Executive Summary
I. Introduction
II. Current Plans
Affordability
III. Alternative Options
Scaling Back Modernization Plans
The Options
Annual Costs of Alternative Fighter Modernization Plans
Near-Term and Long-Term Savings
Reducing Force Structure
IV. Are Current Modernization Plans Necessary?
Comparisons With Potential Adversaries
Aircraft Age
Precision-Guided Munitions (PGMs)
Broader Air Power Picture
The Revolution in Military Affairs
V. Conclusion

Introduction

Over the next several decades the Air Force, Navy and Marine Corps plan to buy three new types of tactical combat aircraft. The Navy and the Air Force have already began procuring, respectively, the F/A-18E/F and the F-22. Around fiscal year (FY) 2005, the Air Force plans to begin procuring its version of the Joint Strike Fighter (JSF). Soon thereafter, the Navy and Marine Corps will follow with procurement of their own versions of the JSF. Altogether, the Services plan to buy 3,739 of these aircraft at a cost likely to reach nearly $340 billion (FY 2000 dollars).1 To complete these plans, the Defense Department (DoD) will need an estimated $11.1 billion annually, over the next 27 years, including a total of some $60 billion over the next six years.

Whether or not these aircraft are viewed as necessary depends on one’s assumptions about a range of factors, including: modernization trends among potential adversaries; the effect of airframe age on aircraft capability; the importance of PGMs; the impact of fighter modernization on electronic warfare and other kinds of support requirements; and, perhaps most importantly, the degree to which the revolution in military affairs could change the shape, value and effectiveness of air power in the future.

Although this analysis discusses some of these questions, it does not seek to resolve them. Instead, the main purpose of this report is to describe a range of alternative approaches to fighter modernization that might be pursued if the current plan is deemed either unnecessary or simply unaffordable. Among other things, this report finds that:

Unless more money is provided for defense than currently projected in the administration’s plan or the congressional budget resolution, over the long run, the cost of DoD’s fighter modernization plans is likely to exceed available funding by some $3 billion annually.

There are many options available for scaling back existing aircraft plans. Cutting all three programs in half could save up to $2 billion a year, canceling one fighter could save as much as $3.8 billion a year, and canceling all three programs could save $5.3 billion annually.

Under each of these options, sufficient funding would also be available to replace the cancelled or scaled back next generation systems with new current generation aircraft, or upgrades of existing aircraft in order to avoid the higher operations and support costs that might otherwise be caused by the aging of the Services’ fighter forces.

Alternatively, if proposed next generation tactical combat aircraft are as effective as projected by the Services, it might be possible to provide adequately for U.S. security with tactical air forces smaller than currently planned.

None of the options considered in this analysis would lead to the fielding of air forces as capable as those in the Clinton administration’s plan. However, under all of these options, U.S. air forces would be substantially more capable 10-20 years from now than they are today.

This report consists of three chapters. The first chapter describes the administration’s current fighter modernization plan and raises concerns about the affordability of that plan. The second chapter presents a range of more affordable alternative options. And the third chapter discusses a number of non-budgetary factors that bear on the wisdom and necessity of the current fighter modernization plan.

Current Plans

The first of the three new fighters scheduled to enter production under current plans is the Navy’s F/A-18E/F fighter. This aircraft is a substantially upgraded version of the existing F/A-18C/D fighter. The F/A-18E/F has a longer fuselage, larger wings and a more powerful engine than the C/D version. The new aircraft is replacing earlier F/A-18 models in the fighter and ground-attack roles, and the A-6 in the deep interdiction role. The first 12 F/A-18E/Fs were procured in FY 1997, with the first of these aircraft to become operational in FY 2001. Altogether, the Navy plans to buy at least 548 F/A-18E/Fs, with production peaking at 48 aircraft a year. The Navy estimates that this program will cost a total of about $44.6 billion, including about $6.0 billion for R&D and $38.6 billion for procurement—some $70 million per aircraft.2 The Congressional Budget Office (CBO) has estimated that, assuming historical rates of cost growth, the unit procurement cost of the FA-18E/F is actually likely to reach $74 million. In that case, total acquisition costs would amount to $46.7 billion, including $40.7 billion for procurement. (See Table 1.)

The Air Force’s near-term modernization efforts center on the F-22 fighter, which is intended to replace the Service’s existing fleet of F-15 fighters in the air superiority role. Procurement funding for the first two F-22s was provided in the FY 1999 defense budget, with aircraft deliveries scheduled to begin in FY 2000. Altogether, the Air Force plans to buy 339 F-22s with production peaking at 36 aircraft a year. The Air Force estimates that this program will cost roughly $60.4 billion, including $24.7 billion for R&D and $35.7 billion for procurement—about $105 million per aircraft. By contrast, assuming historical rates of cost growth, CBO has estimated that the F-22 program could cost a total of some $67.2 billion, including $25.3 billion for R&D and $41.9 billion for procurement, giving it a unit procurement cost of some $124 million.

The third major tactical aircraft program being pursued by the Services is the Joint Strike Fighter (JSF). Currently two teams, one led by Boeing Corporation and the other by Lockheed Martin Corporation, are developing competing JSF prototypes. Eventually, this effort is expected to yield a family of relatively low-cost aircraft for the Air Force, Navy and Marine Corps. Specifically, versions of the JSF are intended to replace the multi-role F-16 in the Air Force, the F-14 air defense fighter in the Navy, and the AV-8B and F/A-18A-D fighters in the Marine Corps. Production of the JSF is projected to begin around FY 2005, with the first JSF becoming operational in FY 2010. Altogether, the Services plan to buy 2,852 JSFs. DoD estimates that R&D costs for the JSF program will total about $20.6 billion. Assuming the Services’ cost goals set for the JSF can be met, unit procurement costs for the JSF would average between $43 million and $53 million, depending on the version of the aircraft. This implies total procurement costs for the JSF program of some $131.9 billion. By comparison, assuming historical rates of cost growth, CBO has estimated that the JSF program could cost a total of some $223.4 billion, including $24.1 billion for R&D and $199.3 billion for procurement, with unit procurement costs ranging from $65 million to $78 million per aircraft, depending on the version.

Table 1: Tactical Aircraft Acquisition Cost Estimates

Source: CSBA. Based on CBO and DoD data.

Taken together, the Services plan to buy 3,739 aircraft of these three new types for a total cost ranging from about $258 billion (assuming DoD’s cost goals are met) to $337 billion (assuming historical rates of cost growth).³ Through FY 1999, about $38 billion has already been provided for these programs and 64 aircraft have been procured (62 F/A-18E/Fs and 2 F-22s). Under current plans, another $219-298 billion will be needed over the FY 2000-26 period to complete the three next-generation aircraft programs. In addition, current plans include the purchase of 30 new F-16s and 20 remanufactured AV-8Bs over the next several years, for a cost of about $1.4 billion.

Assuming the Services’ unit cost goals can be achieved, an average of $7.3 billion a year in procurement funding would be required over the next 27 years to pay for these plans. Should CBO’s higher unit cost estimates turn out to be correct, an average of $10.1 billion annually in procurement funding would be needed to pay for these plans. In addition, another $800-900 million will be needed to complete R&D for the three aircraft programs. Altogether, completing these three programs will require average acquisition budgets (procurement plus R&D) of $8.1 billion to $11.1 billion a year over the FY 2000-26 period.

