Guest post from Chris.B
Recently there’s been a number of articles written and comments made about the idea of reviving various aircraft as “low cost” solutions for service in the UK armed forces. In addition, the subject of cost has come up numerous times.
Why does one aircraft cost so much more than another?
Why is that one nation can afford to buy x amount of a new frontline fighter, while we cannot?
Some of the suggestions made have merit, but some I feel do not, and increasingly it gets frustrating trying to explain why certain things are not as cheap as people would otherwise believe. On that note then I thought it would be instructive to have a brief (it looked brief in my head) look at some of the concerns that go into costing military projects, in particular those involving aircraft.
Please note that this is by no means an exhaustive list and also that some of these factors might come into play when looking at other projects, while some will not.
Onwards and upwards then, starting with…
Research And Development
Quite simply, the upfront cost of designing a new aircraft. This involves everything from basic technical drawings, to computer modelling, to feasibility studies, wind tunnel testing of scale models, cost control studies, prototypes and the list goes on. At every stage there are groups of people making decisions and as a general rule these people are highly paid experts.
That involves a lot of upfront cash to be spent. It’s not sufficient just to say “we’ll revive xyz aircraft and that airframe costs abc”. There are various management processes and hoops that have to be jumped through, to ensure that large sums of money are not splashed out on projects that in all reality might not have a hope in hell of getting off the ground (figuratively, as well as literally).
The tale of Typhoon is a hallmark of this kind of expense. A group of foreign governments agree to pool resources. Studies are done, contracts are drawn up, then everything goes down the pan because one country doesn’t like the way it’s being put together. So the remaining countries now have to reassess the situation, come to a new agreement and sign a new batch of contracts.
At this point, someone else comes along and says they want it. Again new agreements are drawn up, contracts are signed. Then one of the original partners decides they’d very much like it if the aircraft could fulfil some new role that was never originally intended and which only they have a need for.
New agreements are drawn up. New contracts are signed.
All of this costs money and entails delays. Delays are bad because it makes it difficult for manufacturers to predict their future budgets. They’re simply not going to lay down money for new plant machinery or order expensive key components without a guarantee that there will be new work on the horizon. This is simply good business practice and you can’t really knock a company for doing it.
But even then, when the project has been approved and production is under way, politics can still rear its ugly head. A new government comes in and they decide they don’t need as many shiny, pointy things for the air force over the next 20 years, so they cut an order by 25%.
The manufacturer still has to make money and has already invested large sums in R&D, so that cost now gets spread over the smaller batch, driving up the unit price. In addition, they still want to make a reasonable profit and without large future orders they have no real choice but to take that cut now.
The reduced numbers also affect the supply from sub-contractors. Those small companies are looking at their books the same way the big “system of systems integrator” (I hate that phrase) does. Subsequently they will essentially penalise the main manufacturer for their reduced order size.
But it doesn’t end there. The main manufacturer then gets another nasty letter from the government; “we want you to slow down production”. Basically the government is trying to do what all governments do, and that’s balance the books by pushing as many expenses as they can into the future, irrespective of the total cost to the project. This is the essence, for example, of Private Finance Initiatives (PFI).
So the manufacturer now has to produce 10 less planes per year. They could tell everyone to just work really slowly and take more coffee breaks, but that still costs the same in labour along with a reduction of income from sales. A much more economical solution is to simply release a proportion of the work force. Of course this is a short term measure only.
The planes still have to be produced eventually, so the man hours required to do it will still have to be accounted for at some point. Except that now you have to pay for another year or so of bills. So not only has the project been delayed, but it also just got a bit more expensive overall.
At this point it seems that politics couldn’t do any more damage, however the Government still has one more ace in the hole.
See, at the last election our now incumbent fictitious government won a new marginal seat. Given that elections are essentially won and lost in the marginal constituencies, the government would now quite like to hold on to this one. So they sign a deal with the manufacturer to hand production of the control surfaces to a factory in the marginal constituency, securing both jobs and political capital in one fell swoop.
That poses a problem however, a problem which fits in nicely with the next segment.
Imagine if you will that Henry Ford was still alive and well. In a few months time he’d be coming up for his 148th birthday, which is mighty impressive. Except that out of curiosity he decides to take a tour of a factory building modern fighter aircraft, at which point he promptly has a heart attack and dies, thus restoring the balance of the space-time continuum.
So what caused the heart attack?
The sight of a very large hangar/warehouse being used to construct just a few planes at a time, with individual workers crawling over them to perform all manner of tasks completely by hand. There is little in the way of automation and no hint of a production line.
