Australian F-35 Work Promises “Not Realized”: National Auditor

PARIS --- Australian industry benefits from the F-35 Joint Strike Fighter program fall short of what successive governments have claimed, the Australian National Audit Office said in its latest report on Major Defense Programs.

ANAO’s Feb. 28 report also revealed that, as of June 2016, the acquisition cost of the 72 F-35As planned by Australia has increased by over 30%, to A$16.7 billion, because of the US dollar’s appreciation over the Australian dollar.

Australia will thus end up paying A$232.5 million for each of its F-35s, a figure that is far in excess of the latest US$85 million unit cost now claimed by the F-35 Joint Program Office (JPO).

The ANAO report also reveals two new problems that will limit the operational capabilities of the F-35 when it enters RAAF service:

-- “The Project is unable to deliver the Maritime Strike [missile] originally scoped at project approval…. due to changes in the approved Block 4.1 and Block 4.2 scope, as agreed by the JSF Executive Steering Board.

An alternate missile has been identified, and “is assessed to deliver the required capability,” and “approval to procure this alternate capability is currently being staffed through defence for Government Approval.”

-- “Defence acknowledges schedule risk remains with the Block 3F software due to the complexity of integration and fusion. Notwithstanding the risk, the JPO is forecasting Fleet Release of the Block 3F software in late 2017 to coincide with the scheduled completion of SDD.”

These findings clearly contradict claims by Australian ministers that the program is progressing well. ANAO also cautioned that “Establishing the required ICT infrastructure to support stand up of the JSF capability” is at risk, and that “the Australian Training System may not be established in time or with the required capability to support RAAF training of personnel, with the consequence of affecting RAAF capability declarations.”

Contracts fall well short of promises

Australia is not alone in having obtained less F-35 work that promised by Lockheed Martin, Italy having for example publicly complained of the shortfall, but Australian ministers continue extolling financial and industrial benefits flowing to Australia that ANAO says do not exist.

In a Feb 28 statement, for example, Minister for Defence Industry Christopher Pyne said that “the benefits the F-35 program provides to local economies, employment and skills….are to be celebrated,” adding that “So far, we have been very successful in F-35 production work, with over A$800 million in production contracts to date.”

The ANAO found that, on the contrary, “Expected economic benefits (return on investment, market share/regional footprint) of Australian Industry participation in the global JSF Program are not realised.”

Neither Pyne’s office not the Australian DoD media office have responded to requests for clarification e-mailed Feb. 28.

Financial status

ANAO also provided some interesting information about Australia’s financial contributions to the F-35 program. As of June 2016, for example, it had only paid A$933.2 million out of the A$16.738 billion it has budgeted for the acquisition program, with only a further A$$246 being earmarked in the 2015-16 Budget.

In terms of schedule, Australia will receive its first 14 F-35s by June 2019 –- 30 months late – but ANAO notes that the Department of Defence believes it can catch up and have the entire 72-aircraft fleet delivered by September 2023, or 3 months early.

Major Risks and Issues Identified by ANAO

The JSF is a large and complex program and many challenges remain. While as a MoU Partner Australia does have a role, overcoming technical challenges is primarily a US responsibility.

The major risks facing the NACC Project are:
• Possibility of US and JSF Partner Governments altering commitments to the broader JSF Program that impacts Australian acquisition and life-cycle costs.
• Integration of the JSF into the Australian Defence Force (ADF) systems.
• Establishing the required facilities and Information, Communications and Technology (ICT) infrastructure to support stand up of the JSF capability.
• Lack of timely data and releasability of JSF program information that impacts the timely, efficient and effective integration of the F-35 aircraft system into the ADF.
• The maturity of the JSF System and ability to meet IOC and FOC.
• Transition of the JSF into service at the same time RAAF ramps up Australian Super Hornet and Growler capabilities.
• Establishing and ramping up the JSF sustainment system.
• Establishing the Reprogramming element of the program.
• Ensuring required industry outcomes during JSF production and transition into service.
• Significant workforce challenges in effectively manning the Defence acquisition and sustainment organisations impacts program management activities to establish the JSF capability.

Click here for the ANAO’s F-35 Project Data Summary Sheet (18 PDF pages)

Click here for the full Major Project report (490 PDF pages) both on the ANAO website.

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