Okt 25 2012

Comments on Dutch GAO Report: “JSF withdrawal options - October 2012″

Gepubliceerd door JSFNieuws.nl om 18:02 onder Global F35 News

Between the lines of the latest Report of the Dutch Government Accountability Office (Rekenkamer), an inconvenient truth can be found, like Johan Boeder wrote in an editorial comment on JSFNieuws: “F-35 unavoidable - F-35 unaffordable”.

Some observations about the objectivity of the report and other facts

(1) The GAO report was leaked by Dutch MoD to the big (pro-JSF, pro-industry lobby, right winged) Telegraaf. In my opinion it can be seen as an pre-emptive strike to publish a small part of the facts in the report in a way that is positive fort hem.
By doing that today NOBODY (TV, radio) will hear the full truth written down in the report. Some of the facts are shocking.
(2) The Dutch MoD, a close circle around the minister and persons involved in the JSF, got the concept of the report one week ago to give a last comment on the report. The Dutch minister of defense, Mr. Hillen, said the parliament “he would try to find the leak”. But in fact he must say “I failed” (must be easy to find the person when you have controlled circulation of a document).
(3) By leaking they were forced to lift the embargo, it was lifted yesterday afternoon about 15.30 hours. Since I am able to read/study the 144 page report.
(4) The scope of the report is very restricted The scope is: is it possible to leave the SDD/the PSFD/the IOT&E and what are the options of leaving in terms of costs.
(5) The information is mostly based on data of Dutch MoD, p.e. budget data, O&S data, F-35 performance data, evaluation conclusions of the 2008 evaluation, planning data is fully based on Defense documents, clearly without independent audit (because this was not the scope of the report). By mixing this in the same report; it gives the impression that also these data (performance, budget) has been audited independently. See Appendix 1 and Appendix Literature. For example: no word about the Canadian or
Australian audit reports. Some references to US-GAO 12-437 and US-GAO 1993_software testing (!).
(6) Interviewed: persons of Dutch MoD (DMO); Dutch NIDV (Industry), Dutch Ministry of Economic Affairs. All pro-JSF.
(7) Used data: earlier document send to Parliament; documents of MoD, MinEcAffairs; publications international press; internal data of MoD, MoEcAffairs. All pro-JSF documents.
(8) No interviews with independent auditors, think tanks or GAO of other partner countries
(9) Opinion about alternatives (F16 Block 60, Saab Gripen) based on opinion of Dutch MoD/DMO.
(10) The calculations/options to stop with the F-35 (scope of the report) are considered in a more independent way.
(11) The conclusion that withdrawing from the SDD and IOT&E would not be a logical choice now, and will cost money, could be predicted in July 2012. Because SDD cost (€ 1 billion) are sunk costs and for the IOT&E we did order 2 F35As already. From that
point of view no news.

Very interesting, sometimes new, facts about the IOT&E

(1) The IOT&E will not be finished in 2015, but in 2019 (no one told the parliament, and in 2008-2009 they were sure it was necessary to buy the first F35As because the IOT&E would start in 2011! it shows the incompetence of Dutch DMO in even
predicting options in the near future.
(2) In an early IOT&E (between 2015 and 2019, that is early) Block 2 software will be the standard. No Block 3 will be used. (operational evaluation with Block 2, unpossible

Delivery

(3) One of the options studies a later purchase of the F-35, with 10 ordered in
2019, and the others between 2022 and 2027; with an IOT&E between 2019-2022 (!)
based on a decision in 2015
(4) Option 1: see table page 62 and page 64, delivery 2019-2022 of 8-8-10-10
aircraft, IOC 2021 or 2022
(5) Earliest IOC 2021 !!
(6) The F-16 will be operational until 2027 (was 2021, than 2024). Total
life-extension cost € 334 million/US$ 440 million. Operational capability will be more and more restriced.
(7) NL cannot operate conform NATO requirements any longer, due to growing restrictions in operational capability of F16 and due to lower numbers