Compare this with the factories used to make cars, where the product moves steadily along a largely automated production line. Interchangeable components are inserted at various stages, in an order that has been pre-planned to make it as efficient as possible. Much of the work can be done by computer controlled robotic arms with an incredible degree of precision.
A decent factory working with a well planned system can produce something on the order of 100,000 cars annually. Or at the top end you have Hyundai’s massive Ulsan factory, which employs approximately 34,000 people and can produce something on the order of 1.53 million vehicles per year. Now that’s mass production.
The fact is that aircraft manufacturers simply don’t leverage the kind of savings that could be expected with better assembly processes. I accept that they’re building something significantly more complex than a hatchback and in nowhere near the same quantities, but there is still savings to be made.
A good example of this, albeit not in the realm of fighter aircraft, is the construction of the Navies new Astute class submarines. After consulting with an American firm, BAE was able to develop new construction methods such as laying the various circular sections flat to the ground to aid the installation of things such as piping.
Such efficiencies have not found their way into aircraft manufacturing. It could be argued that governments don’t order enough planes for it to be worth while, but maybe if those planes weren’t so expensive in the first place then the government would be able to afford more of them?
And now that we’re at the manufacturing stage, it’s time to get into some of the nitty, gritty of the issue.
Alone, engines are the most expensive single ticket items put into any aircraft. Designed to operate for prolonged periods of time with very little internal maintenance, at temperatures measured in the hundreds of degrees Celsius and at revolutions per minute (RPM) measured in the tens of thousands, modern jet engines must be both immensely powerful and yet highly reliable.
To achieve such an impressive feat means a very expensive design process, coupled with expensive material technologies. Engine components must be resistant to high temperatures and pressures, resistant to the wear of continuous high speed operation, and yet also lightweight so as to not affect performance. Such a demanding combination does not lend itself well to the word “cheap”.
Looking at some of the current aircraft in use, it’s easy to see how aircraft such as the BAE Hawk come in at a more modest cost relative to it’s more powerful brothers and sisters in the strike wings. It’s engine is smaller and produces less thrust. At the opposite end of the scale we have the rather complex engine and drive shaft system intended for use on the “B” variant of the F-35.
And finally for comparative purposes, we have single engined fighters such as the Saab Gripen up against twin engined jets of the Typhoon and Rafale ilk The difference in price between a Gripen and a Typhoon can easily be accounted for by two major aspects. The first is the Gripens solitary engine, saving a few million quid. The second is the radar.
The gold standard of modern radars is the Active Electronically Scanned Array (AESA) radar. Consisting of as many as a thousand antennae, each with its own independent power source, the AESA radar is a complex but very clever tool. Unlike previous mechanically scanned radars that could only search certain areas of the sky at any one time, an AESA radar can be programmed to cover a wide field of view without having to budge so much as a millimetre.
But that’s just the start.
Using a complex system controlled automatically by computer, an AESA radar can dedicate portions of its array to track various targets that have already been detected, whilst using others to continue scanning the rest of the sky looking for fresh targets. It can operate on multiple frequencies at the same time if needed. It can switch frequencies very rapidly while searching, in order to avoid being detected by conventional Radar Warning Receivers (RWR). It can even be used as a receiver itself to detect enemy emissions. And then jam them.
But all of that comes at a price.
The technology itself is pretty well understood by now. However the first problem with AESA radars is trying to miniaturise all that wonderful magic into a system small enough to be fitted inside the nose cone of a modern fighter. The second problem is writing the software code to control it. That involves a lot of people who I would hasten to suggest are plenty times cleverer than I am. At maths at the very least.
This makes radars very expensive to design, build and install. And as it’s relevant, I’m going to mix that thought about software coding for the AESA into my next point.
Principally of the Fly-by-wire system for the aircraft, but also things like the integration of weapons, sensors, data links etc. This process would also apply separately to the radar.
Coding sounds, on paper, not that difficult. Just tell the computer to do x when the pilot gives it input y. Except that the amount of data flowing in and out is tremendous, and the amount of calculations required mind boggling. To give you some idea of what we’re talking about here, the new F-35 will eventually require about 8 million lines of code. That’s about the same as Windows NT version 3.5.
Except that the chaps at Microsoft were writing code for a home computer, to make it run fairly routine tasks. Fly-By-Wire software needs to be able to cope with some very complex algorithms and some serious physics. It’s not quite as bad for commercial aircraft or aircraft that are designed to be inherently stable.
But modern fighter aircraft are deliberately built to be wild and free spirited if you will, resulting in a subsequent need for the aircrafts computers to constantly receive feedback from various systems and make continuous adjustments to keep the aircraft from flipping onto its back and then taking a nose dive.
