Last week we laid down some criticism with a small blurb…which itself received some criticism for over-simplifying the issue. Thanks for the debrief and copy shot.
It just so happens that it’s a poorly understood topic in the Pentagon, in Congress, defense media, and think tank land...so this week we're going to unpack it.
Hang on, you’re about to learn more than you ever wanted to know about cost per flying hour.
The Dollars and Sense of Flying Costs
Cost per flying hour (CPFH) is an operation and support (O&S) metric that is often used in defense budget documents and costing studies of military aircraft.
The reason you hear about it is that it helps frame the long-term costs of owning and operating a particular fleet—historically a significant proportion of the total ownership cost of a weapons program.
Be wary of CPFH figure or comparisons without a laundry list of supporting details and the financial forensic ability to perform the analysis on the raw data—not numbers gleaned from releasable documents or public official talking points.
In the simplest terms, CPFH is calculated as an aircraft fleet’s O&S costs divided by its flying hours. Beyond that, it gets very confusing very quickly. Since there is no unified Pentagon standard, we’ll use the Air Force Cost Analysis Agency (AFCAA) process to show you why:
- The numerator is comprised of 25 different elements spanning 6 categories.
- While only 5 of these 25 elements are variable costs, they comprise over 50% of the total costs in factoring CPFH.
- Because these 25 elements are binned in various ways depending on how they are used in various parts of government, there are six different versions with six different definitions of CPFH.
And that’s just the Air Force’s approach. The Navy costing model is different, and so is OSD CAPE’s.
There are also a few other nuances to keep track of.
When talking about the CPFH of aircraft with an active production line, the denominator (flying hours) of the equation is constantly growing because the total aircraft inventory is incrementally growing. With no other changes, the more a fleet flies the lower the CPFH becomes because it spreads indirect/fixed costs over a larger base.
How a fleet’s maintenance strategy is structured also plays a role in operating costs. Contract Logistics Support (CLS) programs (F-22, F-35) have more variables and considerations to manage than organic maintenance programs (F-15, F-16). Lots of ink has been spilled by professional cost analysts on the topic, but there’s still no unified way to account for the differences in the variables and overhead costs, which often are paid out of different accounts.
But Wait, There’s More
Even if you’ve managed to sort through all that to try and make a CPFH comparison, you still have to look at the type of dollars that are being used. Some CPFH figures and comparisons are based on dollars from different years. Weird, right?
For example, the recent initiative to reduce the F-35A CPFH to $25,000 by 2025 is actually based on 2012 dollars…even though the idea was first conceptualized in 2019, wouldn’t start until 2022, and would run until 2026.
That means that $25,000 in 2012 dollars is $29,500 in today’s dollars…which is $33,000 in 2026 dollars…which is the F-35A CPFH right now. Mission accomplished before it begins? Not likely. Chances are, those are two different types of CPFH...which is what we've been trying to show you.
Our head hurts, and so should yours.
Comparing CPFH is like comparing apples to orangutans. It’s not easy, which is why analysts with raw data are the ones doing the work at professional costing agencies.
Point to ponder: What good is comparing CPFH between different aircraft with different attributes, roles and missions?
An alternative concept gaining traction in the beltway is cost per effect which seeks to level the playing field by focusing on outcomes. Don't get too excited though; it’s been the holy grail of defense accountant geeks for over 50 years.
In That Number
The number of companies in a $950 million Air Force umbrella contract that will support Joint All-Domain Command and Control (JADC2). A majority of them are startups and small businesses.
Trivia: OTD in 1943, the Army Air Force launched Operation Tidal Wave, a daylight low-altitude heavy bomber air raid against heavily-defended oil refineries in Romania. Of the 178 B-24 Liberator bombers used on the raid, how many returned to base unscathed?
We usually reserve this space for our On the Radar section, but this week we want to cover some overdue tac admin.
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They Said It
“The offices behave like tourists, visiting new shops, spending some money, and moving on to the next destination. But just as selling a few souvenirs will not sustain a local business, winning a few small R&D [Research & Development] contracts will not keep a young tech company permanently afloat.”
Red 6 is a company working to bring Augmented Reality to the fighter cockpit with synthetic adversaries for fighter pilots for “within visual range” training—dogfighting. It’s a concept whose value is hard to explain, but easy to understand once you see it. Zoom in here to see what a pilot sees looking through Red 6’s AR headset…powered by Epic Games’ famous Unreal Engine (i.e. the game engine that powers Fortnite).
- Anduril wins a unique proof-of-concept defense contract structure that will permit various defense department agencies to hire Anduril as a service and pay an annual fee to implement and manage Lattice, its AI-powered counter-drone software
- CACI is awarded a $496 million Air Force contract to help them automate weapons systems testing for operational safety, suitability, and effectiveness
- Inmarsat announced ORCHESTRA, a first-of-its-kind network that promises to seamlessly integrate GEO, LEO, and terrestrial 5G into one harmonious communication network
- The NGA opens Moonshot Labs, a new totally unclassified lab in St. Louis to foster commercial collaboration
- Astronomers announced a proposal to develop a tool that will permit astronomers to avoid satellite passes in their observations…which sounds like a useful counter-disclosure system for the Pentagon
- The Navy is experimenting with using bots for mundane supply chain tasks like scraping bills of materials to quantify the price of vendor proposals
- The NRO extends its contract with Planet Federal to provide daily 3-5 meter commercial satellite imagery
- The Air Force awards Raytheon a $482 million contract that will deliver updated AIM-120 missiles to five countries (plus the USAF) through 2024
- Teledyne nabs a $39.2 million contract from the Navy for its littoral battlespace sensing-glider (LBS-G) program, an unmanned undersea vehicle (UUV)
- Interesting: The Space Force delivers a mission planning software upgrade to its Advanced Extremely High Frequency satellite communications system
- Compelling: Eutelsat Quantum just put the world's first commercial fully flexible software-defined satellite in orbit, meaning it can be reconfigured in space to meet changing market and operational conditions over its 15-year operational life
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Trivia Answer: Answer: 33. While 88 B-24s did manage to make it back to their base in Libya, 55 of them had significant battle damage. It is considered one of the bloodiest and most heroic air missions of all time. Proportionally, it was the costliest Allied air raid of WWII; and it had the most Medals of Honor awarded for any single air action in history.