The administration’s FY 2000-05 Future Years Defense Program (FYDP) includes a total of about $54.4 billion in R&D and procurement funding for the three next-generation fighters, plus $1.4 billion for the procurement of the additional 30 F-16s and 20 AV-8Bs, for a total of $55.8 billion. If history is any guide, because of escalating R&D and procurement costs, a more realistic estimate of the six-year cost of these modernization plans would be over $60 billion, or an average of about $10.1 billion a year.

These plans would require spending far more on tactical aircraft modernization than the Services spent in the 1970s, 1980s and 1990s. During those years, the Services bought a total of some 5,150 F-15, F-16, F/A-18A-D, F-14, A-6E, and AV-8B fighters for some $220 billion. The main reason for the high cost of DoD’s current plan is the much greater cost of developing and procuring the proposed next-generation aircraft. R&D costs for the F-22, for example, will be about three times higher than they were for the F-15. In terms of unit procurement costs, the F/A-18E/F will cost about 50-60 percent more to procure than the F/A-18A-D, while the F-22 will cost 120-160 percent more than the F-15, and the JSF will cost 80-170 percent more than the F-16.

Table 2: Joint Strike Fighter

Source: CSBA. Based on CBO and DoD data.

Affordability
It is doubtful that the Services’ current tactical aircraft modernization plans are affordable given likely future budget levels. In the past, procurement funding for tactical combat aircraft has accounted for an average of about 4.6 percent of the Air Force’s budget and 3.6 percent of the Navy’s budget.⁴ If these same shares are maintained in the future, the overall DoD budget stays flat in real (inflation-adjusted) terms at the level currently projected for FY 2005 (the last year of the current FYDP), and the Air Force and the Navy maintain their historical shares of overall DoD funding, the two Services would have an average of about $7.0 billion a year available for fighter procurement over the FY 2000-26 period.

This is $300 million a year less than would be needed to pay for the administration’s procurement plans even assuming the Services’ unit cost goals can be met. Assuming, more realistically, that these programs experience significant cost growth, the future funding levels for tactical aircraft procurement would fall some $3.1 billion a year short of meeting the Services’ funding requirements. In addition, the Services may find it difficult to fully fund the $800-900 million a year required to complete R&D for the three aircraft.⁵

It is of course possible that in the future the Services could achieve and sustain tactical aircraft modernization budgets high enough to fully pay for these three programs. This could happen if, for example, rather than staying flat, the defense budget, and the Air Force and Navy budgets in particular, were to grow in the years beyond the FY 2000-05 FYDP. Alternatively, sufficient funding could be made available for these programs if a greater share of the overall Air Force and Navy budgets were allocated to tactical aircraft modernization. However, neither of these possibilities seem likely to become a reality. Notwithstanding a good deal of rhetoric to the contrary, it seems unlikely that funding for defense will grow substantially beyond FY 2005.

Under the administration’s defense plan submitted this past February, funding for national defense is projected to rise modestly, in real terms, from about $283 billion (plus $9 billion in the Kosovo emergency supplemental)⁶ in FY 1999 to about $293 billion in FY 2005. Although the 1999 congressional budget resolution (CBR) contains about $30 billion more for defense over the next five years, it would actually provide less funding for defense in FY 2005 than the administration’s plan. Moreover, under the CBR, funding for defense is projected to decline to some $263 billion in FY 2009, the last year included in the budget resolution.

A substantial, sustained increase in funding for defense appears unlikely because both the administration and Congress seem to place higher priority on a number of other policy goals. The administration has emphasized the need to protect Social Security, provide greater resources for non-defense discretionary programs, and expand Medicare coverage. The Republican leadership in Congress has focused on protecting Social Security, while at the same time implementing a major tax cut. Neither of these approaches leaves enough money to simultaneously finance a major increase in funding for defense.⁷

Likewise, it may be difficult to shift funding from within the Air Force and Navy budgets to pay for tactical aircraft modernization programs. Both Services have other major modernization programs competing for their resources. Among other things, current Navy plans call for continued procurement of a large number of surface combatants, and the purchase of new classes of attack submarines and amphibious ships. In the case of the Air Force, competing programs may include airlift and tanker modernization, and command, control, communications and intelligence (C3I) programs.⁸

An even greater barrier to shifting funding from elsewhere within the Air Force and Navy budgets to pay for tactical aircraft modernization programs is the likelihood that operations and support (O&S) costs will increase. O&S includes military pay, operations and maintenance activities, family housing, and military construction. Current DoD plans assume that O&S costs will decline over the next several years as a result of reductions in overhead and infrastructure activities (e.g., base closures). If these savings do not materialize or, worse yet, O&S costs increase in the future (as they have in the past), the Services could be hard pressed to provide tactical aircraft modernization efforts even with their historical share of funding.⁹ Among other things, the increasing age of many weapon systems, the continued involvement of U.S. forces in contingency operations in Bosnia, Kosovo and elsewhere, and higher military pay raises could fuel future growth in O&S costs.¹⁰

Alternative Options

There are a wide variety of different ways in which the Services’ tactical aircraft plans could be scaled back in order to make those plans more affordable. At the outset, it is important to acknowledge that none of the alternative options described below would lead to the fielding of air forces as capable as those in the administration’s plan. However, under all of these alternative options, U.S. air forces would be substantially more capable in the future than they are today. Whether they would be capable enough to meet U.S. security requirements is a critical question that is discussed in the last section of this report.

This analysis provides an overview of the kinds of options available and a rough estimate of the level of savings which might be achieved through each approach. The first set of options discussed below would slow the rate at which next-generation combat aircraft are incorporated into U.S. tactical air forces, but would sustain current force structure goals. Conversely, the second set of options would leave current modernization plans unchanged, but would pay for those plans through offsetting reductions in the size of U.S. tactical air forces. Of course, the best option might involve a combination of cuts both to modernization plans and force structure.

Scaling Back Modernization Plans
All 12 of the options listed in Table 3 would involve canceling or scaling back one or more of the Services’ three next-generation tactical aircraft programs. Nevertheless, each of these options would support the Services’ current force structure goals (i.e., 20 Air Force tactical fighter wings, 11 Navy carrier air wings and 4 Marine Corps air wings). Moreover, under each option an attempt would be made to keep the U.S. fighter inventory at effectively (though not necessarily literally) the same age as projected under current plans. In other words, under all of these options, the size and, at least arguably, the effective age of the Services’ tactical air forces would remain the same as under the current plan. This is because, under each option, any next-generation aircraft foregone would be substituted for either by purchasing new current-generation aircraft or by substantially upgrading and extending the service lives of existing current-generation aircraft.

In those options that call for the procurement of new current-generation aircraft to compensate for reductions in purchases of next-generation aircraft, the new current-generation aircraft would be the latest versions of the F/A-18C/D (for cancelled F/A-18E/Fs), the F-15 (for cancelled F-22s) and the F-16, F-18C/D, and AV-8B (for cancelled JSFs). In the case of the F-15, for example, the version procured is assumed to be the F-15E, or a version of the F-15E optimized for air-to-air combat.11 Moreover, it is assumed that these current-generation aircraft would be procured on roughly the same schedule currently envisioned for the foregone next-generation aircraft they would replace. This means that many of these aircraft would be procured years from now. Thus, presumably they would incorporate further advances in avionics and other technologies, just as each successive block of F-16s and other current-generation aircraft procured over the past several decades has incorporated new advances. As such, many of the current-generation aircraft procured under these options would actually be superior to the latest versions of these aircraft being produced today or in recent years. In short, these new current-generation aircraft would be less effective than the next-generation aircraft called for under existing plans. However, because they would be the most modern versions of their type, these aircraft would be far more capable than the aircraft they would be replacing.

