James Hasik

Desperately seeking better justifications for the F-22

At the seminar I attended earlier this month, I asked Jacques Gansler, who was Bill Clinton’s Under Secretary of Defense for Acquisition, Technology, and Logistics (more conveniently, USD AT&L), to explain what he meant by the difference between “20th century” and “21st century weapons,” and to give us an example of the former. I did this in front of 200 people, so he was rather on the spot. He started by saying, “I’m not going to tell you that we should cancel the F-22...”

Afterwards, the managing director responsible for defense industry investments at a large private equity firm walked up to me to say “great question! you know he wanted to answer, but he knows he can’t.” I just responded, that’s OK: he did.

To be fair, the F-22 Raptor is most probably an impressive airplane. The gadflies those who claim that the it is not survivable in air-to-air combat are simply ignoring what its experienced pilots are saying about it. Those pilots may very well (as RAND has suggested) be overestimating the lethality of the AMRAAM, but even so, the plane itself is far more maneuverable than a simple application of energy-maneuverability theory would claim. Lockheed Martin and others have made huge advances in flight control software since John Boyd developed E-M theory at Georgia Tech way back in the 1960s. As well, we should remember that the latest versions of the Sidewinder missile are off-boresight weapons, so reliance on tail-chase shots is no longer canonical.

Rather, as a colleague put it recently to me, it’s “way cool technology,” regardless of its political-military utility. That is, I have written publicly suggesting that there are better ways for the US federal government to spend its money than on the Raptor (albeit not on a forlorn attempt to bail out General Motors and Chrysler). The problem is that I can’t figure out who this airplane is intended to fight. The only plausible scenario in which a lot of fighter aircraft are needed is fighting the Chinese over Taiwan. In that case, it’s a game for carriers, and this thing would be restricted to fields on Guam (and Okinawa if the Japanese decide to fight as well).

Sensing that the game may be up, supporters of further purchases of F-22s have turned towards broader, supposedly economic arguments to make their case. The consultancy the Lexington Institute, which is widely suspected to take public positions in support of its clients’ programs, asserted earlier this month that

• that termination of the F-22 program will result in the termination of about 100,000 jobs;
• that the F-22 is important to the trade balance; and
• that the production of the F-22 is economically important, because preserves “skills that are fungible across other industrial areas,” specifically, commercial aircraft manufacturing in the United States that benefits from “the economies of scale created by suppliers and labor forces serving both public and private markets.”

All three points are dubious.

First, the number 100,000 is so suspiciously round that one immediately doubts that it is backed by any serious analysis. There is a tendency amongst flacks and hacks to tally up all the people who spend even part of their time producing something for a particular program, and to presume that their jobs will be somehow irretrievably “lost” when that program ends. If you recall the assertion, a few years ago by the telemarketers association, that the federal no-call list would result in the loss of two million jobs, you know the idiocy of the concept. One needn’t begin a recitation of the notion of substitute products to make the case.

Second, if the trade balance matters (and it’s not clear that it does), then the F-22 might matter, but it only if it were approved for export. It is not, and only two governments—those of Israel and Japan—have voiced any interest in it. The first has military spending funded substantially by US donations, so the effect on the trade balance would be zip. The second is legendarily profligate in its spending on military aircraft (think of the Mitsubishi F-2, essentially an F-16 for which it paid twice the going rate), and is thus no indication of a pattern of customer interest.

Yet, the biggest silliness here is in the third point. Back when Deputy Defense Secretary Paul Wolfowitz attempted to terminate purchases of the C-130J, there were assertions that this would make production of the F-22 (built on another line at the same site in Marietta) more expensive. These, however, were limited to Lockheed Martin’s internal and not-necessarily-objective projections. Indeed, it is a stretch to say that Lockheed Martin’s assembly of another few score F-22s in Georgia is essential to aircraft or aerostructures manufacturing in Texas, Kansas, California, or Washington State. If it is, we’re all still waiting for the dispassionate, econometric analysis to that effect. In all likelihood, we’ll still be waiting for it long after that plant in Marietta builds its last Raptor.

So, is this just some piling onto everyone else’s criticism of an expensive program? Not hardly. There’s a general lesson here for anyone whose program is facing criticism as a 20th century weapon. Whatever that term really means, don’t try to justify your existence using 18th century misconceptions in economics. In the end, it’s just embarrassing.

Trifurcation of the military truck market

A few months ago, as I was sitting in a strategy-setting meeting with many of the managers of a large, military truck builder, I started making a point to the president of the company with the words “if you assume that all future military trucks will be either armored or built for armor...”

