Joint Strike Fighter Acquisition
Observations on the Supplier Base Gao ID: GAO-04-554 May 3, 2004As the Department of Defense's (DOD) most expensive aircraft program, and its largest international program, the Joint Strike Fighter (JSF) has the potential to significantly affect the worldwide defense industrial base. As currently planned, it will cost an estimated $245 billion for DOD to develop and procure about 2,400 JSF aircraft and related support equipment by 2027. In addition, the program expects international sales of 2,000 to 3,500 aircraft. If the JSF comes to dominate the market for tactical aircraft as DOD expects, companies that are not part of the program could see their tactical aircraft business decline. Although full rate production of the JSF is not projected to start until 2013, contracts awarded at this point in the program will provide the basis for future awards. GAO was asked to determine the limits on and extent of foreign involvement in the JSF supplier base. To do this, GAO (1) determined how the Buy American Act and the Preference for Domestic Specialty Metals clause apply to the JSF development phase and the extent of foreign subcontracting on the program and (2) identified the data available to the JSF Program Office to manage its supplier base, including information on suppliers of critical technologies. DOD provided technical comments on a draft of this report, which GAO incorporated as appropriate.
The Buy American Act and Preference for Domestic Specialty Metals clause implementing Berry Amendment provisions apply to the government's purchase of manufactured end products for the JSF program. Currently, only one of the three JSF prime contractors is under contract to deliver manufactured end products to the government in this phase of the program. The Buy American Act will apply to manufactured end products delivered to DOD during subsequent phases, but it will have little impact on the selection of suppliers because of DOD's use of the law's public interest exception. DOD, using this exception, has determined that it would be inconsistent with the public interest to apply domestic preference restrictions to countries that have signed reciprocal procurement agreements with the department. All of the JSF partners have signed such agreements. DOD must also apply the Preference for Domestic Specialty Metals clause to articles delivered under JSF contracts. All three prime contractors have indicated that they will meet these Specialty Metals requirements. While the JSF Program Office maintains more information on subcontractors than required by acquisition regulations, this information does not provide the program with a complete picture of the supplier base. The program office collects data on subcontract awards for international suppliers and U.S. small businesses. In addition, it maintains lists of the companies responsible for developing key or critical technologies. However, the lists do not provide visibility into the lower-tier subcontracts that have been issued for developing or supplying these technologies.
GAO-04-554, Joint Strike Fighter Acquisition: Observations on the Supplier Base
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Report to the Chairman, Committee on Small Business, House of
Representatives:
United States General Accounting Office:
GAO:
May 2004:
Joint Strike Fighter Acquisition:
Observations on the Supplier Base:
GAO-04-554:
GAO Highlights:
Highlights of GAO-04-554, a report to the Chairman, Committee on Small
Business, House of Representatives
Why GAO Did This Study:
As the Department of Defense‘s (DOD) most expensive aircraft program,
and its largest international program, the Joint Strike Fighter (JSF)
has the potential to significantly affect the worldwide defense
industrial base. As currently planned, it will cost an estimated $245
billion for DOD to develop and procure about 2,400 JSF aircraft and
related support equipment by 2027. In addition, the program expects
international sales of 2,000 to 3,500 aircraft. If the JSF comes to
dominate the market for tactical aircraft as DOD expects, companies
that are not part of the program could see their tactical aircraft
business decline. Although full rate production of the JSF is not
projected to start until 2013, contracts awarded at this point in the
program will provide the basis for future awards.
GAO was asked to determine the limits on and extent of foreign
involvement in the JSF supplier base. To do this, GAO (1) determined
how the Buy American Act and the Preference for Domestic Specialty
Metals clause apply to the JSF development phase and the extent of
foreign subcontracting on the program and (2) identified the data
available to the JSF Program Office to manage its supplier base,
including information on suppliers of critical technologies.
DOD provided technical comments on a draft of this report, which GAO
incorporated as appropriate.
What GAO Found:
The Buy American Act and Preference for Domestic Specialty Metals
clause implementing Berry Amendment provisions apply to the
government‘s purchase of manufactured end products for the JSF program.
