F-35 Block Buy — An Assessment of Potential Savings

Methodology and Data Sources

• In total, we reviewed 17 programs, encompassing 26 separate formal MYP contracts and two BB contracting efforts. These include all of the fixed-wing aircraft and most rotary-wing aircraft major defense acquisition programs since the late 1970s that have used formal MYP contracts.
• For purposes of direct comparison among programs, we used formal President's Budget exhibits or justification packages for each program whenever possible. For a rough comparison to actual program outcomes, we used the official data presented in Selected Acquisition Reports, which are formally reported to Congress each year as required by statute.

Observed Trends and Potential Savings

• There are significant differences among the key elements characterizing historical multiyear aircraft programs (e.g., program length, program size, annual production numbers, amount of economic order quantity [EOQ] funding or cost reduction initiative [CRI] funding). Each program must be evaluated in depth and on its own terms with respect to its unique characteristics. Notwithstanding this great diversity, there is a consensus among most program officials and subject matter experts that EOQ and CRIs are important drivers of savings on most MYPs.
• Comprehensive and in-depth analysis of contractor cost structure, particularly on the lower tiers, beyond what has typically been done in the past, can substantially increase estimated program savings, particularly during the contract negotiation phase.
• Development of an appropriate baseline estimate of the likely cost of comparable single-year contracts is difficult but crucial, as it is the basis for determining government estimated multiyear savings.