U.S. Bomber Planes at $81 Billion Seen 47% More Than Plan | Bloomberg

By Tony Capaccio

The U.S. Air Force’s new long-range bomber may cost as much as $81 billion for the 100 planes planned, 47 percent more than the $55 billion sticker price the service has listed.

The Air Force based its estimate of $550 million per plane on the value of the dollar in 2010, and it represents only the production costs for an aircraft that won’t be deployed for at least 10 years. Including research and development, the bomber would cost as much as $810 million apiece in this year’s dollars, according to calculations by three defense analysts.

The cost of the new bomber will draw close scrutiny in an era of declining defense budgets, as the Pentagon faces $500 billion in reductions over nine years under the budget process called sequestration. The Air Force’s track record also is being questioned after soaring costs for the aging B-2 stealth bomber the new plane would replace and the F-35 fighter jet, the most expensive U.S. weapons system, that’s now being built.

“The Air Force has zero credibility on start-of-program cost estimates unless and until it ponies up real details about the bomber and its acquisition plan,” Winslow Wheeler, a former Government Accountability Office defense analyst now with the Project on Government Oversight in Washington, said in an e-mail. “It is a fool’s errand, or worse, to pretend the cost stated now is anything but a bait-and-switch buy-in gambit.”

B-2, F-35

The B-2 was planned as 132 planes for about $571 million each in 1991 dollars before the first Bush administration cut the fleet to 20 planes in the early 1990s. That resulted in a price of about $2.2 billion per bomber, a fourfold increase, in a program that remained highly classified during its development.

The F-35 program has a current price tag of $391.2 billion for 2,443 aircraft, a 68 percent increase from the projection in 2001, as measured in current dollars, for 409 fewer planes than originally planned.

Whatever its ultimate cost, the new bomber would mean billions for the defense contractor chosen to build it. Lockheed Martin Corp. (LMT) of Bethesda, Maryland, and Chicago-based Boeing Co. (BA), the No. 1 and No. 2 U.S. defense contractors, said in October that they’ll bid for the project as a team. They may end up competing against Northrop Grumman Corp. (NOC) of Falls Church, Virginia, the prime contractor for the B-2, which hasn’t yet announced an intention to bid.

The Air Force has requested $379 million in funding for development this year, increasing to more than $1 billion in fiscal 2015 and $2.8 billion in fiscal 2018, according to data released by the service.

Through 2023

The Air Force hasn’t provided its rationale for the increased spending. The Congressional Budget Office said the Air Force plans to request $32.1 billion through 2023.

The $550 million per plane projection for the new bomber is “the only cost estimate approved for public release at this time,” Air Force spokesman Ed Gulick said in a statement.

Gulick said the estimate is a “target that helps balance capabilities and cost” and is being used in “rigidly containing the design” of the bomber.

The more complete “program acquisition unit cost” will be derived later by adding research and development, as well as estimating “inflation up to the year you purchase aircraft,” Gulick said.
The Air Force’s cost estimate “seems rather ambitious,” said Todd Harrison, a defense budget analyst with the Center for Strategic and Budgetary Assessments, a Washington-based policy group. He calculated a price of $810 million a plane in fiscal 2014 dollars, or $81 billion for 100, based on $20 billion in projected research and development costs.

Historical Increases

“Aircraft programs, and stealth aircraft in particular, have gone far over their initial cost estimates,” Harrison said. “If you factor in historical cost growth, the total program cost could easily top $100 billion.”

Russell Rumbaugh, a defense analyst with the Stimson Center, also a policy group in Washington, said his comparable estimate is $682 million per plane. Kevin Brancato, a defense analyst with Bloomberg Government, projected $784 million per plane in this year’s dollars.

“The incentives in the budget system almost force the services to low-ball their cost estimates,” said Gordon Adams, a professor at American University in Washington who oversaw the national security budget for the White House under President Bill Clinton. “Otherwise they do not get the program in the budget. It grows later.”

The Air Force now operates a fleet of 159 long-range bombers, including 63 swing-wing B-1Bs developed in the 1980s by Rockwell International, which is now part of Boeing, and the 20 B-2s from the 1990s.

Aging B-2s

The new bomber is needed because the “B-2 is an older airplane that’s getting expensive” to maintain and “it’s not as stealthy as we’re now capable of making aircraft,” Deputy Defense Secretary Ashton Carter said in an interview before he left office Dec. 4.
As the Air Force anticipates its needs 10 or 20 years from now, “expecting those aircraft to perform reliably at such advanced ages may prove to be overly optimistic,” said Mark Gunzinger, an airpower analyst with the Center for Strategic and Budgetary Assessments.

The Air Force is still flying 76 B-52 bombers from the H series that entered service in May 1961. They remain capable of launching conventional and nuclear bombs and cruise missiles.

Top Projects

The Air Force has identified the new long-range bomber as one of its top three weapons projects, along with the F-35 from Lockheed and the KC-46 aerial refueling tanker made by Boeing.

Defense Secretary Chuck Hagel has said the bomber will support the U.S. strategy of rebalancing toward Asia. Pentagon officials have said they’ll do as much as they can to shelter such priority weapons systems from the automatic budget cuts.

An Air Force summary of the bomber describes a stealth aircraft able to deliver both nuclear and conventional weapons. While the “baseline aircraft” would be piloted, the bomber would be designed to “enable future unmanned capability,” according to the service.

Beyond that, the Air Force, which has said the bomber would incorporate “proven technologies,” has said little about its classified plans for the new plane.

“It would be a mistake to view this aircraft as simply another bomber,” said Retired Lieutenant General David Deptula, the Air Force’s former chief of intelligence, surveillance and reconnaissance.

‘Cloaked in Secrecy’

It may take off on a bombing run, using intelligence and surveillance sensors provided from other platforms and on-board jammers to degrade ground radar, he said in an e-mail. The bomber crew also could use its radar and sensors to direct land-and sea-based strikes, as well as collect intelligence on the return flight, according to Deptula, who helped plan the air campaign in the 1991 Gulf War.

“The operational characteristics are going to be cloaked in secrecy for a while, and I think that makes perfect sense,” Air Force Chief of Staff General Mark Welsh told reporters in November.

Welsh said capabilities would be carefully weighed against the $550 million-a-plane target.

“What we don’t want to do is try to reach into some level of technology that’s impractical.” That’s when “prices start to get out of control and your requirements start to drift,” Welsh said. “We are not going to go there.”

Adams cited the B-2’s cost escalation, as well as plans for a medium-range bomber that Defense Secretary Robert Gates canceled as too costly in 2009. Gates supports the new bomber.
“How many times are we going to go down this overpriced bomber road?” said Adams said. “It’s like Lucy with the football. We never get to kick an affordable aircraft through the goalpost.”

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