Friday, May 13, 2011

BlackFive Clears Up F-35 Cost 'Confusion'

 and Ares Dances....poorly

Update 2: BlackFive has explained his interpretation of the chart he used, and as he uses it there is no error. I interpreted it differently (which makes it my error), and would have constructed the chart  somewhat differently to make it clearer. (But then, since I'm Retired AF, I'm a 'Powerpoint god' ...... Note the small 'g')

Updated and Corrected: There was an error in Blackfive's graphic that I missed and repeated here and am keeping for historical accuracy. Essentially the graphic lists RDT&E and MILCON as a part of APUC, when it is part of PAUC. The error does not materially change Blackfive's assertion that what is of importance is the URF, and not the other higher and scarier costs the F-35 detractors like to toss around. My corrections in RED below.
This error is regrettable, mostly because it will give disingenuous F-35 'haters' a hook to ignore Blackfive's larger point.

For the record, and per my DAU course materials, the following is true: 
APUC (Average Procurement Unit Cost) = total procurement dollars (in program base year dollars)/ total procurement quantity. APUC is calculated by dividing total procurement cost by the number of articles to be procured. Total procurement cost includes flyaway, rollaway, sailaway cost (that is, recurring and nonrecurring costs associated with production of the item such as hardware/software, systems engineering (SE), engineering changes and warranties) plus the costs of procuring technical data (TD), training, support equipment, and initial spares.

PAUC (Program Acquisition Unit Cost) = RDT&E $ + Procurement $ + unique MILCON $ (in program base year dollars)/Total procurement quantity + RDT&E prototypes that are production reps used for IOT&E (if any)

Original Post:  
I've been on the road to DC this week (two days and three flights to get back when it should have been a 2+ hr non-stop...another story) so am just catching up on BlackFive's post and the Ares Blog response,  all courtesy of Solomon at SNAFU! (This started out as a SNAFU! comment but the more I thought about it the more I wanted to call B.S. on the B.S.)

When it comes to F-35 ‘costs’ Sweetman is still playing it like he does when frequent commenter 'jackjack' calls him out on the Ares' abuse of F-35 cost numbers. In other words, he talks past the point being made to keep beating the "B.S. Anti-JSF Drum" (patent pending) and holding the JSF costs he does note as 'high' while carefully avoiding equivalent costs (if the info even exists) for other systems. While this Sweetman tactic has at times driven poor 'jackjack' around the bend in frustration, I doubt if it will be little more than mocked at BF for the fey strawman tactic it is. The part of Sweetman's Ares response that directly referred to and linked back to BF's post demonstrates either:
1. The Ragin' Hedge Baby from the Shires didn't really read Blackfive's post or
2. He's assuming a $ cost number used by BlackFive was directed only at Sweetman's use of it.
3. He read the BlackFive post, but thinks his interpretive dance schtick will keep foolin' the rubes.

Sweetman Channels Groucho: "Who are you going to believe? Me or your own lying eyes?"

NOWHERE does BlackFive claim what Sweetman says he does. To whit Sweetman’s parenthetic:
“Blogger BlackFive, for some reason, thinks that APUC includes lifetime O&S costs, and goes off to draw some predictably inaccurate conclusions”
Sweetman is apparently referring to BF’s statement at the link [bold emphasis is mine]:
“Whoa, wait a minute, you say, I’ve seen costs as high as $110 million a copy!

I’m sure you have. But they don’t reflect the URF. Instead they may reflect the Total Ownership Cost (TOC) - the cost of everything necessary to operate the aircraft over the span of its service life - or any of a number of other costs used in the project for various purposes, but it won’t reflect the one we should be most concerned with, the URF.
Yep. 100% accurate.

I find it interesting that Sweetman would assert BF is wrong, when in fact BF’s post includes a graphic (below) that clearly illustrates (with errors irrelevant to BlackFive's point) what gets counted within each 'cost' category and contains no assertions inconsitent with the graphic.

BlackFive's Point 
As I read it, the point of BlackFive’s entire post was about recognizing the URF cost for one airplane as the most relevant cost for discussion: the one people can understand that is similar to the cost they pay when they buy something like a car. The URF value is the value of one plane that comes closest to the expression of what it takes (the discrete value) to produce a unit/commodity that is at risk of loss, or of the value that could be consumed by wear and tear during use. It is a very sensible measure of cost for discussion by the general public and insiders as well.

Sweetman's Fetish
Sweetman’s fetish for APUC and the relevance he assigns to it on the other hand is not nearly as appropriate or useful, unless you like being obtuse for some reason. APUC includes not only the cost of value gained that will not be worn out or lost, but includes costs over which the program has no control, such as military construction, which might not actually occur or will even be ‘gamed’ (now irrellevant anecdote removed.) Even so, I would be comfortable discussing and comparing APUC for various programs IF they were adjusted for comparable-year dollars and even better, if adjusted in quantities for equivalent combat capabilities. associated with production of the item such as hardware/software, systems engineering (SE), engineering changes and warranties) plus the costs of procuring technical data (TD), training, support equipment, and initial spares. But there is one aspect of APUC that makes it VERY inappropriate for use, that I also note Sweetman is careful to avoid mentioning: it includes ‘sunk’ cost, most notably RDT&;E Production, Engineering, and Technical Data  costs that are already incurred.  Since the primary production line for the F-35 is pretty much already stood up, and all the suppliers' production capabilities are running in place waiting for higher production demand, this has to represent a huge chunk of APUC that is already sunk cost. I say Sweetman is “careful to avoid” because while I don’t know if he’s mentioned frequently or ever, it should be stated EVERY time APUC is used and he doesn’t. This failure to do so is, IMHO, a Lie of Omission: one that moves from ‘venial’ to ‘mortal’ the farther along a program is into development and as the increasing % of APUC associated costs become sunk costs.
BlackFive almost nailed it. So what if he cut the 10-ring instead of hitting dead center? Sweetman's response is just more of his pushing his precious and pathetic meme.

There. Didn't have to change all that much after all.


Solomon said...

wow. Just wow!

Thanks for to work on my blog fu but i posted some of your thoughts and the link to this story.


B.Smitty said...

SMSgt Mac,

I'd be interested to know how the APUC costs break down. I believe initial spares and training do take up a significant chunk, but I don't know how much.

SMSgt Mac said...

It would be my guess that the amount of sunk cost in the 'Training' and 'Initial Spares'(Long lead items usually invested in 2-3 years in advance) are not insignificant, but they have to pale against the production infrastructure cost. I know a guy in Training (at leaast he used to be) if I run int him around town I'll try to get an indication from him. But I'm sure if someone wanted to drag through the contract items to date, a ROM estimate could be built. Volunteers?