Posted on 09/14/2017 7:04:48 AM PDT by sukhoi-30mki
PARIS --- The US government has offered Canada a batch of Super Hornet fighters at a price that is six times higher than the US Navy is paying for the same aircraft, analysis of official US documents reveals.
It is generally understood that the cost of combat aircraft varies according to the amount of options, ancillary equipment, spares and weapons included in the package.
However, as in all commercial transactions, prices depend on the buyer. Prices are also sometimes manipulated to influence prospective buyers to take a given course of action.
This appears to be the case with the US government’s Sept. 12 offer of 18 Boeing Super Hornet fighters to Canada, which is looking for a small number of interim fighters whereas Washington would much prefer that it buy the Lockheed Martin F-35A without bothering to compete the program.
This may be one reason for the sky-high sticker price Canada is being asked to pay – three to six times as much as the US Navy is paying for the same aircraft.
Canada offered dissuasive price
On September 12, Canada was quoted a cost of $5.23 billion for 10 fully-equipped F/A-18E single-seat and eight F/A-18F two-seater Super Hornet aircraft with their support equipment, some spares and other services.
These 18 fighters would thus end up costing Canada $290.6 million each in acquisition alone.
However, according to the Pentagon’s FY17 budget, current production F-18 cost the US Navy $81.5 million each – three-and-a-half times less than the price quoted to Canada.
In a separate contract released on Sept. 13, the Pentagon announced that the US Navy will actually paying $676.6 million for six F/A-18E and eight F/A-18F aircraft, or $48.3 million each for the Lot 41 aircraft it is buying in this financial year (see below.)
It is worth noting that the price offered to Canada on Sept. 12 is almost exactly six times the price paid by the US Navy for the latest Super Hornets it ordered Sept. 13.
Some will rightly note that the price offered to Canada includes a lot of support equipment, spares and services that are not included in the US Navy order, as they are bought separately.
It is questionable, however, that this ancillary equipment could cost five times as much as the aircraft themselves.
Kuwait offered bigger package at lower unit price
At this stage, it is interesting to look at another proposed Super Hornet sale, this time to Kuwait, that the US Defense Security and Cooperation Agency submitted to Congress on Nov. 17, 2016.
Kuwait requested thirty-two F/A-18Es and eight F/A-18F aircraft, with a spares and weapons package twice as big as Canada’s, which the United States agreed to supply for $10.1 billion. This works out to about $252 million per aircraft, or five times as much as what the US Navy is paying.
So, in a same financial year, the range of F-18 unit prices can actually vary by a factor of six, according to the customer.
Conclusion: caveat emptor
Two main lessons can be drawn from this brief analysis.
The most obvious one is the prices paid by the Pentagon for its military aircraft does not provide a credible indication as to the prices paid by foreign customers. For this year’s Super Hornet, the range is one to six.
But, in 2013, Australia was offered 12 Super Hornets and 12 EA-18G Growlers (a more expensive electronic attack variant) for only $3.7 billion (or $154 million each -- about half of what Canada is being asked to pay today.
A second lesson should attract the attention of all the countries that have signed onto the F-35 program believing the informal promise that its unit cost would be of about $85 million per copy.
We have already demonstrated that the F-35’s costs are being manipulated. But the example of how F-18 costs are boosted to multiples of what the Pentagon is paying for the same aircraft offers a cautionary tale to F-35 buyers.
Even assuming that the F-35’s price drops to $85 million a copy for the US, applying the same cost escalation model as for the Super Hornet indicates that export F-35s could end up costing six times as much, or about $510 million each, once spares, support equipment, training and weapons are added.
But, in fact, it could get even worse.
If a factor of six is used for the Super Hornet, an aircraft that is in its 41st year of full-rate production, what additional costs will be added to the F-35, an aircraft so technically troubled that it is still in development 16 years after the Joint Strike Fighter program was launched?
-ends-
If we developed and produced in USA. IF they don’t like it they better be willing to shell out even more millions to get their own military industrial complex going.
That’s right; they outsourced the R&D to us decades ago, so they should pay.
Interesting stuff, as usual...I wasn’t aware US defense contractors had such pricing flexibility with foreign sales. I seem to recall Russia selling fighter aircraft without such markups.
I would like to respond to the last line of the article though:
“If a factor of six is used for the Super Hornet, an aircraft that is in its 41st year of full-rate production, what additional costs will be added to the F-35, an aircraft so technically troubled that it is still in development 16 years after the Joint Strike Fighter program was launched?”
The article seemed to be theorizing at the beginning that the F/A-18 pricing was high to encourage uptake of the F-35. I’d guess that partner nations have already been guaranteed F-35 prices/markups? Does anyone know or have a link?
At any rate, the “troubled” F-35 program seems on the verge of providing world-class aircraft, and the only mass-produced stealthy fighter (we’ll see how China’s efforts go, but they’re clearly not ready for prime time now). The F-35B in particular is an awesome accomplishment, it was great seeing four of them them flying and dropping weapons in South Korea alongside the B-1 the other day. Semper Fi!
We make the product. In a capitalist society the owner and proprietor sets the price. I dont care that you dont like me charging others different prices for my product.
If you can meet your needs elsewhere, please do.
Well, at least the Canadians pay less for drugs developed in the US...
Price per unit depends on how many you buy.
USN buys a lot, therefore the average cost per unit is significantly less than what Canada is paying.
The jets to Canada are not just like the USN jets. There are FMS security deletions that have to be paid for (cost big bucks to change software codes on a very small number of jets), and the jets also have specific country codes in the software.
The writer of this piece has no idea about FMS and export restrictions/technology requirements.
Writer in an idiot.
Buy low, sell high, maneuver....
Usually it’s buy high, sell low with the Feds spending and/or giving away our money.
Oh, and Canada has to pay for non-recurring research and development costs for “their” jets.
Please see Posts 10 & 8.
Good. Charge them whatever. The hosers rely on US defense anyway.
We can always sweeten the deal by giving them a few million of our illegal immigrants.
“This appears to be the case with the US government’s Sept. 12 offer of 18 Boeing Super Hornet fighters to Canada”
Ok, since when does the US Government set the price of a Boeing product? And if Boeing sets the price, then why would Boeing set the price at a point to encourage the buyer to go get the Lockheed product instead?
I’m thinking there are a lot of leaps of faith in this article.
“Canada is being asked to pay – three to six times as much as the US Navy is paying for the same aircraft. “
Three to six times?
That kind of hole leads one to discount the theory.
In 1952 that was a _very_ good interceptor for defense of Canada from bombers. Fast climb, fast speed for the day, long range. Canada had a very good aircraft industry and still does. But its a fact we put them under tremendous pressure to buy US products when NORAD was the thing.
Trudeau will love it ,he can’t wait to waste tons of money
Well first we have to paint a leaf on there and paint aint cheap. Then there is the cost of anti freeze, snow tires, and making the bitch’n Betty say, “Altitude eh! Pull up eh!”
These mods are expensive.
It was a very good but very specialized aircraft that no-one would buy. The Brits had their own ideas, and the Yanks straight out said they would not buy it.
Killed Avro, and most of the engineers went to Texas and Florida to work for NACA/NASA. We know how that worked out...
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