THE NEXT FSX FIASCO

FSX Redux

A little over a year ago, a furious
debate swept Washington and the Nation.
Cabinet officers in the new Bush
Administration, members of Congress,
policy analysts and leading
industrialists were aghast at the
imminent prospect of a technology in
which the United States leads the world
— state-of-the-art aerospace design and
manufacturing — being sold off to the
Japanese.

At that time, the issue was the
so-called FSX, an
advanced fighter aircraft Japan planned
to design and develop with the assistance
of the American manufacturer of the F-16,
General Dynamics. Legitimate questions
were raised about the wisdom of this
transaction:

• Would it do for the
  Japanese aircraft manufacturing
  industry what Detroit had done
  several decades earlier for
  Tokyo’s then-nascent automobile
  industry?
• Would the United States
  lose its competitive edge in this
  technological field and dominant
  world market share as it has in
  so many others, from computer
  chips to VCRs?
• Would the prospect of
  short-term profits prompt the
  U.S. government and one of its
  leading companies to sell the
  United States’ technological
  seed-corn, and in so doing ensure
  that this country would shortly
  become a net importer,
  instead of an exporter, of
  derivative products?

A debate similar to that
which surrounded — and helped ultimately
somewhat to ameliorate — the FSX deal is
urgently needed today. As a result of an
exceedingly short-sighted decision by the
Defense Department, the United States
government is poised to terminate the
most promising aerospace development
since the invention of the jet engine:
the V-22 “Osprey” tiltrotor
aircraft.

V-22: State of the American
Art

Incredible as it may seem, a
proposal by the Secretary of Defense to
abandon the V-22 comes just as the
government’s eight-year, $2 billion-plus
investment aimed at realizing the
potential of the tiltrotor technology
begins to pay off. Thanks to
this sustained investment, myriad
engineering challenges have been overcome
that previously precluded a single
aircraft design from accommodating both
vertical take-offs and landings like
those of helicopters and horizontal
flight like that of conventional
airplanes.

Such a capability was formally
recognized by the Department of Defense
in 1982 to be an essential one
for as many as eleven different
military missions from transporting
Marine and Army units and much of their
equipment into battle, to search and
rescue, special forces and electronic
warfare operations.

It does not take much
imagination to recognize the vast
potential contribution the tiltrotor
could make in the civilian sector,
as well. For example, in an era of
increasingly gridlocked urban airports
and inadequate service to many rural
communities in the wake of airline
deregulation, the V-22 promises
cost-effective solutions to intractable
transportation problems. Such solutions
are highly attractive in overseas markets
like Japan and Western Europe, offering a
substantial export market for a
commercial derivative of the Osprey. In
particular, Japan’s limited useful land
mass makes such a system an imperative
for its transportation needs in the 1990s
and beyond.

The Foreign Competition

Not surprisingly, a number of other
nations are actively pursuing their own
variants of the V-22. Several leading
European companies (including
Aerospatiale, Westland, and MBB) have
teamed together to form an organization
called Eurofar for the purpose of
developing and marketing a tiltrotor
aircraft for commercial and military
markets. The Soviet Union’s Mil Design
Bureau is reported to have as many as three
different tiltrotor designs under
development for various military
applications.

Last but not least, Japan is also
aggressively seeking to acquire this
technology. Its Ishida group has touted a
similar system, designated the TW-68,
which was displayed at last year’s Paris
Air Show. Interestingly, the TW-68 is
being developed by a team of designers
formerly employed by Bell Helicopter,
the company that (together with Boeing
Helicopter) has been readying the V-22.

In fact, so keen is Japan’s interest
in the Osprey technology that the only
company visited by the minister of
the Japanese Ministry of International
Trade and Industry (MITI), Hikaru
Matsunaga, during his visit last month to
the United States was Bell. At the end of
his tour of the V-22 line, he confided,
“If you produce this aircraft, I
guarantee you we will buy it; if you do
not, I guarantee you we will
build it.”

Why is the U.S. V-22 An
Endangered Species?

Given the U.S. government’s enormous
sunk investment, the numerous, identified
military and commercial requirements and
the prospect of a loss of yet another
crucial technological advantage to
foreign competitors, one may wonder: How
could the United States possibly
consider terminating the Osprey program?

The answer lies in the convergence of
budgetary pressures on the one hand and,
on the other, the over-reliance of a new
Secretary of Defense on the advice of key
subordinates with a penchant for
shortsighted, penny-wise and
pound-foolish approaches to managing
defense programs and operations.

During the hectic first weeks after
Richard Cheney was tapped by President
Bush to become Defense secretary —
following a delay of several months
imposed by the bitter and protracted
Senate consideration of John Tower’s
nomination, Mr. Cheney suddenly found
himself in the unenviable position of
having to produce $10 billion in cuts in
a budget with which he was largely
unfamiliar. He did what many of his
predecessors have done during similar
“belt-tightening” phases: He
turned to his department’s Program
Analysis and Evaluation (PA&E)
organization to develop a “hit
list.”

Under PA&E’s current director,
Assistant Secretary David S. Chu, such
lists are always close at hand.
Regrettably, they often prominently
feature programs like the V-22,
technologically advanced weapons just
entering into production after years of
research and development.

The PA&E argument usually goes
like this: The Pentagon should continue
to buy a larger number of older
systems (in this case, a mix of
CH-53E and H-60 helicopters) for what appears
to be a somewhat smaller amount of
money, rather than paying more for a
newer system. At first glance,
terminating a major procurement of a new
weapon seems to offer the sort of massive
savings that are demanded by the present
budget reduction exercise.

