F-35 Joint Strike Fighter (JSF)

[dapaterson]

Flyaway price is not the only acquisition cost.  The Gripen, for example, should fit within existing hangers; most other options (including the Super Hornet) would require new hangers.  And ongoing operating and lifecycle maintenace costs will also vary depending on the aircraft chosen.

In addition, most calculations ignore the signficant contribution agreement under the JSF when calculating Canada's cost.

 

[drunknsubmrnr]

True indeed.  But they all provide less capability and that is something the Life Cycle Costing folks can't dicker with.

But they will all offer a lot more in IRB's.

 

[Haletown]

But they will all offer a lot more in IRB's.

Rumour has it the Grippen proposal will offer up new Ikea stores in every town over 50,000 people and free assembly for key challenged people.

 

[jpjohnsn]

Rumour has it the Grippen proposal will offer up new Ikea stores in every town over 50,000 people and free assembly for key challenged people.

The beauty of the Grippen is that it too only requires an Allen wrench for all maintenance.  It'll make tool control MUCH easier. 

 

[Haletown]

The beauty of the Grippen is that it too only requires an Allen wrench for all maintenance.  It'll make tool control MUCH easier. 

They come flat packed with an extra Ikea key and are sold as "some assembly required"  ;D

Gotta keep the shipping costs down.

 

[drunknsubmrnr]

Rumour has it the Grippen proposal will offer up new Ikea stores in every town over 50,000 people and free assembly for key challenged people.

And a monkey!

 

[SeaKingTacco]

And a monkey!

Well certainly...somebody has to fly it!

I kid, I kid.

 

[dapaterson]

And a monkey!

No, that's the pilot.

Sure, he shrieks when he doesn't get what he wants and has been known to throw his own feces, but that's no real change from current fighter pilots...

 

[jpjohnsn]

No, that's the pilot.

Sure, he shrieks when he doesn't get what he wants and has been known to throw his own feces, but that's no real change from current fighter pilots...

Hmmm.  So does that mean that the shearling coat it was wearing might be the new leather flight jacket I keep hearing is on the way?

 

[a_majoor]

While there are lots of good points about capabilities and life cycle costs (and I hardly see that getting a 1970 or 80 vintage design that is already maxed out performance wise could be considered a good deal), for the breathless media; the only thing that matters is a single number (and let's not confuse the issue by understanding or reporting how these numbers are calculated).

 

[HB_Pencil]

But they will all offer a lot more in IRB's.

No, they won't. Actually every single program is significantly inferior to the JSF industrial partnership program. IRBs actually are fairly poor instruments for industrial development. Much of the spending goes to industries not involved in aerospace because the contracted firm is not able to invest the money into this area.

Even if the F-35 provided less gross benefits than the competitors  (which it doesn't... it provides 110~120%), the contracts it provides are all far superior in quality to the others. They are uniformly of what would be considered high quality.

 

[drunknsubmrnr]

Actually every single program is significantly inferior to the JSF industrial partnership program.

That's amazing! Since you're able to say what bids that haven't even been written yet will contain, is there any chance you could predict next month's S&P futures?

 

[HB_Pencil]

No, its just the reality of how Canadian regulations manage offsets and their effect on the Canadian economy. Traditional offset arrangement can't match the JSF's industrial partnership program for a number of reasons.

First: the relative value of "traditional offsets" are not very high. Several countries, like Australia, have abandoned them altogether because of their ineffectiveness.

Unfortunately the F/A-18E, Rafale and Eurofighter are all well established manufacturing lines. Moreover several of them are nearing the end of their production. That means there is very little opportunity for Canadian producers to join those programs and gain direct offsets. That means most of these programs would need to offer indirect offsets (ie stuff not related to the procurement program.) Some of it will be in aerospace program; Boeing likes to count "new" purchases of subassemblies from Canadian aerospace manufacturers. However many times it can be a hodge podge of services or goods that are from completely unrelated industries. Holding a conference in Vancouver can be counted as part of an offset commitment, or "like trades" for goods or debts that Canada owes other countries. These are very poor from an industry development standpoint.

The JSF's contracts are all direct offsets on the F-35 fighter. They are also with Canada' top aerospace firms, who are now gaining access into the US defence market, at the precise time it is starting to open up to foreign producers.