Currently, only one of the three JSF prime contractors is under
contract to deliver manufactured end products to the government in this
phase of the program. The Buy American Act will apply to manufactured
end products delivered to DOD during subsequent phases, but it will
have little impact on the selection of suppliers because of DOD‘s use
of the law‘s public interest exception. DOD, using this exception, has
determined that it would be inconsistent with the public interest to
apply domestic preference restrictions to countries that have signed
reciprocal procurement agreements with the department. All of the JSF
partners have signed such agreements. DOD must also apply the
Preference for Domestic Specialty Metals clause to articles delivered
under JSF contracts. All three prime contractors have indicated that
they will meet these Specialty Metals requirements.
While the JSF Program Office maintains more information on
subcontractors than required by acquisition regulations, this
information does not provide the program with a complete picture of the
supplier base. The program office collects data on subcontract awards
for international suppliers and U.S. small businesses. In addition, it
maintains lists of the companies responsible for developing key or
critical technologies. However, the lists do not provide visibility
into the lower-tier subcontracts that have been issued for developing
or supplying these technologies.
JSF Development Phase Subcontract Awards to the United States and Other
Partner and Nonpartner Countries:
[See PDF for image]
[End of table]
www.gao.gov/cgi-bin/getrpt?GAO-04-554.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Katherine V. Schinasi at
(202) 512-4841 or schinasik@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Buy American Act and Specialty Metals Requirements Apply but Will Have
Little Effect on JSF Subcontracting Decisions:
JSF Program Office Maintains Subcontract Information on Specific Areas
of Interest:
Conclusions:
Agency Comments and Our Evaluation:
Scope and Methodology:
Appendix I: Joint Strike Fighter Partner Financial Contributions and
Estimated Aircraft Purchases:
Appendix II: Joint Strike Fighter System Development and Demonstration
Subcontract Awards:
Tables:
Table 1: Joint Strike Fighter Partner Financial Contributions and
Estimated Aircraft Purchases:
Table 2: JSF Development Phase Subcontract Awards to the United States,
Qualifying Countries, and Nonqualifying Countries:
Table 3: JSF Development Phase Subcontract Awards to the United States
and Other Partner and Nonpartner Countries:
Figure:
Figure 1: Example of Specialty Metals Clause Application:
Abbreviations:
DCMA: Defense Contract Management Agency:
DFARS: Defense Federal Acquisition Regulation Supplement:
DOD: Department of Defense:
FAR: Federal Acquisition Regulation:
GAO: General Accounting Office:
JSF: Joint Strike Fighter:
United States General Accounting Office:
Washington, DC 20548:
May 3, 2004:
The Honorable Donald A. Manzullo:
Chairman:
Committee on Small Business
House of Representatives:
Dear Mr. Chairman:
As the Department of Defense's (DOD) most expensive aircraft program,
and its largest international program, the Joint Strike Fighter (JSF)
has the potential to significantly affect the worldwide defense
industrial base. As currently planned, it will cost an estimated
$245 billion for DOD to develop and procure about 2,400 JSF aircraft
and related support equipment by 2027. In addition, the program expects
international sales of 2,000 to 3,500 aircraft. If the JSF comes to
dominate the market for tactical aircraft as DOD expects, companies
that are not part of the program could see their tactical aircraft
business decline. Although full-rate production of the JSF is not
projected to start until 2013, contracts awarded at this point in the
program will provide the basis for future awards, if companies continue
to meet cost and schedule goals.
