Editor's note: With news of the Air Force potentially awarding the contract for the next-generation bomber and Congressional Republicans reaching an agreement with the White House on the defense budget, WATM presents a short primer by our friend Winslow Wheeler on how the Pentagon tends to complicate how much things actually cost.
On Wednesday March 25, 2009, an F-22 crashed near Edwards Air Force Base in California. Sadly, the pilot was killed. The news articles surrounding this event contained some strange assertions about the cost of the crashed airplane. Based on the price asserted in the Air Force's "fact" sheet on the F-22 that was linked to a Pentagon news release on the crash, the press articles on the crash cited the cost per aircraft at $143 million.
It was incomplete, to put it charitably, but the media passed it on nevertheless. The extant "Selected Acquisition Report" (SAR) from the Defense Department is the definitive DOD data available to the public on the costs for the F-22. The SAR showed a "Current Estimate" for the F-22 program in "Then-Year" dollars of $64.540 billion. That $64.5 billion was for 184 aircraft.
Do the arithmetic: $64.540/184 = $350.1. Total program unit price for one F-22 calculates to $350 million per copy. So, where does the $143 million unit cost come from? Many will recognize that as the "flyaway" cost: the amount we pay today, just for the ongoing production costs of an F-22. (Note, however, the "flyaway" cost does not include the pilot, fuel and other consumables needed to fly the aircraft away.)
The SAR cost includes not just procurement costs, but research and development (R&D) and some military construction, as well. At about the same time as the crash, a massive lobbying effort had started to buy more F-22s, to reverse Secretary of Defense Robert Gates impending announcement (in April 2009) that he wanted no more. F-22 advocates were asserting the aircraft could be had for this bargain $143 million unit price. That was, they argued, the "cost to go" for buying new models, which would not include the R&D and other initially high production costs already sunk into the program.
Congressional appropriations bills and their accompanying reports are not user-friendly documents, but having plowed through them for decades, I know many of the places and methods that Appropriations Committee staff like to use to hide and obscure what Congress and the Pentagon are actually spending. Let's check through the 2009 congressional appropriations for the F-22. Most – but not all – of the required information is contained in HR 2638, which contained the Department of Defense Appropriations Act for fiscal year 2009.
In the "Joint Explanatory Statement" accompanying the bill, the House and Senate appropriators specified that $2.907 billion was to be appropriated for 20 F-22s in 2009. The math comes to just about what the Air Force said, $145 million per copy. So, what's the problem?
Flipping down to the section on "modification of aircraft" we find another $327 million for the F-22 program. Switching over to the Research and Development section, we find another $607 million for the F-22 under the title "Operational System Development." Some will know it is typical for DOD to provide "advance procurement" money in previous appropriations bills to support the subsequent year's purchase.
In the case of the 2009 buy of 20 F-22's, the previous 2008 appropriations act provided "advance procurement" for "long lead" F-22 items to enable the 2009 buy. The amount was $427 million. Here's the math: $2.907 + $.327 + $.607 + $.427 = $4.268 billion for 20 aircraft. That's $213 million each.
Do not think these data represent an exceptional year. If you check any of the annual buys of F-22s, you will find the same pattern: in addition to the annual "procurement" amount, there is additional "modification," R&D" and advance procurement.
A few weeks later, F-22 advocate Sen. Saxby Chambliss, R–Ga., attempted to amend the 2010 DOD "authorization" bill coming out of the Senate Armed Services Committee to buy seven more F-22s for $1.75 billion, or $250 million each. The Chambliss effort, almost certainly worked out in close association with Lockheed Martin – a major F-22 plant is in Marietta, Ga. – surely sought to pay Lockheed the full amount to procure more aircraft: not $143 million each, but $250 million.
Clearly, Chambliss and Lockheed knew about some additional F-22 costs not included in my estimate of $213 million. The pathology of low-balling a weapon's costs goes far beyond the F-22 example cited here; it is a basic tenet of bureaucratic behavior; it helps a program acquire support by top DOD management and Congress.
Understatement of cost does not occur in isolation in the Pentagon; it is accompanied by an overstatement of the performance the program will bring, and the schedule articulated will be unrealistically optimistic. Once the hook is set in the form of an approved program in the Pentagon (based on optimistic numbers) and an annual funding stream for it from Congress (based on local jobs and campaign contributions), the reality of actual cost, schedule and performance will come too late to generate anything but a few pesky newspaper articles.
(This post was excerpted from The Pentagon Labyrinth: 10 Short Essays to Help You Through It.)
About the author: Winslow T. Wheeler focuses on the defense budget, why some weapons work and others don't, congressional oversight, and the politics of Pentagon spending. Before joining the Center for Defense Information in 2002, he worked on Capitol Hill for four U.S. Senators from both political parties and for the Government Accountability Office. At GAO and the Senate, Wheeler focused on Pentagon budget issues, weapons testing, the performance of U.S. systems in actual combat, and the U.S. strategic "triad" of nuclear weapons.