Second: Offsets must be delivered within a year of the delivery date. That means there is a very defined timescale for their benefits. In a way they can be market distorting and act to the detriment to a Canadian firm: it needs to quickly ramp up production, and then with a year, two or three, the contract ends with no followthrough. Also the buys are often for current technologies and goods so there is really no industrial innovation going on.

JSF is different; it pays out over the entire production length of 30+ years. That's much preferable to a contract that pays out less funds over a shorter period of time. In order to win these contracts Canadian firms had to invest heavily into R&D as well as new production lines, which increases their long term competitiveness.

Third: Value: Canadian law requires 100% offsets.  On the JSF's acqusition, its offset requirement would be around $7 billion (you don't count stuff like milcon, training or project management.) I've seen firms offer up to 120%, but never more than that. That brings it $8.4 billion, compared to the current minimum of $9.0 billion dollars that Industry Canada has calculated the F-35 will obtain.

 

[drunknsubmrnr]

the relative value of "traditional offsets" are not very high.

Agreed.

Offsets must be delivered within a year of the delivery date.

I disagree. There appears to be multiple formulae at the IRB website describing when and where the money is supposed to be spent, but it's definitely not in the first year.

Canadian law requires 100% offsets.  On the JSF's acqusition, its offset requirement would be around $7 billion (you don't count stuff like milcon, training or project management.) I've seen firms offer up to 120%, but never more than that. That brings it $8.4 billion, compared to the current minimum of $9.0 billion dollars that Industry Canada has calculated the F-35 will obtain.

The JSF MOU required IRB's to be dropped, so there's no 100% requirement there. Industry Canada identified ~$9 billion in opportunities that Canadian firms might get, over the lifetime of the ~$46 billion contract. That looks like an equivalent to ~20% of "high quality" IRB, not 100%. I don't think that leaving ~$36 billion of offsets on the table is a good return for the possibly higher quality of the JSF offsets.

 

[Edward Campbell]

Please remember: there is no such thing as an industrial benefit! We, Canadian taxpayers, pay 100%, usually more like 120% for each and every "offset." It has been like that since the "offset" thing started back in the 1970s (with the CP-140 project, as I recall) (I was in DLR at the time.) There is no free lunch and arms producers are not charitable organizations. Regional industrial benefits, etc, etc, etc, are ALL scams - without exception - perpetrated by politicians, bureaucrats (including those in uniform) and marketers on the public.

 

[drunknsubmrnr]

there is no such thing as an industrial benefit!

Well, there is but it could be more accurately described as a "pork-buying kickback". The deal apparently appears to be:

• Buy the F-35 for whatever the price eventually turns out to be without IRB/kickbacks
• Buy "something else" for pretty much the same price with IRB/kickbacks

I think we all know how that's likely to go.

 

[HB_Pencil]

I disagree. There appears to be multiple formulae at the IRB website describing when and where the money is supposed to be spent, but it's definitely not in the first year.

You've misread. Its within a year of the end of the final delivery.  Edit: I didn't write that clearly enough. My bad. There can also be extensions.

The JSF MOU required IRB's to be dropped, so there's no 100% requirement there. Industry Canada identified ~$9 billion in opportunities that Canadian firms might get, over the lifetime of the ~$46 billion contract. That looks like an equivalent to ~20% of "high quality" IRB, not 100%. I don't think that leaving ~$36 billion of offsets on the table is a good return for the possibly higher quality of the JSF offsets.

No, you (along with many in the press) are conflating ISS with Production and acquisition IRBs. They are different phases and possess different IRBs, because the support contract is often with a different company than the OEM. Remember CF-18s are not supported by McD/Boeing but L3 MAS, a Canadian company. C-130Js are maintained by Cascade Aerospace, not LM. Thus the proportion of what the O&M IRB requirement really depends on a lot of things, which is not really a part of the acquisition decision.

Edit: just to clarify, Canada's $9.8 billion in production contracts refers to the $9~ billion acquisition phase (where the real Offset requirement is around $7 billion.) The $30+billion in operation and support is covered by a second, entirely different set of IRBs, if required. The actual amount is quite a bit less, as a large proportion of that is fuel, milcon and CF personnel costs. I'd have to look into breakdown to see what it would entail if done by a non-Canadian firm.