In the remaining alternative options listed in Table 3 (those designated with an asterisk, options 7, 8 and 9) it is assumed that any reduction in planned purchases of next-generation aircraft would be compensated for through a combination of purchasing new F/A-18C/D, F-15, F-16 and AV-8B aircraft and modifying and upgrading existing aircraft of these types. Generally, it is assumed that half of the foregone next-generation aircraft would be replaced with new current-generation aircraft and half with substantially modified and upgraded existing current-generation aircraft.¹²

Modification and upgrade efforts can vary dramatically in terms of cost and effectiveness. Typically, efforts aimed simply at extending the lives of existing systems are relatively inexpensive, while those aimed at not only extending their service lives but also significantly improving the system’s capabilities can be very costly. This analysis assumes that the Services would pursue the latter course, essentially rebuilding existing aircraft through an extensive remanufacturing program that would cost about 75 percent as much as buying new-production aircraft. It is assumed that by remanufacturing existing aircraft the Services would effectively double the aircrafts’ service lives, while preventing any major increase in their O&S costs, and substantially improve their performance—making the aircraft close to or as capable as the latest new-production versions of the same aircraft.

An example of what might be involved in such an effort is provided by the Marine Corps’ ongoing AV-8B remanufacturing program. Under this program 72 older AV-8B Harrier IIs are being upgraded to the most recent new-production Harrier II Plus configuration.¹³ The program involves providing each aircraft with a new fuselage, a new, higher-powered engine, and new avionics, including a new radar and a night-attack capability. The program is also expected to add about 6,000 hours (roughly 20-25 years) to the life of the aircraft.

The Defense Department has already begun reviewing the possibility of upgrading older F-15C/Ds as an alternative to buying the full number of F-22s currently planned. The House Defense Appropriations committee, which recently voted to cut FY 2000 funding for F-22 procurement (but approved funding for continued R&D), noted that “service life data from the Air Force indicates that the F-15 can exceed 16,000 flying hours without major structural changes.” This equates to a service life of 50 years or more. Moreover, the committee noted that the F-15’s combat capabilities could be “improved substantially with upgraded radars, jammers, and helmet-mounted targeting systems.” ¹⁴

It should also be possible to remanufacture existing F-16s and F/A-18E/Fs to substantially extend their lives and improve their capabilities. Recently, concerns have been raised that F-16s are aging faster than anticipated because they are engaging in more stressful maneuvers, and carrying larger payloads and fuel loads, than originally expected. However, Air Force officials contend that with relatively modest structural upgrades (costing as little as $800 million for the entire F-16 fleet), F-16s should be able to keep flying today’s demanding mission profiles for at least 8,000 hours.¹⁵ It is assumed here that the service lives of existing U.S. Air Force F-16s could be increased by another 4,000-6,000 hours, to a total of at least 12,000-14,000 hours (i.e., 40-50 years), through a major remanufacturing effort, and that the aircraft could be given roughly the same capabilities as the latest new-production F-16C/Ds. According to the Air Force, these aircraft are as much as five times more effective than the earliest versions of the F-16.¹⁶

It is possible that substantially upgrading and extending the lives of existing aircraft would be more difficult and costly than assumed in this analysis. The Services have limited experience with the effects of wear and tear on aircraft, especially tactical combat aircraft, operated for 40 or more years, or the effects of aging on some of the advanced materials used in the manufacture of many current-generation aircraft. If the impact of aging is more severe than currently anticipated, the cost of extending the lives of these aircraft could grow. Moreover, if the needed modifications and upgrades are too substantial, it may simply turn out to be more cost-effective to buy new-production versions of the aircraft. Even in the case of the AV-8B Harrier II Plus program, for example, although the Marine Corps and Boeing Corporation claim that that remanufacturing old AV-8Bs costs only two-thirds to three-quarters as much as buying new-production aircraft, the General Accounting Office (GAO) has argued that remanufacturing is actually more expensive.¹⁷

On the other hand, the assumptions in this analysis may be too conservative. It may be that the lives of many current-generation fighters could be extended and their capabilities significantly improved for less than estimated here. This analysis assumes that remanufacturing older F-16s to the latest version would cost about $23 million per aircraft, compared to $30 million for a new-production F-16. However, a number of NATO countries, including Belgium, The Netherlands, Norway, Denmark, and Portugal are currently upgrading and extending the lives of their F-16 fleets through the F-16 Mid Life Update (MLU) program. At a cost of about $5 million per aircraft, the MLU is providing these F-16s, many of which were built in the early 1980s, with new cockpits and avionics systems, including a new mission computer and radar upgrades. The program is expected to add another 10-20 years to the life of the aircraft and perhaps as much as double their air-to-air combat capabilities.¹⁸ This might suggest that as little $10 million per aircraft (one-third the cost of buying an new-production F-16) could be enough to extend the aircraft’s service life to 12,000 hours or so, as well as improve its capabilities.¹⁹

The potential for even very low-cost modifications to yield dramatic improvements in capability was also recently noted by the House Appropriations Committee. According the committee, for about $200,000 per aircraft, F-15s could be upgraded with a new datalink (“Link 16”), which allows aircraft to share target information and, tests suggest, could lead to a five-fold improvement in air combat kill ratios.²⁰

The Options
Each of the alternative options described in this report is basically a variation of one of four different approaches. It is important to note that the “Administration Plan,” with which the 12 alternatives are compared in Tables 3 and 4, is calculated based on the high-end (and likely more accurate) unit procurement and R&D cost estimates described earlier, rather than the lower cost estimates projected by the Services. (See Table 5 on page 19 for a detailed breakdown of the number and types of aircraft to be procured under each option.)

Cancel One Program, Fully Fund Other Two (Options 1-3):
Under each of these options, one of the planned next-generation aircraft systems would be cancelled, while the other two systems would be purchased in the full quantities currently planned. In each of these options, DoD would compensate for the cancellation of the single next-generation aircraft program by purchasing an equivalent number of new current-generation aircraft. Projected savings from these options range from $300 million to $3.8 billion a year over the FY 2000-26 period.

Cancel One Program, Cut Other Two In Half (Options 4-9)
Under options 4, 5 and 6, one of the planned next-generation aircraft systems would be cancelled, while the other two programs would be purchased in half the numbers currently planned. In each of these options, DoD would compensate for the cancellation of the single next-generation aircraft program and the halving of the other two next-generation programs by purchasing an equivalent number of new current-generation aircraft. These options would generate long-term savings of $1.9-4.5 billion a year. Options 7, 8 and 9 (which are marked with asterisks in Table 3) are identical to options 4, 5 and 6, respectively, except that it is assumed that DoD would compensate for the cancellation of the single next-generation aircraft program and the halving of the other two next-generation programs by purchasing an equivalent number of new and remanufactured current-generation aircraft. These options would provide annual savings of $2.3-5.1 billion a year over the long run.

