Leaked Budget Document Shows Restructure Of JSF Program

(MoneyWatch)  The Pentagon is busily preparing the 2011 defense budget which will be sent to Congress on the first Tuesday in February. This year that should be around the Second. One of the steps of the budget process is for the the Office of the Secretary of Defense to issue Presidential Budget Decisions (PBD). These documents instruct the services and OSD staff how to restructure their budgets to meet the desires of the President and the Executive Branch. It seems a PBD relating to the F-35 Joint Strike Fighter (JSF) has been leaked to the media and it does not include good news for the program or prime contractor Lockheed Martin (LMT).

The decision document restructures the program to extend the development time line and reduce production over the next several years. The money saved by not buying the over one hundred aircraft between 2011 and 2015 will pay for the increased development costs. Over the last twelve months when the focus of the DoD budget moved to the JSF some had said this would happen. One of the concerns expressed is whether Lockheed can meet the increased planned annual production rate.

The problem is that as quantities are shifted to the out years their cost may go up individually and the total cost of the program will definitely increase. The funding available may not support the actual buy of aircraft within the current planned procurement so years will have to be added to the program on the back end. While this is several years out it is money not in the current budget and would either have to be added or reprogrammed from other sources. Delays in the deliveries of aircraft will also require further extension of the life of the F-15, F-16, A-10 and F-18 aircraft to be replaced. If funding is not provided for this there will be a gap where the U.S. may lack sufficient aircraft to meet its requirements. That is why delays in development programs lead to cost increases downstream. It is more then just a matter of moving the planned money to pay for the shifted production.

The JSF is also dependent on contributions from allies like the U.K. and Holland. These countries based their financial commitment on the planned quantity of aircraft they would buy. Now if the prices go up and the aircraft are not produced when originally planned they may not have the money necessary to support the original plans. Reductions in buys in each year could lead to further cost increases and the whole program could spiral to where the actual number purchased is much less then first planned.

The Pentagon is denying that this is a final decision but it falls in line with news from the Summer about an outside evaluation of the program which saw delays and cost increases. If it does turn out to be true it would be a blow to the plans of the Obama Administration as well as Lockheed's bottom line. Lockheed had already announced that they would take some of the money from their fee pool to offset development costs. The further delays could affect this even more reducing the amount of money made on the development and testing of the aircraft. This money could be made up in production but that now is stretched out over more years.

The Obama Administration planned to accelerate the development and production of the F-35. This was one of the arguments made for ending the F-22 Raptor program at the current planned quantity of less then 200. The loss of the aging F-15 and F-16 aircraft would be made up with F-35 instead of F-22 aircraft as planned at one point. The decision if it holds true continues to illustrate how difficult and complicated the development and production of advanced technology like stealthy fighter and attack aircraft remains. If the F-35 does face these delays and cost increases they will join a long line of systems that eventually went on to be successful and effective. Albeit at a greater investment by the procuring countries.

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