Then you would be wrong, he cut me off. He went on to explain, in his characteristic, gruff-but-informed style, that there was no point to armoring vehicles meant for homeland security duties, hauling mail across the base, and picking up the general from the parade ground. At the moment, I admitted some understanding regarding his point, but further questioned whether a military truck builder was best suited to building vehicles for hauling boxes across camp. Naturally, someone at the table wondered aloud as to what the postal authorities needed...

Fast-forward to today’s, when Army Times carries an article on the US Army’s plan to buy 400 electric pickup trucks from Columbia Parcar and others next year, and as many as 10,000 such vehicles over the next several years. Naturally, these aren’t meant for service in Afghanistan, but they’ll save a lot of money running errands at Fort Bragg. Their limitations—small payload and a fifty-mile range—are obvious, but the cost savings are too dramatic to ignore. Most commuters in the industrial world are still edgy about the idea of a vehicle with just a fifty-mile range. However, should global petroleum prices, which are subject to a very steep supply curve, recover as the global economy does, that reticence may disappear.

The Army's effort to lead the way ought to be appreciated for helping develop the market. As Defense Industry Daily notes that Clay Christensen would say, it’s a disruptive innovation that neatly trifurcates the military market into three segments:

1. serious blast- and bullet-hardened trucks, with good off-road mobility, for hauling troops and weapons in the sketchier parts of the world
2. commercial trucks painted green, with reasonable off-road mobility, for constabulary and disaster relief duties at home
3. really economical, electric vehicles for light and purely on-base use

This process, of course, has been underway for some time. It should be clear by now that Humvees are unnecessarily large for most on-post duties, and insufficiently robust when up-armored for counterinsurgency duties. This is why the Canadian Militia is being equipped with 'Milverados'—Chevrolet Silverados (painted that medium Canadian green) for internal security and disaster relief duties, while the Canadian Army (and those militiamen who get mobilized) will drive vehicles like the RG-31 and the Cougar.

Not many generals, after all, commute to their defense ministry headquarters in Land Rovers or MRAPs these days, so there is every reason to expect demand to continue to evolve this way. That has considerable strategic significance for companies building military trucks. Many of those trucks that militaries will buy won’t actually be military trucks, and the rest will be some pretty robust vehicles. Taking on market (3) above could very well be a bridge too far for military truck manufacturers. However, even to compete in the aforementioned markets (1) and (2) simultaneously, one would need a wide set of capabilities:

• manufacturing capacity—in capital and production staff—so flexible that it could cost-effectively handle both high and low-volume assignments
• engineering staff skilled at designing for both commercial and military standards and price points
• marketing and sales staff who can switch between advancing the military benefits of combat vehicles to promoting one’s compliance with the latest European diesel emissions standards

That’s a tall set of orders, and it may be more than most single enterprises can handle. That suggests a slightly more comfortable future, with less price competition, for those who specialize in the really robust combat-capable vehicles (like those of the MRAP class), as the upper end of the market increasingly diverges from the rest of the truck business.

What that new secret bomber project portends

Work, it seems, has begun on a new heavy bomber for the USAF. As we have known for some months, the evidence is simple but clear. Northrop Grumman's first quarter 2008 financial report booked $2.6 billion in revenue from classified programs. At the same time, the backlog at the company's aircarft group increased by about the same amount. The suddenness with which this occurred further suggests a noncompetitive award. That is well within the US federal government's acquisition rules if the air secretariat determined that only Northrop Grumman could reasonably be expected to cost-effectively succeed at the endeavor.
Such a determination in turn points to some probable parameters for the plane. While this is not certain, if Northrop has the nod without protest, the design may substantially draw upon that of the B-2 Spirit. The Air Force may be favorably recalling the Navy's positive experience with the development of the on-time, on-budget, and substantially derivative F-18E/F Super Hornet. Such a choice would favor payload and range over speed; one alternative much discussed over the past few years was the so-called FB-22. This was an interesting idea, but one which brought a differnt viewpoint on what mattered in a bomber. What the USAF plans to do with that payload may signal something about its evolving corporate view of its future. The B-2A can already carry 64 precision-guided 250-pound Small Diameter Bombs, which is more than one might want to try to use at once in contested airspace. Rather, as a colleague has suggested, the USAF may be thinking of a plane that can carry real bunker-busters: bombs as big as 8000 pounds for erasing the mad mullahs' underground lairs.
It's breathtaking stuff, but it's real money as well. If that two-point-six billion turns into a production program of a few score billion, Northrop Grumman's shareholders, staff, and suppliers will be very happy. That would be doubly-bad for Lockheed Martin: no FB-22 or any other Lockheed bomber, and a possible raid on the F-35A budget to pay for Northrop's plane. That looks quite possible now that the new Air Force secretary (who might stick around past January) and chief of staff have signalled their willingness to trade fighters for drones and bombers. That's a reasonable choice to make. The Navy and Marine have themselves some 880 fighters, which is more than almost anyone else could bring to a fight. There is indeed room for alternate ideas about force structure.
This is why the bomber decision is good news as well for drone-builders. With a succession of durable, if very different, reformist defense secretaries--Rumsfeld and Gates--a real willingness to change may finally be taking hold across the department. What is arguably a scaled-down Cold War force structure may morph soon into one more suitable to policing the global commons in the twenty-first century. Some of the companies that did well under the old regime may yet thrive under the new, but not all have bought into the options for thriving under change. Customer spending patterns of 2011 or particularly 2014 may be very different. Knowing what those will be, as Rumsfeld used to say, is not so knowable, so knowing how to react and adapt is all the more important.

