Vanguard Magazine

Oct/Nov 2013

Preserving capacity, General Tom Lawson, Chief of the Defence Staff, Keys to Canadian SAR

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Page 32 of 47

Next-Gen Fighter N In short, [the KPMG report] reflects a slew of questionable guesses about the future and, as a result, is yet another in a lengthy series of misinterpretations that have created a cross-purpose dialogue in Canada since 2010. price for 65 aircraft was $8.388 billion; the 2013 LRIP 7 fleet price would be $4.875 billion (a savings of $3.5 billion). Comparing the KPMG study's unit price of $129 million per aircraft with the latest LRIP 7 export price of $75 million per aircraft shows a savings of $54 million per aircraft, reflecting a 42 percent price reduction. Lockheed Martin has reported that the export prices for F-35A between LRIP 1 and LRIP 5 has decreased by 50 percent. In addition, the price between LRIP 5 and LRIP 7 has seen a further eight percent reduction, leaving the new 2013 LRIP 7 price only $5 million above Canada's 2002 ROM estimate. As production ramps up, the experience curve commonly produces substantial cost reductions. However, changes to the numbers of aircraft produced within each LRIP may cause fluctuation in prices; as well, later LRIPs could be affected by changes in the total quantities of the program, particularly if the overall U.S. government order decreases. Sustainment costs also vary significantly. In its report, KPMG showed an odd 42-year lifecycle sustainment cost of $13.29 billion. The JPO Program Executive Officer's (PEO) prepared sustainment cost forecast for 65 aircraft, however, works out to $7.48 billion, a 43.7 percent difference. The largest part of sustainment is the aircraft maintenance, repair and overhaul (MRO) and support, which should be less expensive for the F-35A due to the advanced reliability of the engine, electronics, avionics, and the use of electric sub systems and onboard diagnostics. In addition, Lockheed Martin's new aftermarket fleet management system, the Autonomic Logistics Information System, reflects fifth generation support improvements that are projected to generate substantial reductions in the overall support cost. It's not entirely clear what KPMG has included in their $45.8 billion total LCC. But even if they include all costs for procurement, development, test and evaluation, operational (pilot salaries, training and facilities), support, inventory personnel and logistics salaries, MRO infrastructure, supplier repair and overhaul (R&O), upgrades, obsolescence, military facilities, airfields and infrastructure cost, military support personnel, hangar facilities and utilities, as well as mission equipment, stores, fuel and even decommissioning cost, it is unlikely to add up to $45.8 billion. Without a realistic baseline with manageable variables one cannot determine what the KPMG analysis really means. The study's operator, sustainment, risk, attrition and disposal costs represent $23.6 billion of its findings, but these costs will exist for the military regardless of which fighter aircraft Canada finally decides to procure. Determining total program cost The findings in the table (p.34) are based on the F-35 JPO's data provided by the Program Executive Officer on the total LCC by flying hours (CPFH), using average annual flight hours, optional fleet sizes and a lifecycle for 50 and 42 years of ownership, which indicates the ratio between acquisition and total LCC of various national F-35 fleets. OCTOBER/NOVEMBER 2013 33

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