Foreign Assistance

Pursuant to a congressional request, GAO evaluated conflicting cost estimates that the United States and Israel prepared for the Lavi fighter aircraft, which Israel is developing to replace its older fighter aircraft.

GAO found that: (1) Israel financed 90 percent of the development and initial production of the Lavi with U.S. foreign military sales (FMS) loans that Congress forgave; (2) the U.S. aircraft industry is heavily involved in the Lavi program; and (3) the Department of Defense (DOD) estimated that the Lavi would cost about $22.1 million per aircraft, or 52 percent more than the Israeli estimate of $14.5 million per aircraft. GAO adjusted the Israeli estimate to make it comparable to the DOD estimate and found that: (1) the Israeli-estimated hourly labor rates and other costs appeared low, while the DOD estimate for labor rates was high; (2) DOD overestimated the aircraft's weight; (3) DOD improperly adjusted its calculations for labor hours; (4) DOD overestimated the cost of materials; and (5) the DOD estimate could have been high by as much as $4.3 million. In addition, GAO found that, even using the lowest estimate, the Lavi's cost will: (1) exceed an Israeli-imposed annual spending limit for the aircraft; and (2) cause Israel to spend an increasing portion of its defense budget on the Lavi and damage its ability to meet its other defense needs.