When the Aeronautica Militare placed its initial order for three F-35As, it was able to approach the Italian Parliament with a surprisingly low unit cost: 80 million dollars. This is significantly lower than what European countries are paying for their Eurofighters. But what exactly is unit cost? How is it determined? Is it the cost of manufacturing the airframe? The cost of airframe plus engines? Airframe plus engines plus flight avionics? What about weapons systems integration? What about development costs? Up-front investment? Cost of ownership? What about differences caused by different service requirements? What gets averaged into the unit price can mean a difference of hundreds of millions of dollars. One thing is certain: whether or not it’s included in the sticker price, it will be in a contract somewhere, and will get paid somehow.
Eurofighter (Centre) with Su-30MKI and Tornado
With so many possibilities for juggling the figures, it is no surprise that fighter manufacturers have become expert in doing so, and incidentally created a confusopoly (to borrow a word from Scott Adams) by filling the market with incomparable prices. Defense Aerospace.com’s 2006 paper Sticker Shock: Estimating the Real Cost of Modern Fighter Aircraft is one of the braver attempts to create comparable baselines for the major contenders in the Western fighter market. Some of its findings are unsurprising- the Swedish JAS-39 Gripen is both the cheapest to buy and the cheapest to own, with the French Rafale a close second. The Super Hornet is not nearly as cheap as advertised. But most shockingly, the F-35 is at least several million dollars less expensive per unit than the Typhoon.
That the Typhoon is expensive is something everyone has been painfully aware of. Its tortuous pan-European procurement model and the vascillation and wrangling over different national requirements have contrived to make it one of the great cautionary tales in procurement lore. But that the F-35 is cheaper- well, we’ll see about that.
It should be noted that Defense Aerospace’s estimate of F-35 unit price, $115 million, is significantly higher than the price quoted by the Italian Air Force- and this was in 2006, before the full cost footprint of the F-35 was understood. Winslow Wheeler, the Director of the Straus Military Reform Project at the U.S. Center for Defense Information, estimates the unit cost at $155 million. As far as a country like Canada is concerned, that could go up as far as $167 million. But that is nothing compared with Canada’s share in the total program cost, now estimated to be in the neighbourhood of $46 billion over 42 years- an eye-bugging $707.7 million per plane.
So, are we just comparing apples and oranges? Should we concede that the whole mess is beyond our meagre imaginations and give up trying to make sense of it? No. Because in the end, whatever the sticker price, a certain amount of money has been directed in total to procuring a certain number of new airframes. That global number may be difficult to dig out, but the taxpayer deserves to know how much public money is being spent per aircraft. More than that, it is part of due diligence for a government to properly study all the ways in which these programs might bleed money in order to improve the cost-effectiveness of their purchase. Unfortunately, if they believe a program is in their interest for other reasons, they may deliberately turn a blind eye.
It also matters who’s buying. If you’re paying for the development of an aircraft and the initial orders, your costs will be higher than those of a foreign buyer five years later. If you consider the Rafale’s total program cost of around 39.6 billion euros, then the 115 aircraft built for France thus far average to 344 million euros, which will decrease to around 152 million euros if all planned aircraft are delivered. The flyaway cost for a new customer, however, may actually be in the neighbourhood of the avertised $62.1 million, which of course does not include cost of ownership and may not include certain systems.
In short, it is usually better to buy someone else’s aircraft with a limited defence budget, and, for Canada at least, even a $114-118 million Typhoon (assuming that unit prices have not been reduced) would still be far better than a $167 million F-35. But it is not the sticker price, but rather the total program cost, from the beginning of the program through systems integration through cost of maintenance and upgrades that needs to be considered- and laid out for public scrutiny. If they are not, then no unit cost quoted in any competition can be trusted to reflect the true cost of the program.