Cut All Three Programs By One-Half (Options 10-11)
In option 10, the planned purchase of all three next-generation aircraft would be cut in half. Under this option, DoD would compensate for the halving of the three next-generation aircraft programs by purchasing an equivalent number of new current-generation aircraft. This option would yield long-term savings of $1.7 billion a year. Option 11 (which is marked with an asterisk in Table 3) is identical to option 10, except that it is assumed that DoD would compensate for the halving of the three next-generation aircraft programs by purchasing an equivalent number of new and remanufactured current-generation aircraft. This option would yield annual savings of $2.0 billion.

Cancel All Three Programs (Option 12)
Under this option, all three next-generation tactical aircraft programs be would cancelled. In this option, DoD would compensate for the cancellation of the three next-generation aircraft programs by purchasing an equivalent number of new current-generation aircraft. In addition, the Services are assumed to retain the 62 F/A-18E/F and two F-22s procured in FY 1999 and prior years.²¹ Projected savings from this option would average $5.3 billion annually over the long run.

Annual Costs of Alternative Fighter Modernization Plans
(in billions of FY 2000 dollars)

Table 3: FY 2000-26

Table 4: FY 2000-05

Near-Term and Long-Term Savings
The annual average costs of the administration’s current fighter modernization plan and the 12 alternative options are displayed in tables 3 and 4. These tables also show the level of savings, compared to the administration’s current plan, that would result from each of the 12 alternative options. Table 3 provides the estimated costs and savings for the FY 2000-26 period. Thus, it includes all of the costs associated with the administration’s current plan (which will not be completed until FY 2026), and all of the costs and savings associated with each of the 12 alternative options. Table 4, by contrast, focuses on costs and savings over only the next six years, the period covered by the current FYDP (FY 2000-05). In both tables, the options are displayed in order of cost, from highest to lowest. In other words, the options projected to yield the greatest savings (i.e., the lowest cost options) appear toward the bottom of each table.

At least three observations are worth making about the savings generated by these options. First, the largest savings generally accrue from canceling outright, rather than scaling back, plans for next-generation systems. This is because when the number of aircraft to be procured is reduced, the unit procurement costs of that aircraft tend to increase, sometimes substantially. Just how much scaling back total procurement quantities will increase unit procurement costs depends on a wide range of factors. But generally the effect is greatest when the decision to scale back the plan is made after the aircraft is already in production, and least when production is still some years off. Among other things, this is because production facilities are designed and workforces hired with a particular optimal production rate in mind. When that rate is not achieved, it inevitably leads to some inefficiencies. It is assumed in this analysis that halving the total planned procurement quantity of the F/A-18E/F or the F-22—both of which are currently in production or beginning production—would increase the unit cost of those two aircraft by 20 percent, while halving the planned purchase of the JSF—which is still some five years from production—would increase unit procurement costs for that aircraft by only 10 percent.²²

Canceling an aircraft program outright, rather than simply reducing the number of aircraft to be procured can also yield higher savings since it may allow R&D costs to be avoided. However, it is assumed in this analysis that only cancellation of the JSF would yield any R&D savings. The F/A-18E/F and the F-22 development programs are so far along now that it is assumed these efforts would be completed even if the procurement plans for these aircraft were cancelled. Thus, under those options in which the F/A-18E/F or the F-22 is cancelled, DoD would retain the capability to procure the aircraft on relatively short notice if, at some point in the future, the systems were deemed both necessary and affordable.

In the case of the JSF, it is assumed that if procurement of the aircraft were cancelled, the Services would complete the prototype phase of the development program, but would not move the JSF into the much more costly engineering and manufacturing development (EMD) phase. However, under those options in which procurement of the JSF is cancelled, it is assumed that DoD would spend several billion dollars over the next decade on an aircraft technology development program. The goal of this effort would be both to ensure that the United States retains a robust fighter design capability, even in the absence of a major fighter EMD effort, and to develop new technologies that could be incorporated into future fighter designs. Altogether, it is assumed that about $4 billion would be spent to complete JSF prototype development and fund a follow-on aircraft technology development program.²³ These efforts would also go at least some way toward speeding the delivery of the JSF or an improved version of the JSF, if procurement of such an aircraft were later deemed necessary and affordable.

The greater efficiency of canceling programs outright and, conversely, the substantial penalty paid (in terms of higher unit costs), when programs are scaled back, but not cancelled, can perhaps best be seen by comparing options 12 and 10. Under option 12, all three next-generation fighter programs would be cancelled and an equivalent number of new current-generation aircraft purchased in their place. This option would result in annual savings of some $5.3 billion a year over the long run—greater savings than any of the other options. By comparison, under option 10, all three next-generation fighter programs would be cut in half. As in option 12, the foregone next-generation aircraft would be replaced with new-production current-generation aircraft. This option would yield only about $1.7 billion a year in savings—less than all but two other options.

A second important observation is that the level of savings generated by each option depends not only on which next-generation systems are cancelled or scaled back, but the steps that are taken to compensate for that decision. For example, as a comparison of options 4, 5, 6, and 10 to options 7, 8, 9 and 11 shows, compensating for cuts in next-generation aircraft programs by remanufacturing existing current-generation aircraft could save $300-600 million a year more than replacing those foregone aircraft with new models of the latest current-generation aircraft.

Moreover, if it were assumed that existing current-generation aircraft could have their service lives extended and their capabilities improved adequately through a less ambitious modification program that cost only about one-third (rather than 75 percent) as much as buying new-production versions of the aircraft, the savings under options 7, 8, 9, and 11 would increase by some $600 million to $1 billion a year over the long run. This would bring total savings under option 9, for example, to an average of some $5.1 billion a year.

A final observation is that the alternative options vary not only in terms of the level of savings they would generate, but also the timing of those savings. As can be seen from comparing the two tables, some of the options would yield far more substantial saving in the near term than over the long term (e.g., option 2, canceling the F-22), while other options would yield far more substantial savings over the long term than in the near term (e.g., option 3, canceling the JSF).

Reducing Force Structure
Another way to reduce the cost of the Services’ tactical aircraft plans would be to leave current modernization plans unchanged, and pay for those plans through offsetting reductions in the size of U.S. tactical air forces. For example, cutting two Air Force tactical fighter wings (one active and one reserve) and one or two aircraft carriers (the ships plus their air wings) could yield total savings of more than $3 billion a year over the long term. This includes savings due to reductions in direct, indirect and overhead O&S costs, and reduced procurement requirements in some related areas (e.g., the need to buy one less aircraft carrier, fewer trainers and other support aircraft, and smaller quantities of spare parts and other minor equipment). Under this option, since the force structure would be smaller, but all 548 F/A-18E/Fs, 339 F-22s and 2,852 JSF would still be procured, the transition from current- to next-generation aircraft would also be completed somewhat earlier.

If a force structure cut of this magnitude were made today, it might significantly reduce the Services’ ability to carry out the administration’s long-term defense plan. That plan, reaffirmed most recently in the 1997 Quadrennial Defense Review (QDR), requires that the U.S. military retain the capability to fight, and win quickly and decisively, two major theater wars (MTW) nearly simultaneously. It also requires that the U.S. military maintain sufficient forces in peacetime to carry out a wide range of forward presence operations, and support U.S. involvement in peacekeeping and other contingency operations.

