F22 Raptor at Airshow

[Mike Abberton]

Most of the "large unit cost" misinformation that gets spread around on US weapon production contracts (like the $20,000 coffee pots on C-5's or the $400 hammers) has to do with the way the US Government pays for weapon development.

Basically after the prototype competition, they issue a contract to the winner that includes: developing the final product, building the infrastructure to construct the weapon (tooling, dies, etc.), build the initial batch of weapons, build up the initial spare parts, and sometimes even make base improvements to maintain the new weapon (like stealth coating facilities for the B-2s). That entire cost then gets divided by the total number of weapons in the first order batch resulting in very high unit costs. (And not just on a per unit basis, but on a per component basis. So that $400 hammer might be $4 for the hammer and $394 of development/tooling/etc. cost.)

I am not sure of the actual breakdown, but for combat aircraft, the actual manufacturing costs for the planes alone is probably somewhere between 1/3 and 1/2 of the total cost at the start (depending a lot on the number of units). That usually only gets smaller as teething issues drag out development and drive up the overall project cost. As the overall project cost goes up, the typical goverment reaction is to cut the number of units bought in the first batch. So while that saves overall expenditure, it can wildly drive up the contract's per unit cost.

However, if and when there is ever a second order, you have already paid for development, tooling, etc. and the second batch per unit cost drops usually by quite a lot. Also, it usually happens that manufacturing costs per plane drop a bit as the manufacturer gets some experience and figuring out better ways to put things together.