The Norwegian fighter decision, and our views on the near future of the combat aircraft market

The other week the Norwegian government announced—and a month before its deadline at that—its decision to replace its F-16 Fighting Falcons with F-35 Lightning IIs—the Joint Strike Fighters (JSFs). After Eurofighter GmbH withdrew its Typhoon earlier this year from Norway’s fighter replacement competition, the sole alternative under consideration was the JAS-39 Gripen Next Generation (NG). Upon the announcement, Saab’s share price immediately dropped 12 percent.

The Norwegian government’s choice wasn’t shocking, in that Russia-bordering Norway values deeply its close military relationship with the United States, has been a development partner for the F-35 for some time, and had apparently wrangled a robust work-sharing package out of Tom Burbage, Lockheed Martin’s JSF honcho. Still, the Swedish government respectfully noted its disappointment. More so, according to Defense News, Stockholm

also manifested surprise over Norwegian Defense Minister Anne-Grete Strøm-Erichsen's statement that the JSF was "the only candidate" that fulfilled all the operational requirements specified, and that the Lockheed Martin aircraft was offered to Norway at a "lower price than the Gripen NG."

The former point about requirements is believable, if the F-35’s lower radar signature was a big selling point in this particular competition. The latter point about the price is yet puzzling. The Norwegian government would not officially comment, but a source at the defense ministry in Olso told Defense News that

The basic unit price for the JSF was considered to be lower than the basic price for the Gripen. Norway will pay about $2.5 billion for 48 aircraft or $52 million per unit. This is the no frills price.

That would be a great deal on a fighter jet these days. It’s also a great deal less than the $200 million per unit that the Israelis have been told to budget for their F-35s, but Lockheed Martin insists that this higher figure includes training, spare parts, maintenance, and other provisions. It’s worth remembering some numbers at this point. According to the USAF’s 2009 budget, USAF procurement costs for the F-35A will amount to $146 billion for 1763 aircraft, or $83 million per plane (ignoring inflation, as always with these things). The F-35B (vertical landing) and F-35C (arrested landing) versions will cost a bit more. The USAF’s part of the research, development, testing, and engineering (RDT&E) program is expected to cost at least $44 billion, much of which has already been sunk, though the US Navy and the US Government Accountability Office (GAO) estimate higher costs yet. According to the GAO, the life cycle costs of the aircraft fleet (excluding funds, that is, for RDT&E and procurement) will amount to $147 billion. Since that grand total comes to $191 million per airplane, the Israelis may just be bracing for the fully-frilled price.

Notably, neither Lockheed Martin nor the Norwegian government has stated whether the price is guaranteed fixed. That’s disconcerting, given that $52 million may not even cover the marginal production costs of each additional aircraft, and also given the pattern of cost overruns in fighter aircraft development. The unsettled nature of the costs has stressed out a few governments: EADS CASA briefed Australian Defence Minister Joel Fitzgibbon on the Typhoon when he stopped in Spain on his recent European tour. Australia had been considered a safe sale for Lockheed Martin, but with 24 Super Hornets on the way to fill the gap in production delays, anything is possible—including just a second order of Super Hornets.

