F-35 Block Buy

In 2015, the United States and partner governments in the F-35 program began considering the use of a three-year block buy (BB) contract for procurement of F-35 aircraft during fiscal years 2018–2020. A BB contract (which is similar to a multiyear procurement contract) can save money by providing prime contractors and their suppliers the incentive and ability to leverage quantity and schedule certainty and economies of scale, thus generating savings that would not be available under three annual single-lot contracts. This report presents an assessment of potential cost savings available through a BB contract for F-35 procurement. The research independently assessed savings for the aircraft's air vehicle and engine, consistent with the way contracting is handled in the program, and focused on recurring flyaway costs. For the air vehicle, the estimated savings is $1.8 billion, or 5.2 percent of the cost of contracting annually for three lots. For the engine, the estimated savings is $280 million, or 3.8 percent of the cost of contracting annually. Thus, the combined BB savings is approximately $2.1 billion, or 4.9 percent of the cost of annual contracting. These savings are estimated relative to an annual contracting baseline computed by RAND and are roughly comparable to those estimated for historical multiyear contracts for other fighter aircraft.