One advantage of having a competent in house design team is that institutional knowledge is generally shared across designs. There is also the downside that institutional idiocy is also shared across designs.

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    7. The beauty of BuShips and its interactions with the General Board was that the Board set the general characteristics based on direct feedback from the fleet as well as numerous other inputs. Thus, "institutional idiocy" did not really have a chance to promulgate.

      Further, BuShips was the epitome of an engineer's career. The best and most experienced rose to the top which, again, discouraged the appearance of "idiocy". And, of course, actual combat tended to provide the unvarnished truth about the value of the various designs.

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    8. Good question on in-house vs out-sourced.

      I don't think you can draw definite conclusions based solely on in-house or out-sourced criteria. In addition you have to look at some other aspects of the culture in BOTH the in-house and out-sourced organizations. For example is the out-source organization focused solely on cost (present day Contractors) or more on performance (like skunk works). Does the in-house org have people that have fought ships, do they have an atmosphere of seeking best results, do they have an accepting attitude towards new ideas, iIs there a leader of vision (like Rickover or Meyers).


      There are probably some other attributes that I need to think on. But you don’t want too many as it waters down the differential and every org can claim goodness. I think the best way to present this is a table that shows the attributes and the plus or minus of both organizations and then the expected or usual results.

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  5. CNO,

    With your entry and comments above- manufacturing of missiles are in small numbers, and it's very very expensive to full arm every naval ship, One thing which just occurred to me: countries will run out of missiles (even ignoring fuel--Australia has just over 2 week's supply in reserve. Other nations??? ). This could be another factor which supports CNO's belief that naval battles will agaian be within visual range, like :

    http://navy-matters.blogspot.sg/2016/06/the-past-is-prologue.html .

    Naval battle will be interesting to see. Italian ships still carry mulitple guns, albeit usually 76mm guns, but most ships have just a single 5 inch, at best. China may have an edge, because they've been building 10,000 ton "Coast guard" vessels, so ramming is a legitimate tactic for them:

    https://www.reuters.com/article/us-southchinasea-china-coastguard/chinese-coast-guard-involved-in-most-south-china-sea-clashes-research-idUSKCN11C2LA


    Given this possible scenario, perhaps guided shells are an area more research should go into. (I know...that was one of the things the Zumwalt was supposed to research).

    Andrew

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    1. Largely not an issue. Missile production is quite honestly one of those things that can in fact be ramped quite rapidly. Most of the actual factories are running at a fraction of capacity and many other shops/factories can be easily converted over to missile production. The main limit is really the guidance/sensor suites and those can also be ramped up rather quickly.

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    2. We've had this discussion in a Canadian naval discussion group I'm a part of.
      Right now we rely on the US for much of our munitions. With the bids for our new frigate being all European (though I believe the dutch and Spanish use primarily US made munitions) some had suggested we make the switch to European made munitions as well.
      As an aside we have some folks in the group who see this as part of a greater reaction to trade issues, I think that's ridiculous.
      Aside from the supply line issues that having our munitions come from Europe, it's obvious that they do have a much smaller industrial base, and so how easy would it be for us to obtain missiles from them in the event of a high level war. It's not like shipping across the Atlantic hasn't been targeted before.
      The other question that came up though, is how much could production be ramped up, in the USA. Could we actually expect reliable supply from those companies, and if we had too, how quickly could we license and supply ourselves. Now I believe from a technical standpoint we have the expertise, but otherwise, it is a worry.

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    3. "Missile production is quite honestly one of those things that can in fact be ramped quite rapidly. Most of the actual factories are running at a fraction of capacity"

      I don't believe this but I'm quite willing to be convinced. Do you have any reference to support your belief?

      I suspect the combination of explosives manufacture and handling/assembly, fuel manufacture/assembly, and sophisticated electronics manufacture/assembly is well beyond the ability of any converted manufacturing facility and I have seen nothing to indicate that our current facilities are well below capacity. I need to see some kind of supporting evidence for your claim in order to believe it.

      Given that a single battle in a high end war would likely deplete an entire manufacturing year's worth of missiles (of whatever type, depending on the type of battle) and that we could reasonably expect dozens of major battles per year, we would have to be able to increase our current missile manufacturing capacity by a factor of 12x - 20x, at least. This seems unlikely from what I know.

      Give me a documented reason to believe!

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    4. "how much could production be ramped up"

      Production, whether in Europe or US, will certainly be ramped up in the event of a major war. How much is the question. My suspicion is that any increase will be totally consumed by the manufacturing country's needs and little will be available for other countries.

      Unless Canada enters a war on its own (not very likely), its ability to acquire ramped up munitions from any source is questionable.

      Modern munitions, unlike WWII simple explosives, are highly sophisticated with advanced electronics requiring rare earth elements and other rare compounds and highly technical, advanced manufacturing techniques that do not lend themselves to quick and easy ramping up or manufacture by converted facilities as was done with, say, tanks by the auto companies in WWII.

      I note that Canadian defense spending is around 1% or less of GDP. Canada needs to increase its spending and work towards becoming a bit less dependent on foreign countries for military assistance.

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    5. There is evidence to support CNO's statement that inventories would deplete quickly. Last night I was reading about the British Brimstone missile (The UK's very successful answer to the USA's Hellfire), and in their campaign in Libya, in wiki. Here's a quote:

      "This prompted the MoD to ask MBDA to convert more missiles to the dual-mode version.[1] 150 dual-mode missiles had been ordered in December 2010,[27] but according to the Royal United Services Institute, stocks of usable dual-mode missiles fell to single figures at one stage of the Libya campaign.[46] The 500th dual-mode Brimstone was delivered in March 2012,[14] at which time over 200 had been fired in combat".


      Andrew

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