Grand assumptions make an ass out of the F-35 program and customers

According to a U.S. DOD test report (PDF) we now know that the main business plan assumption for the F-35 program known as the Autonomic Logistics Information System (ALIS) that was to provide for affordable maintenenace and sustainment of the aircraft has gone bust.

Here is what we were told in 2007 about ALIS.

Now that the first F-35 is in test flights and the U.S. is working on a two-plane early production contract, the logistics systems also are coming to life.

Lockheed Martin says this maintenance strategy means that logistical support will make up about 50% of total program costs, compared to 67% of total costs under a less centralized strategy. Also, the planes are designed with maintenance in mind, an approach that is expected to yield further savings.

"Designed with maintenance in mind".

Sorry, not new. (PDF). Ditto with the Gripen.

Also the F-22 at the time of this article was using performance based logistics. It worked OK; and of course, was tailored to one customer. USAF--with its poor maintenance management deskilling--flip-flopped this around over the years which added to the cost per flying hour.

Reality hit.

Under ALIS, the F-35 flying customer doesn't buy spare parts. They buy flying hours.

"They're not just buying the jet, they're buying the support along with it," said Kimberly Gavaletz, Lockheed Martin's vice president for F-35 global sustainment, in a telephone interview this week.

Under the maintenance plan, F-35 owners will pay for anticipated operating time, not spare parts. Based on how much the aircraft are expected to fly, Lockheed Martin will manage parts inventory, plan overhaul schedules and train the military crews who support aircraft operations.

"We don't want the warfighters out there worrying about how many spare parts they have," Gavaletz said.

In a flying hour buy plan at a fixed price per hours. This should be great.

So, the F-35 is really a lease plan since you can't do anything with the jet unless the people that created it have you sign off on more money depending on your flying hours.

More...

In addition to aircraft maintenance, the new logistics plan tackles a host of other tough issues. For the plan to achieve its savings goals, all of the partner nations must sign on to the F-35 program's regional approach to aircraft maintenance.

And...

Lockheed Martin says it is working through these issues, in partnership with the Pentagon program office. So far, the need to keep costs down has helped to offset pressure to build extensive facilities in each participating nation, Gavaletz said.

Define "extensive facilities". Would that be $1.6B for a partner nation? More? Less?

"They all want to do everything in every country, but they're also realistic that that's not going to be the case," Gavaletz said. "My biggest concern is people will put too much in and we'll have too much capacity."

So in other words, the message of turn-key maintenance provided by the seller of the aircraft is not a done deal and someone decided to keep the freight train moving anyway?

Yes, not all of the rabid rent-seekers seem to have grasped that concept.

Other assumptions in ALIS were that as time when on and alleged learning curve went up, Lockheed Martin sub-contracts would would build more reliability into spare parts and charge less for them. Really no problem right? Since 4000,5000, even 6000 F-35s might be made...

LM would also provide regular beat-downs on their sub-contractors to make sure the spares were on-track to cost less not unlike a Walmart supply chain plan. "You want to continue to provide your product for the F-35 do you not? Good boy. Also your contract to build F-35 flux-capacitors will be up for competition again next month. I know your 100 person shop has been doing this for 3 years now but rules are rules. Remember? Efficiencies. Don't forget efficiencies. Good luck tiger."

Unknown if any additional margin from this would find its way back to the flying customer, or into the LM profit margin.

And who cares? By this time the customer is on the hook. There isn't another provider because no government or any other potential provider has access to proprietary LM processes and design procedure. Ditto for PW jet engines.

Years in...

--Customer: "I have noticed an uptick in contract costs for flying hours".

--Contractor: "Yeah? What are you going to do about it? Down your whole fleet, fly less or pay up?"