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Cost of SDF aircraft parts skyrocketed over the years

  • November 16, 2021
  • , Asahi , p. 8
  • JMH Translation

By Sakakibara Ken

 

The Ministry of Finance (MOF) examined prices of parts of six aircraft models, including planes and helicopters, procured by the Ministry of Defense (MOD). MOF found that on average there has been a 1.5-to-2.4-fold increase in procurement prices of the aircraft parts since initial purchase, with some parts now costing 10 times the original amount. MOF concluded that the hike in parts’ prices has resulted in higher prices of aircraft and requested MOD to remedy the situation.

 

Total dependence on two firms to manage costs

 

The MOF’s findings were reported at a meeting of an expert panel, the “Fiscal System Council,” on November 15. According to MOF, MOD procured aircraft of the same model over several years and while doing so relied entirely on two firms that assembled the final products for cost management of necessary parts.

 

The hike in the prices of parts could drive up the prices of the final products. In the case of P-1 fixed-wing patrol aircraft purchased for the Maritime Self-Defense Force (MSDF), the cost of acquiring 70 aircraft was estimated at 2.3 trillion yen in FY 2008 but increased by 68% to 3.8 trillion yen by FY 2021.

 

The defense spending often stretches over several years. MOF was concerned that an unreliable estimate on final procurement cost could result in ballooning expenses and initiated the examination of changes in the prices of aircraft parts that are used in six different aircraft models and cost more than one million yen per unit.

 

The MOF found that prices of the parts studied increased over time by 50% to 145% after the initial procurement. In the case of the P-1 aircraft, prices of parts for its hydraulic system went up by 336%, from several million yen in FY 2008 to several dozens of million yen in FY 2020. As for UH-60J and UH-60JA helicopters deployed by three branches of the Self-Defense Forces, the price of tailplane parts increased by 918% from several hundred thousand yen in FY 2014 to several million yen in FY 2020. The engine parts for another type of MSDF helicopter, which cost tens of millions of yen, skyrocketed to hundreds of millions of yen.

 

The price hikes are due to the fact that while two firms, Mitsubishi Heavy Industries (MHI) and Kawasaki Heavy Industries (KHI), have contracts with MOD and received direct orders for the six aircraft models, the subcontractors engaged by MHI or KHI to manufacture the aircraft parts have no direct contract with the ministry. MOD relied on MHI and KHI for managing the cost of parts, and as a result, the subcontractors’ requests for a price increase were generally accepted without being checked by MOD.

 

The six aircraft models are domestically manufactured. However, 40 to 60% of their parts are imported and vulnerable to inflation and currency fluctuation. Many parts are made to special SDF specifications and designs, making it difficult to switch to more generic alternatives even if the price increases. Furthermore, consideration for a possible price increase in the future is lacking when selecting parts, adding to the problem.

 

Although some in the Liberal Democratic Party (LDP) hope to significantly increase Japan’s defense spending, a senior MOF official advises caution. “First and foremost, we must thoroughly understand issues surrounding parts procurement and address the root cause,” he said.

 

Increase in prices of SDF aircraft parts

 

Plane parts

ASDF C-2                                                                           FY 2011-FY 2019

 

·      Parts for hydraulic system (imported)

314%

·      Parts for battery (domestic)

167%

MSDF P-1                                                                          FY 2008-FY 2020

 

·      Parts for hydraulic system (imported)

336%

·      Parts for pressure control system (domestic)

271%

Helicopter parts

GSDF UH-60JA, MSDF/ASDF UH-60J                             FY 2014-FY 2020

 

·      Parts for tailplane (imported)

918%

·      Parts for warning lamp (domestic)

259%

MSDF SH-60K                                                                  FY 2014-FY 2020

 

·      Door handles for inside aircraft (imported)

850%

·      Parts for engine system (domestic)

332%

 

(*The rates of increase are calculated based on the initial procurement price and the price in the most recent contract year.)

 

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