Canada Charged Six Times As Much As US Navy for Super Hornets

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.

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.

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.

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.

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?

I agree with your post. However, doesn’t the same argument hold for the F-35 as well? In that the USAF/USN will buy very many of them, meaning that foreign buyers (with their considerably lower acquisitions) will pay significantly more than the US? Or that FMS security deletions and country codes over the smaller purchase orders from foreign buyers will add more costs? And consequently, while the author may be wrong about a number of things, one premise he nails 100% is where he states that foreign buyers of the F-35 should be prepared for a significantly different price from the F-35 and shouldn’t rely on whatever the US will be paying (at all).

Good question.

“the USAF/USN will buy very many of them, meaning that foreign buyers (with their considerably lower acquisitions) will pay significantly more than the US?”

The JSF is a joint endeavor from the start, one of the benefits for signing the LOA early. Signing early means the country is locked-in to a reduced price and sometimes a price-shared with other like countries operating with the same security deletions. This cost-sharing plan ensures a wider customer base and affordability.

However, there are per-country costs that must be carried only by the purchasing country.

But the JSF was deliberately designed for cost-sharing R&D (group buy), and that required a huge effort to get approval for a broader exception to national disclosure policy (NDP-shared level of hardware and software development and fielding: http://www.discs.dsca.mil/documents/ips/AppB_062009.pdf, http://www.discs.dsca.mil/documents/ips/Chapter3_04052010.pdf).

Please notice the list of buying countries, all very similar in their allegiance to a US-led partnership.

And because they are part of the same US-led team, this made obtaining an NDP authorization to jointly pursue the JSF much easier for the allies: http://www.jsf.mil/program/prog_intl.htm)

So, price should be about the same as US pricing. However, given each country has their own security deletion requirements and country specific software adjustments, they will pay an increased price, nominally, because the negotiated price in the LOA will be agreed beforehand and while each country pays its own non-recurring R&D, they will not be that far off than USAF/USN cost.

“one premise he nails 100% is where he states that foreign buyers of the F-35 should be prepared for a significantly different price from the F-35 and shouldn’t rely on whatever the US will be paying (at all).”

Pretty much true, meaning the price the US pays will be different than the price allies will pay—but NOT that much different. And the buying partners will each pay a different price, too, but very close to each other.

Cheers,

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