Friday, 19 April 2013

Lies, damn lies, and military procurement costs.

As I have pointed out on this blog before, getting a firm price on a fighter jet is an epic task.  Currency fluctuations, fees, economic offsets, bribes...  There is a very good reason KPMG was paid quite handsomely for its now infamous F-35 cost audit.

The best thing about the KPMG audit is that it is quite well itemized.  Costs are broken down in nice, neat categories.  This gives the reader a better ability to compare "apples to apples" when placed along other fighter jet deals.

A tale of 2 fighters.  (the left one is the X-35, but hey...)

With some trepidation, I will place the KPMG audit, details of which can be found here, alongside the recent (and still controversial) Swiss Gripen E purchase, details of which can be found here.  The Swiss Gripen purchase has not been as smooth as Saab would have liked, with the Dassault Rafale being declared the winner on performance.  The Gripen E was declared the overall winner based on value.  However, a recent Swiss government vote has approved purchase of the Gripen E, but without the necessary amounts to actual approve funding.  It must be noted that Switzerland has a large political movement that is opposed to the purchase of ANY jet fighter, and similar issues occurred during the procurement of Switzerland's current F-18 fleet.

The Swiss Gripen deal is to include 22 Gripen JAS-39Es, along with mission planning systems, initial spares and support, training, and certification.  This works out to $149 million per Gripen aircraft.  This deal also includes the lease of 11 older Gripen C and D models to ease transition and maintain capability.  It must be added that this deal is all but finalized and the $3.27 billion dollar cost is a "firm fixed price".

Sound expensive?  Hold on...

The KPMG audit shows a "Acquisition Total" of $8.99 billion for 65 F-35As.  This does include spares, training, and certification, but not initial support.  That cost is detailed below under (what I assume) is itemized as "contractor support".  This "contractor support" is listed as costing an additional $1.98 million.  Added together and divided amongst the 65 aircraft, that comes out to $169 million per F-35.  If we add the $565 million already invested in the JSF program as a "Tier 3 partner", that total now rises to $177.5 million per F-35.  Unfortunately, the F-35's cost is still in flux.  Its actual unit cost will depend greatly on how many F-35s are made in total, and how early delivery is to be made.

Perhaps the F-35 is worth an additional $28 million per plane?  The real price difference is in the operating costs.

Lt. Gen. Bogdan:  Don't like my F-35 cost estimates?  Take it up with this guy...

Jane's has recently estimated that the F-35As operating cost would come out to roughly $21,000 per flight hour.  Some have had issues with Jane's methodology and estimates, so I will instead refer to no less than USAF Lt. Gen. Christopher Bogdan, the executive officer currently in charge of the F-35 program.  In a recent statement to the Dutch, Bogdan stated that the flying cost for the F-35 would be $24,000 per flight hour.  This, despite the F-35's original goal to reduce flying costs compared to legacy aircraft.

So, what about the Gripen?  Well, the Jane's study clearly states that the Gripen is the cheapest modern fighter to operate.  Mind you, this is the C/D version.  A more modern and complex E/F version, with AESA radar, IRST and the like would likely cost slightly more...  But it would unlikely jack up the operating cost an additional $20,000 per flight hour on top of the C/D model's $4,700.

According to Canada's National Fighter Procurement Secretariat's "Draft Industry Engagement Request", Canada's new fighter will be expected to be flown "15 hours per aircraft, per month".  Using Lt. Gen. Bogdan's $24,000/hour flight cost, this works out to $4.32 million per F-35, per year.  That's about $281 million per year for the whole fleet.

The Gripen?  If selected that would work out to $846,000 per jet, per year; based on the low end of the scale of $4,700 per flying hour.  This gives a fleet-wide cost of $55 million.  Even if we double the operating cost, to $1.6 million per year, per jet, that is still only $110 million per year for the entire fleet, that's still less than half  of the F-35's operating cost. Over a 30-40 year period, the cost saving are hugely obvious.

What about the Typhoon, Rafale, and Super Hornet?  They will all likely fall somewhere in the middle, with the Gripen likely still being the far most affordable.

[NOTE:  This article is for comparison purposes only, and I cannot 100% verify all the totals and figures.  If you disagree with some of the cost estimates, click the corresponding links and take it up with those guys.  I just merely worked the math using their figures.  Your mileage may vary... Etc...  Etc...]