On the other hand, if one believes that the current strategy is unnecessarily ambitious, such a reduction in force structure may not be too troubling. This smaller force structure might, for example, be consistent with a defense plan that required that U.S. forces be prepared to win a single MTW quickly and decisively, while assuming a defensive posture in the second theater until the first MTW was successfully concluded (i.e., a “win-hold-win” strategy), and sought to support a less extensive range of forward presence and contingency operations. Another approach would be to maintain the two-MTW requirement as declaratory policy, but to accept a greater level of risk that the United States would actually have to resort to a win-hold-win strategy.

Even if one believes in the necessity of the current QDR strategy, it might well be appropriate to make further force structure cuts at some point in the future—as more and more next-generation aircraft enter service. If these next-generation aircraft are as superior to current-generation aircraft as the Services claim they will be, it may be possible to carry out the same missions in the future with smaller air forces. Of course, the extent to which the improved quality of U.S. tactical air forces would permit reductions in the size of those forces would depend, among other things, on how rapidly potential adversaries were to modernize their own air and air defense forces over the coming decades (see discussion below). In any case, the average annual savings that would accrue over the FY 2000-26 period would obviously be less if the reductions in force structure were made in the middle or toward the end of this period, rather than over the next few years.

Are Current Modernization Plans Necessary?

Whether or not the Services’ current tactical aircraft modernization plans are viewed as necessary depends on one’s assumptions about a wide range of factors. Five of the most important of these factors are discussed in the remaining pages of this report:

• the speed with which potential adversaries are modernizing their own air and air defense forces, and the size of those forces;

Comparisons With Potential Adversaries
Current U.S. plans call for maintaining a force of some 3,500 tactical combat aircraft over the long term. By comparison, the three countries typically identified as potential adversaries—Iran, Iraq and North Korea—have a combined total of only about 1,200 aircraft. Moreover, these aircraft are greatly inferior to U.S. combat aircraft in terms of quality. According to CBO, today about three-quarters of these aircraft are first- and second-generation aircraft (most of which are based on designs from 1950s). By comparison, all existing U.S. fighter aircraft are fourth-generation aircraft (based on designs from the 1970s or 1980s).24

China has much larger air forces than Iran, Iraq or North Korea. But China cut the size of its tactical air forces from about 4,500 to 2,500 aircraft between 1985 and 1995. Moreover, some 90 percent of the remaining aircraft are first- and second-generation fighters.²⁵ In addition, over the next five years at least, all four of these countries are projected to further cut the size of their air forces. Only China is projected to significantly increase its number of modern fighters. And by 2005, China is still expected to have only about 400 third-generation fighters and fewer than 100 fourth-generation fighters.²⁶

There is also some evidence that countries may be modernizing their ground-based air defense forces less rapidly than they did during the Cold War. Reportedly, deliveries of surface-to-air missiles (SAMs) to the developing world fell from an average of about 5,500 per year over the 1985-87 period to some 1,900 per year over the 1994-96 period.²⁷ However, without knowing more about trends in the quality of these SAMs, it is difficult to know how much solace to take from this reduction in the number of missiles delivered.

Overall, these trends certainly do not provide a complete picture of the air-to-air and SAM threats likely to face U.S. air forces in the future. Among other things, it is possible that potential adversaries are making (or will make) significant improvements to existing aircraft and SAMs through modifications and upgrades. These trends also tell us nothing about what steps these countries might be taking to improve their command, control, communications and intelligence (C3I) capabilities, upon which the effective functioning of air defense systems critically depend. Nevertheless, these projections of aircraft modernization trends among potential adversaries, and recent trends in SAM deliveries to the developing world, may suggest that DoD could safely take a slower approach to fighter modernization and maintain smaller tactical air forces than currently planned. Finally, at a more general level, the fact that the value of all major arms deliveries to the developing world declined by some 50 percent over the 1986-1998 period may also suggest that less ambitious plans for U.S. tactical air forces could be adequate. ²⁸

Aircraft Age
Air Force, Navy and Marine Corps officials have pointed out that even if their tactical aircraft modernization programs are followed, the average age of their fighter forces will increase substantially over the next decade. Specifically, the Air Force estimates that the average age of its fighter fleet will increase from about 12.5 years today to some 19.5 years in FY 2011 and then fall to about 18 years in FY 2015. Similarly, the Navy and Marine Corps estimate that the average age of their fighter forces will increase from about 11.5 years today to 15 years in FY 2009 and then drop to 12.5 years in FY 2015.²⁹

As aircraft age, they may develop structural and other problems, resulting in higher O&S costs. According to one study, for example, as a result of the increasing age of the Air Force’s overall aircraft inventory (which includes not only fighters, but bombers, transports, tankers, trainers, and other support aircraft), Air Force annual O&S costs were likely to increase by $5-6 billion by around FY 2020,³⁰ with most of that increase projected for the years beyond FY 2010. However, the degree to which increasing age is likely to lead to increasing O&S costs will depend in large part on the extent to which money is invested in a timely manner into modifying and upgrading existing aircraft. As noted earlier, the options in this report that include extending the service lives of existing aircraft assume that the aircraft would be extensively remanufactured. As such, it seems unlikely that these aircraft would experience any significant increase in O&S costs. Assuming that substantial growth in O&S costs can be avoided through this approach, it is unclear how serious a concern the projected increase in the average age of U.S. fighter forces should be.

The average age of the U.S. fighter force consistently increased throughout the Cold War, reflecting, among other things, the maturation of fighter technology and decreases in peacetime attrition rates. Given the fact that many of the most important strides in fighter technology now concern improvements in avionics (e.g., navigation and targeting capabilities), which can often be retrofitted into existing aircraft, rather than aerodynamic and other structural improvements, a continuation of this trend toward increasing service lives may well be appropriate.³¹ In short, aircraft age may be becoming a progressively less useful gauge of aircraft capabilities. On the other hand, there are severe limits as to how much at least one important technological advance—improved stealthiness—can be incorporated into existing aircraft through modifications.

It is also worth noting that the trend toward older aircraft is not restricted to the United States. The delivery of combat aircraft to countries of the developing world has dropped dramatically over the past decade. During the 1983-85 period, an average of 578 combat aircraft were exported to developing countries each year.³² By comparison, combat aircraft deliveries to the developing world averaged only about 237 annually over the 1995-98 period.³³ This suggests that the average age of Third World fighter fleets is also increasing substantially.

Precision-Guided Munitions (PGMs)
Another factor that could allow DoD to prudently reduce its fighter forces and take a slower approach to modernization is the enormous expansion of the U.S. capability to deliver PGMs. The use of PGMs greatly improved the effectiveness of U.S. air forces in the 1991 Gulf War. Although some PGMs had been used in previous conflicts they were used far more extensively and effectively in the Gulf War than in earlier operations. The war in Kosovo seems to have reaffirmed the growing importance and effectiveness of PGMs. Moreover, the U.S. military’s ability to employ these munitions has expanded dramatically in recent years and is projected to expand still more over the next decade.

During the Gulf War the Services used some 227,000 bombs and missiles against Iraqi targets, about 17,000 (8 percent) of which were PGMs.³⁴ By comparison, during the war in Kosovo, NATO used some 23,000 bombs and missiles, about 8,000 (35 percent) of which were PGMs. Moreover, during the initial phase of the air campaign, when the weather was bad and concerns about Serbian air defenses was greatest, as much as 90 percent of the munitions expended were PGMs. ³⁵

The use of PGMs not only improved the effectiveness of U.S. strikes against Iraq in 1991 and against Serbian forces in 1999, it also contributed—along with the use of special jamming, reconnaissance, and other support aircraft, as well as a small number of stealth aircraft—to the extremely low casualty rate suffered by U.S. forces. During the Gulf War, the allied air forces flew some 40,000 strike sorties and suffered 38 combat losses. The loss rate was even lower in Kosovo, where NATO air forces flew some 13,000-14,000 strike sorties and lost only two aircraft to Serbian air defenses. But even the Gulf War loss rate was several times lower than that suffered by U.S. air forces flying missions over North Vietnam during the Vietnam War.