That means that code wise, you’re looking at hundreds of people to write it and it can cost anything up to $1 billion. Quite the expense just to keep the aircraft on the straight and narrow.
Modern fighters need to be tough and resistant to extremes of temperature, but also lightweight and ideally as transparent to radar as possible. As you’ve probably guessed from the engines section, this is going to cost some serious dosh.
Lithium alloys. Titanium alloys. Glass Reinforced Plastic. Carbon Fibre Composites.
All of the above are materials that routinely find their way into the airframes of modern combat aircraft, which increasingly includes helicopters. None of them are particularly cheap.
Health and Safety
Consider this for a moment. A Tornado sits on some dusty runway in Afghanistan. As the engines spool up to full throttle, the ambient temperature is now pushing into the mid thirties. Celsius, not Fahrenheit. Within minutes the aircraft is off the ground and racing for altitude. From the positively tropical atmosphere on the ground, things are now getting rather nippy as the plane climbs higher and the air around it begins to thin out.
This is just one of the many challenges that faces the modern combat aircraft, along with other such minor issues such as friction heating at high speeds, stress due to high G-forces, fatigue etc. What makes the whole thing even more troublesome is the very real danger that any failure, no matter how small, might result in the total loss of the aircraft and potentially the crew members.
Tolerance for failure then is very much on the low end of the scale.
This is what poses one of the biggest problems to the various projected ideas of taking an old aircraft and up dating it with new systems. Quite apart from the fact that it would need expensive new avionics and engines, it would also need to be cleared for flight with all this new gubbins.
That gets even more problematic when you take a perfectly fine and serviceable airframe and start cutting holes into it that weren’t there before, in order to fit a bomb bay for example. Now the entire aircraft must go back to the testing stage and pass various stress analysis & the like in order to be cleared again for safe flight in military operations.
Seems like an odd thing to be talking about, but it has its place. It’s common after all for people to quote prices of how much it cost a certain country to buy a given number of their personal favourite aircraft. But if I’ve learnt anything over the years, it’s that accurately pricing a modern combat aircraft is very difficult. VAT plays a big part in this.
The problem essentially descends from the fact that different countries charge different rates and only on domestic purchases. So let’s say that for arguments sake Saab is selling the Gripen at a base price of exactly US$100 million. If it sells these aircraft to the Swedish government then you have to tack on another 25% for VAT (and you thought ours was bad), bringing the total cost to US$125 million.
However if Saab sells the same product to the Australian Air Force at the same base price, then you only have to add on 10%, bringing the cost of the aircraft to US$110 million. When you factor in other taxes such as the various import and export duties in force across the globe, and to what extent the various governments apply these to their military purchases, it quickly becomes clear how the true cost of any piece of defence equipment can be hopelessly skewed.
Not difficult enough for you yet? Well we’ve got one last little trick up our sleeve in the form of tax rebates. See the thing is, when politicians talk about investing in British jobs its not all about avoiding the dole queue or scoring political points. There is a very real financial stick to be waved. This is because not all the money given to big defence companies gets splashed on Champagne for shareholders meetings and reclining chairs for the executive offices.
Some of that money is skimmed off as corporation tax. A fair wad of that cash ends up in the pay packets of the various levels of staff, who pay it right back to the government in the form of Income tax and National Insurance. The money they keep gets gradually siphoned off back into the system through taxes like VAT and fuel duty.
The money spent by the big companies on various components, parts and materials also gradually seeps back through the system as well, as small British companies also have to pay their business taxes and then pay their staff. Again, those staff are taxed initially when they’re paid, before being hit again and again at the pumps trying to fuel their car up.
The net result varies depending on who you listen to. I’ve heard figures as low as 25% and figures as high as 45%. The real answer is potentially somewhere in the middle. My personal gut feeling, along with the fact that I prefer to play safe and be conservative, tends to lean a little more towards the lower end of the scale. Still, this is yet another thing that should be factored into any decision as to whether the government should buy British or not.
There is one obvious criticism of this point however.
You buy British and some of the money finds its way back into the government coffers. That’s great for the country. Except for the fact that the MoD likely won’t see that cash again. Given that they’re operating on a budget and have to take these capital expenditures into account, the thought of the treasury getting a good deal is of little solace to a department that is seeing it’s share of the government pie gradually reduced.
So that’s that then. Hopefully this will serve as a useful article for people to check back to in the future and will give everyone food for thought when dreaming up their latest military procurement shenanigans.