Indeed, Boeing’s excellent work with the F-18E/F/G has been the one notable exception to that pattern of fighter planes costing more than expected. The aircraft is admittedly somewhat derivative, but that’s a reasonable way of controlling costs. Today, the single-seat F models seem to be available in quantity for under $60 million each, a reasonable price for a twin-engined fighter bomber with good range. The Super Hornet recently garnered an endorsement from Loren Thompson of the Lexington Institute. I liked that briefing more than his last one, and I am sympathetic to the argument. Almost six years ago, I wrote an editorial in Proceedings of the U.S. Naval Institute arguing that the Super Hornet made more sense on the dollar than the F-22 Raptor—even for the USAF. That argument has been overtaken by the progress of the program, but it still points to a few relevant facts.

As US Defense Secretary Robert Gates famously observed, the Raptor has not been sent to either Iraq or Afghanistan. Whatever its merits, the only point to its particular emphasis on air-to-air combat would be found in a war with one of those elusive near-peer competitors. If that is China, in a war to defend a free Taiwan, then it is unclear just how those Raptors would be brought to bear—unless they were actually based on Taiwan itself. As RAND has made clear, Kadena field on Okinawa must survive a Chinese missile bombardment intact for the Raptors to be available off Taiwan in any meaningful numbers. Otherwise, the whole war will be fought by the Taiwanese air force, Raptors flying on fumes from Guam, and what carrier aviation the US Navy and USMC can bring.

In that context, it is silly to speak in the United States of an Air Force requirement or a Navy requirement or a Marine Corps requirement for fighter aircraft. There is only, meaningfully, a national need of some quality and quantity for air-to-air combat capability. If there are near-peers within range of US air bases with hundreds of presumably precise missiles, it is carrier-based fighter aviation that will be critical. Even the USAF seems to have realized this—that new transport pilot chief of staff is shifting the emphasis of procurement to new long-ranged bombers, attack drones, and a range of what we once called ‘air commando’ aircraft.

It’s entirely conceivable, then, that this could mean a significant reduction in US plans to buy the -A (conventional take-off) version of the Lightning II. That could, in turn, drive up the average price of the remaining aircraft, though much of the development costs are already sunk, and thus irrelevant to rational decisions. While it could make sense for the US government, it wouldn’t help Lockheed Martin’s marketing efforts versus those of Saab and others. Dassault, for example, may be continuing to look for its first export customer for the Rafale, but it has a capable product. MiG has been similarly unsuccessful outside Russia, but Sukhoi has had success with exports of or co-production licenses for the Su-30 series to Algeria (44 aircraft), China (76), India (230), Indonesia (10), Malaysia (18), Venezuela (24), and Vietnam (15).

It’s notable, though, that only the Indian order was of remarkable size. Across Europe, the governments funding the Typhoon are buying their full tranches of aircraft not because they want to, but because their contract with Eurofighter GmbH leaves them little choice. That doesn’t mean that all those aircraft will necessarily be put to good use. For Operation Granby in 1991, the RAF only sent 78 Tornado F3s and GR1s to the Middle East. It is not entirely clear what it will do with 232 Typhoons. With 60 million Iranians across the Gulf, it’s conceivable what the Saudis might do with the 72 that they have ordered. After that, though, the opportunities for large sales thin out quickly. The opportunities of note are in Denmark (48 aircraft), the Netherlands (85), Switzerland (30), Croatia (12), Romania (unclear), Bulgaria (16), Brazil (36), and India (126).

With a moderately priced and versatile airplane, Saab in particular is far from done. The Gripen is in service in Sweden, South Africa, the Czech Republic, Hungary, and Thailand. Its performance against the F-16 in visual-range combat exercises at the 2006 and 2008 Red Flag Alaska meets was said to be impressive. Its bare-base performance is exceeded amongst new fighter aircraft on the market only by the short-ranged F-35B STOVL version of the Lightning II, and this is an important selling point in a world with ballistic missiles and cluster munitions (see that point about Kadena above).

At the same time, Saab doesn’t seem motivated about developing a manned combat aircraft to follow the Gripen NG. Its aircraft development money today is instead heading into the Neuron project, the cooperative effort led by Dassault, EAB, RUAG, EADS CASA, and Alenia to build a stealthy attack drone. Saab is responsible for the overall design, fuselage, avionics, fuel system, and flight testing. The project is getting seriously underway: Saab subcontractor Tjust Mekaniska has just begun machining parts. This should not be surprising: with the Gripen NG, Lightning II, Rafale, Typhoon, and Sukhoi 35 programs all well underway, most of the modern world and beyond will be well-equipped with all the manned fighters that it needs for decades to come. What’s really in increasing demand these days are drones that can undertake a range of roles from surveillance to precision strike, but with quantumly better persistence than existing manned jet aircraft. That, thus, is where the smart money may be flowing today.