One of the reasons PGMs comprised only a relatively modest share of the munitions used in the Gulf War is that only a limited number of aircraft were capable of employing them at that time. For example, laser-guided bombs (LGBs) were the most widely used, and perhaps the most effective, type of PGM employed by U.S. air forces during the war. However, the ability to employ LGBs during the Gulf War was severely constrained because of the relatively small number of aircraft in the U.S. inventory equipped with laser designators. The United States had only 229 aircraft capable of delivering LGBs at that time. By comparison, because of the installation of low-altitude navigation and targeting for night (LANTIRN) pods on F-15Es and some F-16s, today the U.S. Air Force has more than doubled the number of LGB-capable aircraft.

Moreover, the number of aircraft configured to carry PGMs, as well as the number and effectiveness of PGMs is projected to grow substantially over the next decade. The United States currently possesses a vast inventory of relatively modern PGMs. Over the past several decades, DoD has procured some 122,000 air-to-surface PGMs, as well as some 4,000 sea-launched Tomahawk cruise missiles. Nevertheless, shortages of certain types of PGMs were experienced during the war in Kosovo. In particular, the Services were concerned about running out of conventional air-launched cruise missiles (CALCMs), the latest (Block III) versions of the Tomahawk sea-launched cruise missile and the new air-delivered Joint Direct Attack Munition (JDAM). In response, as part of the FY 1999 emergency supplemental enacted in May, Congress approved funding for the conversion of 624 older Tomahawks to the Block III configuration, the conversion of 322 additional nuclear-capable ALCMs to CALCMs, and accelerated JDAM production.

In order to improve U.S. PGM capabilities and ensure that U.S. forces are capable of effectively defeating the kinds of threats that might emerge in future years, current plans also call for the Services to buy large quantities of new PGMs. Specifically, the Services are projected to buy a total of some 88,000 JDAMs, a relatively inexpensive kit that can be attached to existing “dumb” bombs, and 24,000 Joint Standoff Weapons (JSOWs), a more expensive unpowered glide bomb. Both weapons will rely (at least in their initial versions) on information from DoD’s Global Positioning System (GPS) satellite network for guidance and, as such, will be capable of being delivered from almost any combat aircraft. In addition to these relatively short-range systems, current plans call for acquiring at least precision-guided 2,400 Joint Air-to-Surface Standoff Missiles (JASSMs), which are projected to have a range of some 100 miles. The Navy also plans to procure 1,353 Tactical Tomahawks, a new and less costly version of the Tomahawk cruise missile, beginning in FY 2002.

DoD argues that the planned acquisition of next-generation fighters will provide an important complement to its PGM plans. Among other things, stealthy next-generation aircraft like the F-22 and the JSF should be able to rely more heavily on short-range PGMs like the JDAM, than current-generation aircraft. This is because their stealthiness will allow them to more safely penetrate enemy air defenses. Moreover, this is potentially important both because short-range PGMs tend to be much cheaper than long-range PGMs and because they are smaller, so that more munitions can be delivered in a single sortie.

On the other hand, there is a danger that if the Services continue to pursue all three next-generation tactical fighter programs they will end up short-changing funding for PGMs. While the cost of PGMs is not insignificant, those costs pale in comparison to the cost of the Services’ tactical aircraft modernization plans. For example, a single F-22 costs as much to buy as about 5,000 JDAM guidance kits. Moreover, the total cost of the JDAM, JSOW, JASSM, and Tactical Tomahawk programs is projected to be some $14 billion, less than one-third the cost of the F/A-18E/F program alone.

Broader Air Power Picture
In considering the appropriateness of current U.S. fighter modernization plans, it is critical to remember that fighters are only one element of U.S. air power, and fighter modernization is only one of the elements affecting the capabilities of fighter forces. The advantages in numbers and quality enjoyed by U.S. air forces during the wars in the Persian Gulf and Kosovo were not the only factors that contributed to the success of those forces. Also of great importance were a variety of other factors, including: the vastly superior training provided to U.S. pilots and ground support personnel; electronic jamming provided by EA-6B electronic warfare aircraft; the refueling capability provided by DoD’s large fleet of tanker aircraft; the targeting, intelligence and other battle management information provided by DoD’s unmatched network C3I systems (e.g., satellites, reconnaissance aircraft, and Airborne Warning and Control System (AWACS) aircraft); the vast fleet of airlift aircraft that helped deploy and supply U.S. forces, including tactical air forces, sent to both the Persian Gulf and Kosovo; and long-range bombers. It was the ability of DoD to effectively integrate all of these different capabilities that allowed the United States to achieve such decisive victories in the Gulf War and Kosovo.

Likewise, the effectiveness of the U.S. military in a future air campaign will depend on the quality of U.S. military personnel and their training, the existence of a wide variety of supporting capabilities, and the ability of DoD to effectively integrate these capabilities. DoD argues that acquisition of the three next-generation fighters will reduce requirements for certain kinds of support in the future—especially the need for electronic warfare and defense suppression aircraft—or at least prevent a dramatic increase in the level of such support required. This is because the F-22 and the JSF, at least, will be far more stealthy than current-generation aircraft are or can be made through modifications. On the other hand, given the high cost of these aircraft, if DoD moves ahead with its current fighter modernization plans, insufficient funding may be available to provide for high levels of training, or to adequately fund the full range of important support capabilities.

The Revolution in Military Affairs
It is widely believed that we are in the midst of a revolution in military affairs (RMA) that will significantly change the way wars are fought in the future. The driving forces behind this RMA are advances in technology, especially information technology, combined with potential changes in military organization and concepts of operation. There is, however, little agreement on precisely how the RMA will change the way wars are fought, what the implications are for the organization of the U.S. military and its concepts of operation, or how dramatic the changes in warfare will be. The Services claim that their current tactical aircraft plans not only continue to make sense in light of the RMA, but that those plans will effectively exploit the RMA.

There is, however, good reason to question this assertion. Certainly, air power will remain critical to the overall effectiveness of the U.S. military, and tactical air forces will remain an important instrument of air power. But much evidence suggests that a substantially different mix of capabilities will be needed to effectively employ air power in the future.³⁶

The Joint Chiefs of Staff’s vision document, Joint Vision 2010, observes that “power projection, enabled by overseas presence, will likely remain the fundamental strategic concept of our future force.” Unfortunately, the RMA is likely to dramatically reduce the U.S. military’s access to forward bases (e.g., ports, air bases and major fixed supply points). The proliferation of increasingly accurate ballistic missiles and cruise missiles, and the growing access of many countries to satellite imagery, will make such bases increasingly vulnerable to attack. Moreover, this vulnerability will likely make countries more reluctant to grant U.S. forces use of their bases.

Likewise, improvements in long-range strike capabilities, combined with advances in anti-ship mines and submarines, could significantly increase the dangers posed to U.S. aircraft carriers operating in forward areas.