The JSF program is viewed by many within DOD as a model for cooperative
development and production between DOD and U.S. allies. The eight
foreign countries participating in the program are contributing over
$4.5 billion in the development phase. These countries expect to
realize a significant return on their investment in the form of JSF
contract awards to their defense industries. To meet these
expectations, the JSF program office has encouraged the three JSF prime
contractors--Lockheed Martin, Pratt & Whitney, and General Electric--
and their suppliers to provide opportunities for companies from partner
countries to bid on contracts. In our July 2003 report on the JSF
international program, we recommended that the program office collect
and monitor information on the prime contractors' selection and
management of suppliers to identify and address any potential conflicts
between partner expectations and program goals.[Footnote 1]
In July 2003 you requested that we review the extent of foreign
supplier involvement in the JSF program and its effect on the U.S.
defense industrial base. To do this, we (1) determined how the Buy
American Act[Footnote 2] and the Preference for Domestic Specialty
Metals clause[Footnote 3] implementing Berry Amendment[Footnote 4]
provisions apply to the development phase of the JSF program and the
extent of foreign subcontracting on the program; and (2) identified the
data available to the JSF Program Office to manage its supplier base,
including information on the suppliers of critical technologies. On
February 12, 2004, we briefed you and your staff on our work.[Footnote
5] This report summarizes that briefing and provides updated data on
JSF subcontract awards. We performed our review from August 2003 to
March 2004 in accordance with generally accepted government auditing
standards.
Results in Brief:
The Buy American Act and Preference for Domestic Specialty Metals
clause implementing Berry Amendment provisions apply to the
government's purchase of manufactured end products for the JSF program.
Currently, only one of three JSF prime contractors is under contract to
deliver manufactured end products to the government in this phase of
the program. The Buy American Act will apply to manufactured end
products delivered to DOD during subsequent phases, but its domestic
preference restrictions will have little impact on the selection of
suppliers because of DOD's use of the law's public interest exception.
DOD, using this exception, has determined that it would be inconsistent
with the public interest to apply domestic preference restrictions to
countries that have signed reciprocal procurement agreements with the
department. All of the JSF partners have signed such agreements. DOD
must also apply the Preference for Domestic Specialty Metals clause to
articles delivered under JSF contracts. All three prime contractors
have indicated that they will meet these Specialty Metals requirements.
Although the Buy American Act will have little impact on the selection
of suppliers, the large majority of subcontracts (in dollar terms) that
we obtained data on have been placed with U.S. firms.
While the JSF program office maintains more information on
subcontractors than is required by acquisition regulations, this
information does not provide the program with a complete picture of the
supplier base. The JSF Program Office collects and maintains data on
subcontract awards for two specific areas of interest--international
suppliers and U.S. small businesses. In addition, the program office
maintains lists of the companies responsible for developing the JSF's
key or critical technologies. The program office is required to compile
these lists as part of its program protection strategy. However, the
lists do not provide visibility into the lower-tier subcontracts that
have been issued for developing or supplying these technologies.
DOD has recognized the need for the JSF Program Office to assume a more
active role in collecting information on and monitoring the prime
contractors' selection of suppliers. The Department concurred with a
recommendation in our July 2003 JSF report that stated this information
could help the program office identify and address potential conflicts
between the international program and other program goals. Increased
visibility into the supplier base could also aid the program office's
management of other areas and provide DOD with the means to monitor the
effects of the JSF program on the defense industrial base.
DOD provided only technical comments on a draft of this report, which
we incorporated as appropriate.
Background:
The JSF program is a joint program between the Air Force, Navy, and
Marine Corps for developing and producing next-generation fighter
aircraft to replace aging inventories. The program is currently in year
3 of an estimated 11-year development phase. The current estimated cost
for this phase is about $40.5 billion. In October 2001 Lockheed Martin
was awarded the air system development contract now valued at over
$19 billion.[Footnote 6] Lockheed Martin subsequently awarded multi-
billion-dollar subcontracts to its development teammates--Northrop
Grumman and BAE Systems--for work on the center and aft fuselage,
respectively. Lockheed Martin has also subcontracted for the
development of major subsystems of the aircraft, such as the landing
gear system. This is a departure from past Lockheed Martin aircraft
programs, where the company subcontracted for components (tires,
brakes, etc.) and integrated them into major assemblies and subsystems
(the landing gear system).