 

[HB_Pencil]

Please remember: there is no such thing as an industrial benefit! We, Canadian taxpayers, pay 100%, usually more like 120% for each and every "offset." It has been like that since the "offset" thing started back in the 1970s (with the CP-140 project, as I recall) (I was in DLR at the time.) There is no free lunch and arms producers are not charitable organizations. Regional industrial benefits, etc, etc, etc, are ALL scams - without exception - perpetrated by politicians, bureaucrats (including those in uniform) and marketers on the public.

Actually that's what alot of Australian studies have found. Basically they found that offsets of the type we use had detrimental effects to some of their industries. It might look like free money, but in reality its a case of good politics/ very bad public policy.

 

[drunknsubmrnr]

You've misread. Its within a year of the end of the final delivery.  Edit: I didn't write that clearly enough. My bad. There can also be extensions.

The IRB page says different.

http://www.ic.gc.ca/eic/site/042.nsf/eng/h_00018.html

Looks like 60% within the first year, and 40% over the rest of the contract.

No, you (along with many in the press) are conflating ISS with Production and acquisition IRBs.

The Industry Canada page says different.

http://www.ic.gc.ca/eic/site/ad-ad.nsf/eng/ad03962.html#a3C4

For the purposes of this report, "opportunities" for companies in Canada is broken down into the following categories:

Contracts: signed and executed purchase orders for development and/or production work on the planes and associated systems ordered by partner countries to date; and
Identified Opportunities: the extension of contracted work, or new work which has been identified by the prime contractors as being open for competition to companies in Canada, but for which no contract has yet been signed.
These contracts and opportunities are associated with three "phases" of the Program:

Design/Development: where companies in Canada had the opportunity to develop technologies for use on the F-35 and associated systems. Further development contracts could be available in the future as the Program continuously updates the aircraft's software and hardware.
Production: this includes opportunities in early production (the Program is currently manufacturing around 30 planes per year) and full-rate production when production is expected to increase to approximately 200 aircraft per year.
Sustainment: this relates to the maintenance, repair, simulation and training services that will be required by the F-35 JSF partners to operate the F-35 throughout the life of the Program.

We're looking at maybe ~$9 billion in offsets for everything we pay. That doesn't appear to be the same value as the regular process.

 

[Kirkhill]

The IRB page says different.

http://www.ic.gc.ca/eic/site/042.nsf/eng/h_00018.html

Looks like 60% within the first year, and 40% over the rest of the contract.

The Industry Canada page says different.

http://www.ic.gc.ca/eic/site/ad-ad.nsf/eng/ad03962.html#a3C4

We're looking at maybe ~$9 billion in offsets for everything we pay. That doesn't appear to be the same value as the regular process.

DNS:

I think what HB is referring to is that the 46 Billion over 42 years includes only 9 Billion in capital.  Of that 9 Billion some 7 Billion will be spent with Lockheed Martin to purchase the aircraft and spares.  That money is subject to offsets.

2 Billion of the 9 Billion capital, I believe, will be spent in Canada with Canadian companies buying hangars and also buying simulators, likely from CAE.  That money would not be subject to offsets.

That leaves 46-9 or 37 Billion to pay the salaries of the pilots and the ground crew and such like as well as buying gas for the fuel tanks and replacement tires and other consumables together with domestic training costs. Those costs would not be subject to offsets as, like the hangars, they are paid with Canadian dollars to Canadians for services procured in Canada.

The only portion of the 46 Billion liable for the IRB programme would be the 7 Billion or so spent on the actual fighters and some incidentals.

The fact that the programme offers Canadian companies the opportunity to supply parts to the entire fleet of some 2000 to 4000 aircraft and make over 9 Billion in return is the real sweetener to which HB refers.

The programme will spend 7 Billion in the US on the aircraft and some 40 Billion in Canada.

Meanwhile Canadian aircraft manufacturers will sell 9 Billion in spares to the USAF, USN, USMC, RAF, RAAF, RNoAF, RNlAf........and the RCAF.  Amongst others.

My numbers may not be exact but they reflect my understanding of the information I have seen to date.

Cheers.