Heartland friend Bruce McQuain over at the libertarian site Q&O hipped me to this post on the seminal military blog Blackfive. It examines the real cost of the new F-35 Lightning II stealth fighter jet. (Heartland Managing Editor Steve Stanek of Budget & Tax News, call your office!)
Blackfive notes that the cost of the F-35 — up to $110 million a shot; a projected contract for 2,443 of those bad boys can bring the total to $269 billion — has been vastly inflated in the media. The real cost of each fighter, writes Blackfive, is about half that — because there is a big difference between Total Ownership Cost (TOC) and Unit Recurring Flyaway Cost (URF). Confused? Don’t be. Blackfive explains it with a clever analogy:
Think of buying a new car. You go in, look at the sticker price and ask the sales person, “how much will it cost me to drive this car off the lot?” He or she is going to give you a cost at or near the sticker price. You’re going to negotiate it down and, if you strike a deal, you’ll drive it off the lot for that negotiated price. That’s the URF in a nutshell.
With me so far?
But does that cost reflect the TOC (total ownership cost)?
Of course not.
Gas and oil. Extra cost. Maintenance. Extra cost. Extended warranty. Extra cost. Parts. Extra cost. Labor. Extra cost. New tires. Extra cost. Etc. In fact, if you take all of those costs associated with owning, driving and maintaining the car over the years you own it you’ll find that TOC to be significantly higher than the cost to drive it off the lot (URF).
Without making any judgements about the need/utility/cost-benefit of the F-35, this makes sense. My wife and I last year paid off our 2005 Honda CR-V. I believe the sticker price (or URF price) was about $24,000, including taxes, fees and whatnot. But we have certainly paid a lot more than that over the life of the vehicle. And we’ll keep paying — but only for gas, oil-changes and tires, because despite two cross-country moves and a good bit of commuting, the SUV still purrs like a kitten. (Endorsement of Honda vehicles ended.)
Taking this discussion out of my personal life and back to combat planes, Blackfive offers another bit of perspective.
As an example, imagine the original cost of the B-52. Now imagine – with the aircraft having been in constant service for 50 years or more – the total cost of ownership. The difference is going be huge. We could easily see a difference of several hundred million dollars per aircraft between URF and TOC as fuel, maintenance, upgrades, modifications, parts, labor, crew costs, and basing costs are all added to the aircraft’s original price, correct? Imagine seeing the TOC for a B-52 represented as the URF. You’d say “no way, we can’t afford it”.
An interesting post. Well worth a full read — especially since Blackfive’s take got noticed by a spokesman for the House Armed Services Committee, whose correspondence was included.