Such analyses invariably fail to give
appropriate weight, however, to factors
whose dollar value may be less obvious
than the “sticker price.” For
example, features engineered into the
V-22 will make it vastly more efficient,
reliable and survivable than the
helicopters it is intended to replace.
Calculated in life-cycle
terms — the only honest
way of comparing the proverbial apples
and oranges of a system just entering
production with those from long-running
production lines — these considerations
have been estimated to make the V-22
perhaps as much as $11 billion
cheaper than the PA&E
recommended alternatives.

Which brings up another point:
Frequently ignored in Pentagon debates
over systems like the V-22 is the fact
that vast sums are going to
have to be spent to meet vital
requirements — most immediately, the
Marine Corps’ need for combat air
transport of troops and equipment — with
or without the proposed advanced
technology system. In fact, a
rigorous costing of PA&E’s preferred
procurement approach for meeting this
requirement over twenty years reveals
that it may run as high as $29
billion!

If, on the other hand, several extremely
optimistic PA&E assumptions (for
example, that the Marines can actually
operate the older helicopters with two
different pieces of equipment suspended
below — a difficult and tactically
unsound logistical feat) prove erroneous,
the so-called “cheaper”
alternative may have a life-cycle price
tag as high as $40 billion for a
comparable lift capability. This is, on
the face of it, an absurd proposition
given that the cost of meeting
the Marines’ need with the V-22 over
twenty-years is only $30 billion.

Finally, there is no room in
PA&E’s green-eye shade analysis for
the value to the Nation — both the
military services and the civilian sector
— of operationalizing the V-22. If, as
will certainly be the case, the Army,
Navy and Air Force ultimately proceed
with their own purchases of Ospreys, the
unit costs associated with larger
production runs will be substantially
lower than those associated with an
acquisition by the Marines alone.
Moreover, if the armed forces help create
an industrial infrastructure for
tiltrotor technology and validate its
performance (something airlines simply
cannot afford to do with a radically
different technology), the return to the
taxpayer in terms of new employment
opportunities, improved transportation
services and increased export potential
will make the initial investment money
doubly well spent.

Similarly missing from the PA&E
analysis was any assessment of the cost
the United States might
ultimately incur if it were to pass up
the opportunity to be the world’s leading
manufacturer of tiltrotor systems and were
obliged instead to buy this technology
back from the Japanese or other
sources. Since someone is going
to develop a derivative of the V-22 and
since an aircraft with those capabilities
is going to continue to be the preferred
approach for a variety of military
and civilian purposes, it appears
inevitable that this country would later,
if not sooner, have to import such
systems — or manufacture them here under
license.

Congress Must Save the
Osprey

If the Pentagon is determined to be so
short-sighted, there is no reason why the
Congress has to go along. In fact, the
V-22 enjoys broad support on Capitol
Hill, backed by a growing coalition
comprised of legislators with a variety
of interests. Some are concerned about
America’s technology base and the danger
of a new FSX fiasco. Others appreciate
that in the emerging so-called Post-Cold
War world, the need is greater than ever
to provide the Marine Corps (and other
elements of the U.S. armed forces) with
systems like the Osprey that maximize the
flexibility and mobility crucial to
effective power projection missions.

Still other members of Congress are
committed to equipping the Nation to
fight the drug war and appreciate that
the V-22 is the ideal
instrument for performing a variety
of interdiction functions. And of course,
there are those who appreciate the
invaluable contribution the Osprey can
make to revolutionizing the domestic air
transportation system, both in this
country and abroad.

The next few weeks will see a
burgeoning of this tiltrotor technology
coalition. Just as Congress last year
rejected the Bush Administration’s
recommendation to cancel the V-22
outright and directed that the program be
kept alive by providing needed research
and development funds to the Pentagon,
the smart money says the legislative
branch will insist that preparations
proceed for V-22 production.

Fortunately, this congressional rescue
mission can be effected fairly easily,
thanks to the Osprey contractors’
commitment to the program and that of the
Marines — who, to their lasting credit,
have never wavered (despite intense
pressure from the Office of the Secretary
of Defense) in their insistence that the
Osprey is the Corps’ top procurement
priority. The V-22 contractors have
offered to restructure the program so as
to reduce up-front costs somewhat and the
Marine Corps can identify specific
offsets (for example, the
PA&E-imposed helicopter purchase and
M-1 tanks) that they are prepared to give
up. Following such a strategy would
permit Capitol Hill to save the tiltrotor
without savaging other Defense
Department accounts.

If, as now seems inevitable, Congress
is going to make radical changes in other
defense programs, it would be well
advised to keep in mind the following
priorities: Invest in high technology
that will serve multiple purposes —
ideally, both military and civilian —
and will support the national quest for
technological competitiveness; equip the
armed forces with systems that will
enhance their flexibility, mobility and
interoperability; and eschew the advice
of those who would have the country make
penny-wise and pound-foolish decisions,
particularly those who would squander
enormous investments made in the
development of key systems just at the
point where the pay-off is in sight.

If Congress follows these guidelines,
it will fund the tiltrotor, irrespective
of the budget level ultimately decided
upon for the Defense Department. In doing
so, it will provide a clear indication
that at least the legislative branch
recognizes the United States’ long-run
technological requirements and that it is
prepared to ensure they are met.