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  2. You can find it on the DID link about a third of the way down, in green text with a red "+" sign on the right side (Swiss flag) the title is "Here's the deal". The easiest way to find it is click on "2012" under the table of contents on the right hand side of the page. Its dated Aug 28/12: Contract terms.

    It's also mentioned here: The cost for the C/D leases work out to 1 million Swiss Francs per jet per year.

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    1. I would prefer to think of it as a "tangerines to oranges" comparison. The Eurofighter and Rafale are also smaller than the F-35 or Rhino (Super Hornet), as is the current CF-18. Would you dismiss the Silent Eagle for being too big? If total payload carrying ability is a priority, then Canada would indeed be better off with more of a "bomb truck". I have yet to see a "fully loaded" CF-18 however, so I'm not sure if this is the case.

      As for maintenance costs, there is more to it than just how much the aircraft weighs and how many engines it has. The Gripen was designed from the outset to be serviced from improvised roadside bases using a minimum of personnel and equipment. It is said to be more similar to operating a business jet rather than a military fighter aircraft.

      Given that the NG (E/F) models will be heavier, more powerful, and more advanced, operating costs will likely rise. Saab is still claiming a $5000/hr flight cost however, but I provided numbers for double the legacy Gripen's operating cost to allow a considerable amount of "wiggle room".

      Obviously, operating costs are far more significant than procurement costs. As I've mentioned previously on this blog, flight hours can, and have, been cut in an effort to cut costs. Selecting a fighter with low operating costs helps to mitigate future budget cuts to flying hours.

    2. Again, those numbers are from Jane's, not me, so if you have an issue, please take it up with them.

      As far as your motorbikes/cars/trucks analogy, I would prefer to think of the Gripen as something more akin to a Miata...

      As for the class of fighter, be it light, medium, or heavy... The Gripen has been included by the Canadian fighter secretariat in its request for information, therefore, it should be judged on its merits, not by its size. (think Yoda!) If total bomb load or size is a major factor, than it likely won't get much consideration, simple as that.

      Since you mention my background in EMS, will use your ambulance analogy. Ideally, the trucks are just as big as they need to be and no bigger. If they are bigger, then they tend to be much harder to maneuver, harder to park, and more expensive to gas up. Extra space inside is nice, but once you get to a certain size, that extra space becomes wasted and can actually make things more difficult as you have to reach to get to important equipment. The trend these days is smaller and lighter ambulances as fleet costs are a huge factor. Ford has discontinued its E-Series van chassis in favor of the European Transit van in order to compete with the Mercedes Benz Sprinter. The E-Series Ambulances use a 6.8L V-10. The Transit vans will use either a turbocharged 3.5L V-6 or a 3.2L 5-cylinder turbo diesel. Performance remains roughly the same, but fuel economy gains are huge.

      This isn't about which fighter is the world's best. It's about the best fighter for Canada. Operating costs are a huge deal for Canada, as our defense budget is a tiny fraction of the U.S, and still considerably lower than other countries like Germany, Italy, and the U.K.

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    1. You seem dangerously close to arguing for the sake of arguing "nickname goes here"... Do you mind me asking, if you are so dead set against the Gripen for Canada; what would you suggest, and why?

      It is very easy to criticize, and you certainly have proven your willingness to do so. Would you like to offer something constructive to the conversation? What fighter do you believe best serves Canada? What are the benefits to the platform compared to the others? Costs? What is its history and track record? Has it seen service? How does it handle the cold? What economic offsets would be in place? Could it be constructed here?

      If you would like, you could e-mail it to me, and I will post it, unedited and unchanged, here for all to see. You will be given full credit should you choose to give me your name.

      My argument FOR the Gripen can be found all over this blog. Allow me to do the same for your choice. If I you send me something to post, I will leave the comment section open, to promote discussion.

      What do you say, want to be a guest writer?

    2. Although I am a typhoon fan, I am going to refute this idea that the Gripen cannot do, what the hornet can.

      "Yes size matters,"

      True, but not in the way you imagine it matters. The greater the size of the aircraft, the greater its drag and the greater its weight is going to be. You want to reduce the drag and weight of a fighter plane as much as you can. Therefore, a small airplane has advantages over a large airplane. If you have to pick between a large and a small fighter - everything else being equal - you should go for the small one.

      "because when we put a medium fighter load on a light fighter you get a machine that will struggle."

