Defense Acquisitions

F-22 program production costs were expected to grow from the amounts planned, with cost reduction initiatives expected to offset that cost growth. The Air Force estimated production costs at $40.8 billion in 1999; the Office of the Secretary of Defense estimate was $48.6 billion. Both estimates assumed that 339 aircraft would be produced, but neither used the same estimating methodology. The Office of the Secretary of Defense's estimate of F-22 total production cost exceeded the Air Force's estimate by $7.8 billion, or 19 percent. If the Secretary's estimate is correct, the Air Force would have to buy about 85 fewer F-22 aircraft to stay within the congressional cost limit of $39.8 billion. About half of the $21 billion in cost reductions identified by F-22 contractors and program officials have yet to be implemented. Of 10 plans estimated to reduce costs by $6.8 billion, four plans--totaling $5.6 billion--may not be achievable. Six other cost reduction plans--totaling $1.2 billion--may be achievable. Although the Air Force reports quarterly on the total estimated cost of F-22 production, its reports have not regularly included a summary of the status of production cost reduction plans.

GAO noted that: (1) about half of the $21.0 billion in cost reductions identified by the F-22 contractors and program office have not yet been implemented; (2) however, the Air Force may not be able to achieve the expected results from some of the plans because they are beyond the Air Force's ability to control; (3) GAO reviewed 10 plans estimated to reduce costs by $6.8 billion; (4) GAO found that cost reductions for 4 of the plans, which accounted for $5.6 billion in potential cost reductions, may not be achievable because they were dependent on decisions or later determinations that must be made by the Office of the Secretary of Defense or Congress; (5) although the Air Force and its contractors have procedures to track the status of the production cost reduction plans, and the Air Force has reported quarterly to the Under Secretary of Defense concerning the total estimated cost of F-22 production, the Air Force reports have not regularly included a summary of the status of production cost reduction plans; (6) both Office of the Secretary and Air Force cost estimators projected F-22 production costs that exceeded the congressional cost limitation of $39.8 billion in effect at that time; (7) in 1999, after considering the potential of all the cost reduction plans, the Air Force estimated F-22 production cost at $40.8 billion, and the Office of the Secretary of Defense estimated production costs at $48.6 billion; (8) in comparing the cost estimates, GAO found that: (a) although both estimates were based on the production of 339 aircraft, the two estimating groups did not use the same estimating methods, nor did they make the same estimating assumptions; (b) the cost estimators did not make the same assumptions about which cost reduction plans were already implemented or about the cost reductions achievable from plans not yet implemented; (c) the Office of the Secretary's estimate of F-22 total production cost exceeded the Air Force's estimate by $7.8 billion, or 19 percent; (d) although Air Force cost estimators projected a total of $40.8 billion in production costs, the official Air Force cost position was $39.8 billion, the same as the congressional cost limitation; and (e) DOD officials noted that it will be some time before actual production cost trends emerge and before they will know whether the Air Force or the Secretary of Defense estimate is more realistic.

Recommendations

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