Price and budget

(8) In april 2011 Dutch MoD officially decided to lower the number from 85 to 68 -F35As (we can not find that in the latest MOU-PSFD Appendix A)
(9) The Minister confirms (page 39) that they are working with a new number of about 56 F35As.
(10) The Minister confirms (page 39) that the RNLAF needs to reconsider their ambition level
(11) The budget is € 4.050 billion to purchase F35As (total budget was € 4,5 billion, 10% already used)
(12) Price level 2012 and used currency rate US$ 0.7752 in the report
(13) Original (2007) budget was € 8 billion (US$ 10.4 billion) to get 85 units; and recalculated € 6,5 billion (US$ 8.4 billion) for 68 units. This means average US$ 123,4 million/unit.
(14) When the budget will not change (and will stay on the current € 4.05 billion (US$ 5,22 billion) level a table (Figure 7, page 16) shows what will happen. Extrapolation learns that there will be money for 42 aircraft (as published by JSFnieuws in June 2012, but denied by MoD as “non sense”). It is BLACK ON WHITE NOW in the table Figuur 20; page 76.
(15) However the wording of the Dutch GAO is very carefully: no new number can be mentioned, because there are to much price-uncertainties

F-35 Operating & Support Costs

(16) Shocking are the new data about O&S costs
(17) Prior to 2006 they used O&S costs in 2001 (first evaluation) of € 2,9 billion and in 2005 of € 5,3 billion for 85 units
(18) In 2008 pre-evaluation they used O&S 9.05 billion (US$ 11,6 billion) for 85 units during 30 years or about US$ 137 million per unit/30 years.
(19) In 2009 (evaluation results based on these data) they used O&S € 9.8 billion (US$ 12.7 billion) for 85 units during 30 years or about US$ 150 million per unit/30 years.
(20) Now the Dutch MoD (so, not an independent auditor) tells Dutch GAO that O&S will be € 14,2 billion (or US$ 18,3 billion) or US$ 215 million per unit/30 years
(21) And for 68 aircraft i twill be € 13,2 billion (US$ 17 billion) or US$ 250 million per unit/30 years SHOCKING when compared with the data used in 2008 (official evaluation has to be done again)
(22) It shows that a smaller number will bring high costs/unit and the total O&S costs will not much lower (85 units, US$ 610 million/year and 68 units, US$ 567 million/year). This is a shocking difference.
(23) It fully confirms my O&S report april 2009 “F35 O&S costs doubled”, report to Dutch parliament and at that time strongly denied by Dutch MoD.
(24) No references in this “independent” report to Canadian and Norwegian sources who are telling us that also the current claim of Dutch MoD will be too low.
(25) No calculations about a fleet of 42 F35s, cost per unit. (and what about Denmark with a planned fleet of 25 units, etc.)

Claims when NL leaves the F35 project

(26) Page 28 and page 117 tell about the US Federal Acquisition Regulation, page 116 tells us what will happen when NL leaves the F35 project competely. Subcontractors will send claims to the contractors and the contractor (LM, P&W) will send a claim to US DoD and US Dod has the right to send the claims to Dutch MoD (based on US FAR and paragraph 6.12 of MOU-PSFD 2006). We didn’t know that.
(27) In 2006 (signing MOU-PSFD) amd 2008 (signing MOU-IOT&E) and 2010 (buy of 2nd F35A) Dutch Parliament Members were told to have a “free choice” by Dutch MoD (free, but …….). About the possible claims based on US FAR nothing was told. This may play a role in other countries as well. Is seems Canada, Australia, Italy, etc. don’t have freedom of choice any longer.
(28) When NL leaves the SDD we will continue to have the right to het production orders (wiring harnesses !) because we paid in the SDD

Other facts:

- JPO will decide mid 2013 about the PSFD/work for the engine of the F-35
- JPO will decide in 2014 about the PSFD-work of the airframe of the F-35
- The European footprint Production and Sustainment between Norway, Italy and NL still needs further negotiatons, no real steps taken since 2008

Reference:
On JSFNieuws.nl one can find a related article by Boeder, in Dutch, titled: The JSF Casino“, editorial comment on the Dutch GAO report.

Author:
Dhr. Drs VHJM van Neerven MSW MA, editor-in-chief & senior counselor VNC.communication.counsel

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