While these dangers may not prevent U.S. tactical air forces from being brought into threatened regions during a crisis or wartime, they are likely to substantially increase the difficulty and cost of such forward deployments, as well as greatly limit the effectiveness of those forces once they are deployed. These trends may argue for adopting a different approach to force planning and modernization. In particular, these trends may suggest that, rather than focusing on the very costly modernization of the U.S. military’s already large and effective fleet of tactical combat aircraft, greater resources should be devoted to developing a range of other capabilities that might be able to more effectively carry out some missions traditionally performed by tactical air forces.

These capabilities include, for example: missile firing ships (e.g., naval surface combatants with vertical launch system (VLS) capabilities, converted Trident ballistic missile submarines, and other submersibles); land-based extended range precision artillery (e.g., ATACMs follow-ons); long-range bombers; extended-range PGMs; and unmanned aerial combat vehicles (UCAVs).

Although it may make sense to allocate greater resources to the development of these systems than do current plans, given the high level of uncertainty surrounding the pace, shape and implications of the RMA, at this stage it would certainly be inappropriate to commit to the large-scale production of many of these systems. Likewise, although tactical air forces may play a less central role as instruments of air power in the future than they do today, these forces are likely to continue to play a critical role for many years to come. Thus, the best strategy might be to adopt a hedging approach to tactical air modernization.

Such an approach would combine several elements. One element would consist of a robust program of R&D and experimentation with new technologies, such as converted Trident submarines, extended-range PGMs and UCAVs, and new organizations and concepts of operation. Another element would involve taking a slower approach to tactical aircraft modernization. This would probably mean scaling back the F-22 and F/A-18E/F programs, or possibly canceling one of those systems, extending JSF development, and relying more on upgrading and extending the service lives of existing current-generation aircraft.³⁷

In narrow budgetary terms, a hedging strategy would not be the most efficient approach to fighter modernization. As noted earlier, in strictly budgetary terms, the greatest savings would probably be achieved through the outright cancellation of one or more of the three tactical fighter programs. By comparison, a hedging approach could involve reducing purchases of all three new fighters, but not canceling any of them. On the other hand, even under a hedging approach it might well be appropriate to cancel either the F/A-18E/F or the F-22 program. Furthermore, depending on how rapidly and successfully UCAVs and other new technologies were developed, a hedging strategy could also be consistent with deferring, buying a smaller number of, or even canceling, the JSF—by far the largest of the three next-generation fighter programs.

A hedging strategy could also result in some greater budgetary inefficiencies because it might involve not only reducing planned purchases of some next-generation aircraft, but stretching out production of those systems in order retain an option for expanded production well into the future. But here too, much would depend on the speed and success of RMA-related development efforts. In short, while a hedging strategy would not be the most efficient approach to fighter modernization, at least in narrow budgetary terms, just how large an efficiency penalty would have to be paid is unclear and could be quite modest.

In any case, to offset any such penalty, under a hedging approach it might also make sense to make some additional reductions in the number of air wings. As discussed earlier, in the near term, doing so would mean accepting greater risk that the current two-MTW requirement could not be met and might necessitate a reduction in U.S. involvement in forward presence and contingency operations. However, the additional savings achieved through such force structure reductions would ensure that sufficient funding is available not only to cover the cost of a scaled back fighter modernization effort, but to finance a robust program of RMA-related R&D and experimentation.

One of the underlying assumptions of this approach is that the military threats facing the United States today, while certainly significant, are less demanding than those faced during the Cold War and those likely to be faced a decade or more from today. The former assumption makes the decision to slow the rate of new aircraft procurement appear prudent, while the latter assumptions makes greater investment in developing and experimenting with new technologies, organization and concepts of operations seem imperative.

Conclusion

Under current plans, the Services are projected to buy a total of 3,739 new F/A-18E/F, F-22 and JSF fighters. Assuming historical rates of cost growth in R&D and procurement, the total cost of this effort is likely to reach some $340 billion. About $38 billion has already been spent on these three programs. But this is just the tip of the iceberg. To complete these plans, DoD will need to spend an average of $11.1 billion annually, over the next 27 years. This includes a total of some $60 billion over the next six years. However, based on the overall funding levels for defense projected in the administration’s February 1999 defense plan and the April CBR, it appears unlikely that this much money will actually be available for tactical aircraft modernization over the long run. In terms of procurement funding alone, it is likely that costs will exceed available funding by an average of some $3 billion a year in the coming decades.

It is certainly possible that more money will ultimately be made available to pay for these plans. For example, the overall defense budget could grow by more than assumed here, or fighter modernization programs could receive a larger share of the defense budget than they have historically. However, it seems at least as likely that less funding will be available for these programs over the long term. The growth in Social Security and other entitlement costs associated with the retirement of the baby boomer generation beginning around 2010 could create pressures to make further cuts in defense spending. Likewise, competition from other modernization programs, such as shipbuilding, airlift and C3I programs, as well as growing O&S costs, could make it difficult for tactical aircraft modernization programs to maintain, let alone increase, their historical budget shares. As a result, it seems likely that these plans will have to be scaled back in coming years.

This report outlined a range of alternative options that could be pursued to scale back these plans and make them more affordable. It described 12 different options that would involve cutting back one or more of the three next-generation tactical aircraft programs, but still fully support the maintenance of 20 Air Force fighter wings, 11 carrier air wings, and four Marine Corps air wings over the long run. These options indicated that, for example, cutting all three programs in half could save up to $2 billion a year, canceling one fighter could save as much as $3.8 billion a year, and canceling all three programs could save $5.3 billion annually. Under each of these options, sufficient funding would also be available to replace the cancelled or scaled back next-generation systems with new current-generation aircraft, or robust upgrades of existing aircraft. Thus, each of these options should substantially allay concerns that scaling back the three planned next-generation fighter programs would leave the Services with an inventory of worn out aircraft that would require ever more O&S funding to keep them flying. In addition, this report noted that cutting two Air Force fighter wings and one or two aircraft carriers (the ships plus the air wings) could yield long-term savings of some $3 billion a year.

None of these options would lead to the fielding of air forces as capable as those in the administration’s plan. However, under all of these options, U.S. air forces would be substantially more capable 10-20 years from now than they are today. The critical question is which, if any, of these options would provide the United States with affordable and sufficiently capable air forces over the long run. Lastly, it is important to understand that the earlier a decision is made to scale back current fighter modernization plans or to replace those plans with a hedging strategy, the greater the savings and the less drastic the necessary changes to those plans are likely to be.

1. Unless otherwise stated, all figures in this analysis are expressed in FY 2000 dollars.

2. This is the unit procurement cost of the aircraft. In contrast to recurring unit flyaway costs, unit procurement costs include not only the cost of procuring the aircraft itself, but also the cost of other items such as initial spares and ground-support equipment that are also paid for through the procurement account. Unit procurement costs are typically 30-40 percent higher than recurring unit flyaway costs. Unit procurement costs do not include any R&D costs. Unless otherwise noted, the cost estimates for the F/A-18E/F, F-22 and JSF programs contained in this analysis are taken from Christopher Jehn, Assistant Director, National Security Division, CBO, “Modernizing Tactical Aircraft,” Statement before the Senate Armed Services Committee’s Airland Subcommittee, March 10, 1999.

