There is a standard phrase that I and other reporters use to describe Lockheed Martin Corp.'s F-35 Joint Strike Fighter in some form: the costliest program in the Pentagon's portfolio. Accurate? Yes. But not all together fair either, company executives would argue.
At Bethesda-based Lockheed's media day Tuesday, I spoke to a few executives about this — all grimaced when the topic of cost and the F-35 was brought up. That's not because they felt the company overspent, they'll tell you, but because the media has painted program costs to be out of control.
"We're not getting our due credit for cost reductions we've had," Greg Dahlberg, senior vice president of Washington operations said in an interview with Washington Business Journal. "It's hard to break through the media. It's a hard program to describe simply."
Some clarification may be in order, argued Dahlberg and Steve O'Brien, vice president of F-35 business development for Lockheed (NYSE: LMT). So here it is.
Claim: The cost of the program is averaging about 11 percent above what was promised.
More specifically, the total cost of the first four contracts for 63 planes was $12.28 billion — 10.9 percent more than the amount awarded under the original contracts, according to a recent report from the Government Accountability Office.
"In any development program, the unit costs change year to year," Dahlberg said. "It better come down — and it is. People pick a point in time and extend a straight line [for the duration of the program], but it's a curve."
Indeed, that same GAO report noted that production costs seem to be steadying.The lowest cost overrun came from the last and largest contract for 32 aircraft — 6.5 percent. Aircraft labor hours to build the F-35 are decreasing with more experience, according to the report, and "the program is moving down the learning curve as projected."
Claim: Unit costs are about 20 percent more than for predecessor fighter jets.
As noted in a July 2011 article from Air Force magazine — yes, this debate has been going on for quite some time — older aircraft do not have the stealth, advanced avionics or other fifth-generation features of the F-35.
"We won't put out numbers to poke, because the government needs to do that," O'Brien said. "But this is much more multimission capable. How do you quantify that? Hence the problem."
He also noted that costs not tied directly to plane production are built into the F-35 cost estimates — despite not being included in cost estimates for prior generations.
"You need to understand what's in the cost," he said. "When you include the guy who cuts the grass at the base, it's not apples to apples. ... How do you get an apples to apples comparison when you did accounting in a different way?"
Claim: The operating cost for the F-35 is estimated to be $1 trillion.
This point has gotten a lot of headlines since it emerged during a May 2011 hearing. But worth noting, O'Brien said, is that 40 percent of cost estimates are inflation.
Additionally, the estimate is for an expected 50-year life span, based on the assumption that each airplane will be around for a couple of decade after its produced and the final planes will go into operation 30 years from now.
Typically, the Defense Department does not estimate weapons costs as far out as 50 years, like it did with the F-35, Dahlberg said. "You take an aircraft carrier, include cost for refueling and such, and over 50 years you might get a big number too."
So then — even as the big numbers shock the general public and members of the media, is the message of the big picture getting through to those that matter?
"We're plowing through. The discussion has been more good than bad, but it's a big department," Dahlberg said. "What Deputy Secretary Ash Carter has told us is that affordability is the mantra, and 'if you deliver, we'll reward you.' We're taking them at their word."