      A light fighter won't "struggle" with a load, if its thrust to weight ratio is adequate. The Gripen NG filled up with fuel has a thrust to weight ratio of around 0.95, which is pretty much the same as the super hornet. So the Gripen won't be struggling with additional weight any more than the F-18.

      "We are talking about an aircraft with half the power of what CF-18s have now."

      True, but the aircraft also weighs has as much (11.000 kg vs 21.320 kg), so the result is pretty much the same.

      "If we put CF-18 loadouts on it, it will either move like molasses or have to burn fuel to keep a good speed, in which case range suffers. There has to be a cost, and the Gripen will have smaller margins to play with. a lot of what the Gripen will have to do is prove that it can handle current CF-18 tasks at the same level, before it even tries to tackle the newer aircraft."

      This is complete rubbish as pointed out above. The Gripen will be equal to the F-18 in terms of speed and acceleration, if not slightly better because of lower drag. In terms of turn rates, the Gripen is going to be considerably better, because of its much lower wing loading (353 kg/m² vs. 459 kg/m²).

      So no, the Gripen is indeed comparable with the super hornet. It is better in terms of aerodynamic performance. It's major drawback is it lower weapons load of 5.2 metric tons vs. 8 tons.

      So in terms of bang for the buck, the Gripen is No. 1. But, its not the best aircraft on the market. In my opinion, the typhoon is best. But, that's a different topic.

    3. Well said, bhigr.

      If it means anything to you, I agree with you about the Typhoon. If price was no object, then the Tranche 3 Typhoon would be my pick.

  5. The 4700 $/h for Gripen is a joke as specific flight hour cost. Just barely covers the cost of fuel... This flight hour cost value have been spreaded on the whole Internet regardless it is one of the biggest bull*** that I ever heard. Without any interpretation most of people believe this nonsense value. Amazing... For marketing pirpose SAAM and other "clever people" compare this with other AC specific cost which are really inculdes most of caring - even depot level maintenance and similar deep checks - which 100% not in 4700 USD/hour. What a "nice" move...

    Another joke is mentioning the "flux part" of F-35 operational cost. Every fleet may have this part because during the service life are unexpected events, upgrades, later sturctural reinforcementents. Etc. The weapon integration on Gripen C/D almost nonexistant comparing with US jets which already has wide range of weapons... Where is counted this factor? Because in marketing stuff Gripen and Gripen NG have so many weapons which have not been integrated...

    Gripen NG? No offense, but that jet still almost a "paper" jet. Development most of its main components has not been finished, therefore not the operation cost is the only question but developing cost too...

    1. I'm not sure exactly what you mean to say... But I'll try to address your concerns.

      If the "4700 $/h" is "bull***", then please point me to a credible source that says different. That figure was listed by Jane's, along with comparative (not literal) costs for the F-35, Typhoon, Rafale, F-16, and Super Hornet. These dollar amounts will fluctuate depending on usage, country of operation, etc. I've posted links to the study elsewhere, please read it before commenting further on it.

      As per the Gripen's weapons, I find it difficult to understand you, but I think you are stating that it doesn't support a wide range of weapons? It supports the METEOR, AMRAAM, IRIS-T, Sidewinder, Maverick, Brimstone, JDAM, Paveway, and many others; what weapons is it lacking specifically?

      As a "Paper jet" it deserves to be evaluated on the same basis as the International Roadmap Super Hornet, Tranche 3 Eurofighter Typhoon, and Block 3 (fully combat ready) F-35. None of those jets exist yet either, but they are all being flown in another form.

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    1. Still waiting for your guest submission...

      Or do you find it easier to troll with circular, "straw man" arguments? I'm seriously getting tired of seeing your comments pollute my blog without adding any real substance. You make comment after comment, yet have yet to offer much besides rhetorical questions.

      I will leave this as your final warning: If you have a point, MAKE IT. All it takes is a couple of clicks to delete your comments, its really not that much trouble. I'd rather not, but my patience is wearing thin.

    2. "It must also be added that the Swiss are not being forced to pay for development costs."

      Wrong. The development costs are indeed included in the 3.1 billion Swiss francs figure.

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    1. Please give a warning when posting a direct download link!

      I have deleted your post because of this (nasty viruses and all), but I will post the write up in its entirety instead.

      Thanks for the link.

  8. If you wish to post the whole stiff (about 35 pages), just go ahead. :)