09 June 2009

JSF: just keep taking the tablets

We are advised by Washington correspondent Tony Walker in today’s Australian Financial Review that the Lockheed Martin F-35 Joint Strike Fighter which is to replace the F-111 and the FA/18 Hornets will be subject to major delays and cost overruns. The U.S. Government Accountability Office (GAO) has reported to Congress that development of the JSF is about three years behind schedule and that costs have blown out by about 17 per cent since its last report in April 2008. It is now projected to cost about 38 per cent more than original estimates.

This should be a source of neither surprise nor consternation. To understand why this is so it is necessary to understand what is involved in producing new military platforms.

In the business of manufacturing for private use – be it consumption or industrial processes – incremental change is the norm. Successive models of motor vehicles, mobile phones, bulldozers, industrial machinery etc are produced year after year with new or improved features, but only rarely does anyone invest in a step change that will deliver a huge transformation of function or performance in a single bound; too often would that approach involve betting the company.

In the world of defence, however, major items of equipment are produced for a role in contests in which someone lives and someone dies. It is important to win those contests; if it comes to military conflict, we don’t want young Australians to die for their country – we want other people to die for theirs. For this reason, incremental change takes place constantly with equipment that is already in service. Someone develops a counter-measure to some aspect of our capability, and we develop (or buy) and install a counter-counter measure. And so it goes: in-service military equipment is a work in progress throughout its life.

When we want to introduce a new capability, or a new generation of an old capability, it has to be a major step up in capability and performance, which means by definition taking three major, linked risks – technology (capability), timing and cost. We enter the unpredictable domain of seeking to do something that has never been done before, or even approximated.

The process starts with an aspirational definition of what is wanted: we want a platform with a whole suite of defined characteristics and capabilities, we want it to cost no more than $x million per unit, and we want it to be delivered by a certain date. It has to be aspirational because if we ask for less than our ideal we will certainly get less; we therefore define our ideal and do our best to achieve it, knowing that we will inevitably fall short in some respects.

Once the development program gets under way the realities start to bite. We find, for example, on an aircraft project, that in order to make the required high-G turns, there needs to be a bit more structural strength than we had estimated, which will make the aircraft heavier. In the light of that we have to make important choices about whether, in order to keep within the all-up weight limit, we want to sacrifice payload or range, or some combination of both.

Equally, we find ourselves making choices between performance, timing and cost. If we run into an unexpected technical problem and timing is critical we might ask the prime contractor to mount a crash program to solve it, at higher cost. If timing is not critical we might accept a delay in order to protect the estimated spend. Where it has a choice, Australia typically sacrifices delivery time in order to protect capability and cost.

This is a perfectly normal process in the military hardware acquisition business. The Mortimer Report (Report of the Defence Sustainment and Procurement Review) noted on page 30 that of the top 30 Defence Materiel Organisation projects, about one third are expected to deliver on time or ahead of schedule. The remainder are anticipating delays varying from a few months to a number of years. There is a pie chart showing the principal contribution to schedule slippage in financial year 2007-08. The top three contributors are Australian industry (30%), foreign industry (20%) and foreign government negotiation and payments (16%). This means that fully 66% of the reasons for schedule slip are completely beyond the control of the Australian Government.

My advice is, don’t buy a used car from anyone who tells you he can get that under control, and don’t let your kids go to war in the kit he buys.

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