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Eurofighter Typhoon EF-2000 - Cost and Schedule

Eurofighter originally planned to bring the Typhoon to the market in the mid-1990s, a decade before the next-generation US fighter would be ready. But budget cuts, technical problems and disagreements among the four Eurofighter partners led to a delay of seven or eight years.

The commercial arrangements put in place in 1988 were seen as a step forward on previous practice for collaborative projects and were thought to deal pragmatically with the complexities of a development program stretching over 10 years. However, in practice they did not encourage efficient performance by industry and left nations exposed to a higher degree of commercial risk than expected. These shortcomings have been addressed as part of the "re-orientation" of the development program which the partner nations formally agreed at the end of July 1995. This permited the placing of revised main development contracts which will reduce nations exposure to cost increases and provide significantly greater incentive on industry to manage the project efficiently.

The managerial arrangements were modelled upon those for the tri-national Tornado program and were thought at the time to be appropriate for such a complex project. In practice they have proved somewhat cumbersome and bureaucratic. Steps are being taken to rectify this. The industrial management of the program improved, while the government management arrangements were overhauled as part of the merger in 1996 of the international management agencies for Eurofighter 2000 and Tornado. Overall, these improvements, taken together with the revised commercial arrangements, placed the program on a much firmer footing. Political and financial uncertainties, although difficult to quantify, also played a part in the rescheduling of the reorientated program.

The collaborative arrangements have proved problematic. The spread of design, manufacturing and support expertise across a number of suppliers throughout Europe has increased the cost of the aircraft overall and poses risks to the timeliness and affordability of support and upgrade activities. Decisions need to be made with the consensus of all four nations but they have often found it difficult to stick to the suggested timescale of 40 days for agreeing such decisions. Some key upgrades, such as the ground attack capability on Tranche 2 aircraft, have taken several years to agree and deliver. The partners did not anticipate the level of cost increases and delays that the collaboration would entail. The partners learned from early experience and there have been improvements to the arrangements with partner nations. Partner nations have worked to improve the efficiency and effectiveness of the collaborative process, and reduce the number of contracts. Given the very limited number of industrial suppliers that have the capability required to support the aircraft, the partnes have contracted with single suppliers without competition.

As of August 1995 delivery of the first aircraft to the Royal Air Force was scheduled for December 2000, some three years later than planned at the start of the development phase. The roots of much of the cost escalation and re-scheduling can be traced to the collaborative commercial and managerial arrangements for the program rather than to major technical difficulties. In particular, the requirement for work-sharing at all levels between the partner nations has, in some cases, resulted in work being placed with specially created industrial consortia with variable levels of technical expertise.

The anticipated total cost to the UK of buying, upgrading and supporting Typhoon is 37 billion, of which 18 billion had been spent at the end of 2009-10. The UK originally approved an upper limit of 16.7 billion for the development and production of 232 Typhoons in 1996. These costs are now forecast to be 20.2 billion, 3.5 billion more than was approved, even though the UK is buying only 160 Typhoons, 30% fewer aircraft than originally planned. This increase reflects the Department's over optimism when estimating how much Typhoon would cost. Most of the 3.5 billion cost increase on the Typhoon project was on development costs which have more than doubled from 3.2 billion to 6.7 billion. Production costs have remained within the original approval of 13.5 billion, though 30% fewer aircraft are being procured.

The MOD excludes certain elements when reporting the unit costs of Typhoon. It bases its unit cost on production costs alone on the grounds that development costs are sunk costs from a separate phase of the project. It also excludes the cost of capital. The MOD calculates Typhoon's unit cost as 73.1 million which is significantly lower than if development and cost of capital were included - which would give a unit cost of 126 million. Therefore, excluding development costs does not present the full picture of the cost increases per aircraft. If all costs are included, costs have increased by 75% per aircraft. The inclusion of Development costs in effect creates a supplementary increase in Unit Cost because it penalises rather than recognises the increased effectiveness of reduced, more capable, aircraft numbers.

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Page last modified: 16-05-2013 18:40:59 ZULU