Opportunity cost of the Air Force’s inventory

The U.S. must balance current exigencies with future requirements. Any single-focus approach bears a huge opportunity cost…

 

Operating the smallest, oldest, and least ready force the USAF has ever fielded is a clear example. The decline has been long in the making. The baseline of “the new normal” has been shifting through three decades.

 

In 1990, the Air Force fielded 3,206 fighters and 737 bombers.

 

Today, it has 1,731 fighters and 157 bombers–with only 186 F-22s and 153 F-35s fifth generation, stealthy aircraft.

 

The F-22 production line has been dismantled. Only 48 F-35A —the Air Force variant– are being procured by the US each year, versus the more than 100 originally programmed.

 

Mobility aircraft–tankers and transports procurement was slashed by over 50 percent, resulting in the most geriatric and smallest fleet in history. It’s worth noting that all elements of the Joint Force—the U.S. Army, Navy, Marines, and Coast Guard—have been similarly underfunded and unprepared to deter and, if necessary, defeat, peer adversaries.

That was from Lani Kass over at Breaking Defense. Here is her recommendation to stem the force structure decline in anticipation of a peer adversary:

The simple truth is that the F-35 is America’s only 5th generation aircraft in production. Over the past two decades, the number of aircraft designed for high-end warfare has declined precipitously. The U.S. acquired only 21 B-2 Spirit stealth bombers, a small fraction of the original order of 132. The F-22 Raptor — the most capable combat aircraft in history — fell victim to similar strategic myopia, with fewer than half of the required 381 jets procured. Their production line doesn’t exist anymore. In other words, the U.S. failed to anticipate and learn.

Pointer from ComNavOps; here’s a good part from his review:

She goes on to describe the wonders of the F-35, thereby ignoring or violating her own warnings about dogma (F-35 stealth), debacles in the making (is there a better example of a debacle than the F-35?), the opportunity cost of ‘single focus’ (is there a more stunning example of ‘single focus’ than the F-35?), and the human tendency to accept the ‘new normal’ (is there a better example of our acceptance of the ‘new normal’ than the downgraded and deferred F-35 capabilities?).

Good points. The opportunity cost of the F-35 is very large. Proceeding with the production, upgrade, and deficiency fix of the F-35 program precludes a rapid set of parallel developments. Yet if we are to diversify and explore new options, now is the least risky time to do it. Only if we were on a war footing would budgets afford both the F-35 program with its logical following, as well as a rapid deployment of capital to austere development teams for competitor programs which still amounts to a major development effort.

Standing up competition is expensive. It is often turned down because we only see its benefits in production and operations, and they cannot be articulated to a decimal point in the R&D planning stages.

Yet with increasing returns to scale provided by “learning curves” in production, the sunk cost fallacy looms large. Each one will be cheaper than the last (well, maybe not always). And the prospect of recovering inventory levels is much nearer in the future with the F-35 than with new developments.

But if we are in the midst of peer conflict, as we are led to believe, then we should be inviting the challenge to start rapid, iterative, developments, because the need to adapt and change in a peer environment is going to be crucial.

Force Structure

Another thing I’ll not is that the precipitous decline in the Air Force’s force structure from 1990 to today that Lani Kass pointed to is a trend continuing back until 1955, as Chuck Spinney documented in his classic 1980 piece, “Defense Facts of Life” (Recommended).

Between 1990 and today, fighter aircraft have fallen 46%, or an annual drop of 2%. Spinney showed that between 1955 and 1980, the Air Force fighter aircraft inventory fell about 60%, or -3.5% per year.

It might seem that we aren’t doing as bad as we used to; aircraft performance is continuing to improve and we can afford a bit more than the previous trend would indicate. However, defense investment budgets fell a great deal after the Korean War, and then after the Vietnam War. From 1955 to 1980, we move from the end of high wartime budgets to a low point of peacetime budgets just before the Reagan buildup of the 1980s.

Between 1990 and today we saw a big budget recovery. Defense budgets maintained a high wartime level of investment basically since 2001, without much to show for it. (There was downward blip during the sequestration years where the budget went slightly below $600 billion for 4 years, FY2013-2016, yet you wouldn’t know it from defense stocks which more than doubled over that same timeframe).

Overall, it seems that the “cost disease” problem of higher unit costs leading to smaller force structures probably hasn’t gotten worse since Robert McNamara took the helm in 1961. It seems to be a steady trend, and not just for fighter aircraft, but almost all weapon systems platforms. One question is whether the performance gains are worth the force structure shrinkage (i.e., there is no cost disease, that’s only an illusion because we can measure costs better than performance).

On the other hand, if we estimate that there is an acquisition problem, then another question is whether reform can reverse the trend. From looking at the force structure, it seems that all the reform efforts since World War II haven’t made much of an effect on improving the acquisition process. Yet I would contend that none of the reforms have addressed the most pressing problem leading to overly centralized and rigid processes: the program budget

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