3. The Air Force has also indicated its desire to eventually replace its existing inventory of some 200 F-15E and 60 F-117 aircraft with a new deep interdiction aircraft, possibly a derivative of the F-22. If these aircraft were replaced on a one-for-one basis, the cost of Services’ modernization plans could increase by as much as another $30 billion.

4. These figures reflect funding over the FY 1974-FY 1999 period.

5. No attempt is made in this report, however, to estimate just how difficult it is likely to be for DoD to find sufficient funding to cover these R&D costs. While the Service’s tactical aircraft procurement plans for the next several decades are relatively well defined, their R&D plans are not, at least in publicly available sources. Presumably, in addition to completing R&D on the F/A-18E/F, F-22 and JSF, the Services will spend a considerable amount of money over this period funding R&D of follow-on aircraft. But without knowing how much funding is likely to be spent on these efforts, it is only possible to speculate on whether the level of funding likely to be available to pay for tactical aircraft R&D over this period will be adequate.

6. This emergency supplemental included about $10.9 billion for defense, but this included $1.8 billion to cover the FY 2000 costs of a military pay raise and the proposed change to military retirement.

7. See Steven Kosiak and Elizabeth Heeter, “Congressional Budget Resolution: Mixed News for Defense,” CSBA, March 22, 1999 and Steven Kosiak, “Proposed Republican Tax Cut Likely to Lead to Major Cuts in Defense,” CSBA, July 16, 1999.

8. The Air Force eventually plans to replace its current fleet of C-130E intra-theater airlift aircraft with the C-130J. In addition, the Air Force is considering procuring replacements for the C-5A inter-theater transport and the KC-135 tanker. Finally, it seems reasonable to assume that funding for command, control, communications, and intelligence (C3I) programs will increase (at least as a share of DoD funding) over the coming decades, given the likely greater importance of “information dominance” in future warfare.

9. Since the mid-1950s, O&S costs have increased in real terms at an average annual rate of about 1.8 percent per troop.

10. As noted later in this report, whether increasing equipment age leads to higher O&S costs depends in large part on whether, and the extent to which, weapon systems are modified and upgraded to extended their service lives.

11. In June 1999, DoD began a review of possible alternatives to buying all 339 of the F-22s currently planned. One of those options is a version of the F-15E optimized for air-to-air combat. Elaine M. Grossman, “Pentagon Launches Study of Partial Alternatives to Planned F-22 Buy,” Inside the Pentagon, June 17, 1999, p. 14. The F-15E is currently used primarily for long-range attacks against ground targets, but retains the full air-to-air capabilities of the F-15C/D.

12. The exception is the AV-8B. In this case it is assumed that about three-quarters of the aircraft would be new AV-8Bs and one-quarter remanufactured AV-8Bs. Because of the limited number originally procured and their relatively high peacetime attrition rate, there would not be enough existing AV-8Bs available to rely on remanufacturing to meet half of the requirement for current-generation aircraft posed by one of the options (9) included in this analysis.

13. Funding for the remanufacture of 52 AV-8Bs has already been provided. The Marine Corps is seeking funding for the last 20 in FY 2000 and FY 2001.

14. Report of the House Committee on Appropriations, Department of Defense Appropriations Bill, 2000 (Government Printing Office, July 29, 1999), p. 19.

15. Mike Nipper, a spokesman for the aircraft’s manufacture, Lockheed Martin, also noted that the fact that the structural upgrades will ensure that the F-16s reach 8,000 hours “doesn’t mean they won’t go beyond 8,000 hours.” It simply means “they won’t need another depot-level inspection until 8,000 hours.” Jennifer Palmer, “Pace of Yugoslav Operations Stresses F-16 Fleet,” Defense News, June 21, 1999, p. 52.

16. “F-16 Celebrates 25 Years of Flying High,” Air Force Press Release, February 22,1999, p. 2.

17. GAO, Navy Aviation: AV-8B Harrier Remanufacture Strategy Is Not the Most Cost-Effective Option, (GAO/NSIAD-96-49, February 1996), p. 2.

18. Eric Hehs, “F-16 Mid-Life Update Program,” Code One Magazine, Vol. 13, No. 1, p. 4.

19. If the aircraft were to be kept flying for this long, presumably some additional funding beyond the $5 million for MLU-like upgrades would be needed both to give the aircraft added capability and to address any problems that might develop with the aircraft’s engine or airframe (the MLU does not address either of these areas). Another possible low-cost option would be for the Air Force to reactivate and update some of the 400 F-16A/Bs which the Air Force retired early (as a result of the post-Cold War drawdown in force structure), and has placed in secure storage. Indeed, the Air Force has already initiated a program to identify 200 of these aircraft for potential reactivation.

20. Report of the House Committee on Appropriations, p. 19.

21. It is unclear how effectively the Navy could employ an F/A-18E/F force consisting of only 62 aircraft, among other things, given the potentially high logistical costs of supporting such a small force. On the other hand, the Air Force has been able to make highly effective use of its F-117 force consisting of roughly 60 aircraft.

22. These rough estimates of the effect of lower procurement quantities on unit procurement costs are based on historical experience with the F-22 and F/A-18E/F program, both of which have already been scaled back several times, experience with several earlier aircraft programs, and CBO, Effects of Weapons Stretch-Outs on Costs and Schedules (CBO, November 1987).

23. JSF R&D through the end of the prototype phase is currently projected to cost about $3.5 billion, about $2.9 billion of which has been provided through FY 1999. Thus, providing $4 billion in FY 2000 and beyond should be enough to complete the prototype phase and conduct a robust technology development program. Such an effort might even result in the development of further prototypes.

24. CBO, A Look at Tomorrow’s Tactical Air Forces, January 1997, pp. 13-15.

25. Ibid., p. 15.

26. Ibid., p. 13.

27. Arms Control and Disarmament Agency (ACDA), World Military Expenditures and Arms Transfers, 1997, p. 83. This is the most recent year for which ACDA data is available.

28. According to ACDA, the value of arms deliveries to the developing world decreased by 55 percent between 1986 and 1996. Ibid., p. 9. According to another estimate, arms deliveries to the developing world grew by about 4 percent from 1996 to 1998. Richard F. Grimmett, Conventional Arms Transfers to Developing Nations, 1991-1998 (Congressional Research Service, August 4, 1999), p. 56. This suggests that overall, arms deliveries to the developing world remain about 50 percent below their 1986 level.

29. Jehn, p. 7.

30. Raymond A. Pyles, Statement before House Armed Services Committee’s Subcommittee on Military Procurement, February 24, 1999, p. 1.

31. One area where dramatic improvements can probably only be achieved through the production of new aircraft designs is in stealth.

32. ACDA, World Military Expenditures and Arms Transfers, 1995, April 1996, p. 171.

33. Grimmett, p. 69.

34. GAO, Operation Desert Storm: Evaluation of the Air Campaign, June 1997, p. 178.

35. Anthony H. Cordesman, “The Lessons and Non-Lessons of the Air and Missile War in Kosovo,” Center for Strategic and International Studies, July 20, 1999, p. 14.

36. For a fuller discussion of the potential impact of the RMA on air power, see Andrew Krepinevich, “The Future of Tactical Aviation: A Strategic Perspective,” Testimony before the Senate Armed Services Airland Subcommittee, March 10, 1999.

37. None of the options described earlier in this report was designed to explicitly reflect this approach to tactical aircraft modernization. However, some of those options are obviously more consistent with this approach than are others.