Anthony Capaccio / Bloomberg – 2016-09-08 00:56:11
(September 6, 2016 — The US Air Force’s program to develop and field a new intercontinental ballistic missile to replace the aging Minuteman III in the nuclear arsenal is now projected to cost at least $85 billion, about 36 percent more than a preliminary estimate by the service.
Even the $85 billion calculated by the Pentagon’s Cost Assessment and Program Evaluation office is a placeholder number that’s at the low end of potential costs, according to an Aug. 23 memo from Pentagon weapons buyer Frank Kendall to Air Force Secretary Deborah James. It includes $22.6 billion for research and development, $61.5 billion for procurement and $718 million for related military construction.
Lockheed Martin Corp., Boeing Co. and Northrop Grumman Corp. are all competing to build the new ICBMs. But the latest estimate may add to debate about the cost and need for the planned modernization of all three legs of the US nuclear triad of land, air and sea weapons.
The nuclear modernization plan contributes to what defense analysts call a gathering “bow wave” of spending in the coming decade on major weapons that the next presidents will face.
At this stage of the ICBM program “there is significant uncertainty about program costs” because “the historical data is limited and there has been a long gap since the last” such development program, Kendall wrote.
The $85 billion estimate must be revised no later than March 2018 once missile designs are more advanced, technical risks are reduced and the service has a better understanding of overall costs, Kendall said in the memo.
Nonetheless, Kendall approved proceeding with early development and efforts to reduce technology risks of the new ICBM. He directed the service to move toward buying 642 missiles at an average cost of $66.4 million each to support a deployed force of 400 weapons and to budget at least $1.25 billion annually from 2036 to 2040 for operations and support costs.
The Pentagon’s ability to estimate the cost of the new Ground Based Strategic Deterrent was limited by the “incompleteness and significant age of” the “data for comparable ICBM and submarine launched ballistic missiles dating back to the 1960s through the early 1990s,” Kendall wrote.
The Pentagon and Air Force are “accepting greater risk by going with” the $85 billion estimate that’s at the lower end of its calculations, Kingston Reif, an analyst with the Arms Control Association in Washington who follows the program, said in an e-mail.
“From a good-government perspective” it is “better to build in contingency and plan for and prioritize around a bigger bill now, lest a sudden big cost increase threaten to wreck the budget and the program five to 10 years from now.”
Kendall wrote that inflation assumptions and the defense industry’s capability to produce the missiles are major sources of cost uncertainty. Still, he said the $85 billion placeholder is “the most reasonable estimate of program cost at this point.”
In addition to the new nuclear systems, the bow wave of coming costs includes nine Air Force conventional systems and plans for increased construction of naval vessels such as a second Ford-class aircraft carrier.
For the air component of the nuclear triad, Northrop defeated a Lockheed-Boeing team in October for the right to build a new dual-use bomber that can carry both nuclear and conventional weapons, a project valued at as much as $80 billion.
At sea, the Navy is planning to replace its Ohio-class nuclear-armed submarines through a production program now estimated at $122 billion, which doesn’t include development.
That estimate will be updated by year’s end as the Pentagon reviews moving the program into full development.
Kendall’s decision to let the ICBM program move forward marks the official beginning of the technology development stage, with spending increasing from about $75 million this year to $1.6 billion in 2021 and $2.6 billion in 2022, according to the Pentagon estimate.
The “program plans to buy enough missiles to maintain a 400-missile deployed force through 2075,” Air Force spokeswoman Leah Bryant said in an e-mail. “The overall number of missiles acquired in the inventory may vary depending on testing, evaluation, maintenance,” she said.
The Air Force made its early estimate last year that the new ICBM program would cost $62.3 billion for research, development and production as well as command and control systems and infrastructure. That number, as well as the new $85 billion estimate, is calculated in so-called “then-year,” or current-year, dollars.
Bryant said “it is important to keep in mind that at this stage,” as “in any acquisition program, there can still be some uncertainty about projected” ICBM costs because “the historical data used for estimates, whether ours or another organization’s estimate, are limited and very dated.” The last ICBM development occurred in the 1980s, she said.
Kendall’s memo was provided to the staff of the Senate and House defense committees last week.
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