In addition to the Lockheed Martin contract, DOD has prime contracts
with both Pratt & Whitney and General Electric to develop two
interchangeable aircraft engines.[Footnote 7] Pratt & Whitney's
development contract is valued at over $4.8 billion. Rolls Royce plc
(located in the United Kingdom) and Hamilton Sundstrand are major
subcontractors to Pratt & Whitney for this effort. General Electric is
currently in an early phase of development and has a contract valued at
$453 million. Rolls Royce Corporation (located in Indianapolis, Ind.)
is a teammate and 40 percent partner for the General Electric engine
program. The General Electric/Rolls Royce team is expected to receive a
follow-on development contract in fiscal year 2005 worth an estimated
$2.3 billion.
All the prime contracts include award fee structures that permit the
JSF Program Office to establish criteria applicable to specific
evaluation periods. If, during its regular monitoring of contract
execution, the program office identifies the need for more emphasis in
a certain area--such as providing opportunities for international
suppliers or reducing aircraft weight--it can establish related
criteria against which the contractor will be evaluated to determine
the extent of its award fee.
Buy American Act and Specialty Metals Requirements Apply but Will Have
Little Effect on JSF Subcontracting Decisions:
The Buy American Act and Preference for Domestic Specialty Metals
clause implementing Berry Amendment provisions apply to the
government's purchase of manufactured end products for the JSF program.
Currently, only one JSF prime contractor--Pratt & Whitney--will deliver
manufactured end products to the government in this phase of the
program. Under its current contract, Pratt & Whitney is to deliver
20 flight test engines, 10 sets of common engine hardware, and certain
other equipment. The other engine prime contractor, General Electric,
will not deliver manufactured end products under its current contract.
However, its anticipated follow-on development contract will include
the delivery of test engines that will be subject to Buy American Act
and Specialty Metals requirements. Finally, Lockheed Martin will not
deliver any manufactured end products under its development contract.
The company is required to deliver plans, studies, designs, and data.
Lockheed Martin will produce 22 test articles (14 flight test aircraft
and 8 ground test articles) during this phase of the program, but these
are not among the items to be delivered.[Footnote 8]
Although the Buy American Act will apply to manufactured end products
delivered to DOD during the JSF program, its restrictions will have
little impact on the selection of suppliers because of DOD's use of the
law's public interest exception.[Footnote 9] This exception allows the
head of an agency to determine that applying the domestic preference
restrictions would be inconsistent with the public interest. DOD has
determined that countries that sign reciprocal procurement agreements
with the department to promote defense cooperation and open up defense
markets qualify for this exception.[Footnote 10] The eight JSF partners
have all signed these agreements and are considered "qualifying
countries." Under defense acquisition regulations implementing the Buy
American Act, over 50 percent of the cost of all the components in an
end product must be mined, produced, or manufactured in the United
States or "qualifying countries" for a product to qualify as
domestic.[Footnote 11] Our analysis of JSF development subcontracts
awarded by prime contractors and their teammates showed that nearly
100 percent of contract dollars awarded by the end of 2003 went to
companies in the United States or qualifying countries. (See
appendix II for Joint Strike Fighter System Development and
Demonstration Subcontract Awards to the United States, Qualifying
Countries, and Nonqualifying Countries).
The Preference for Domestic Specialty Metals clause applies to articles
delivered by Lockheed Martin, Pratt & Whitney, and General Electric
under JSF contracts. Generally, this clause requires U.S. or qualifying
country sources for any specialty metals,[Footnote 12] such as
titanium, that are incorporated into articles delivered under the
contract. This restriction must also be included in any subcontract
awarded for the program. To meet Specialty Metals requirements,
Lockheed Martin and Pratt & Whitney have awarded subcontracts to
domestic suppliers for titanium; and Lockheed Martin has also extended
to its subcontractors the right to buy titanium from its domestic
supplier at the price negotiated for Lockheed Martin. General Electric
does not exclusively use domestic titanium in its defense products.
However, in 1996, the company received a class deviation from the
clause that allows it to use both domestic and foreign titanium in its
defense products, as long as it buys sufficient domestic quantities to
meet DOD contract requirements.[Footnote 13] For instance, if
25 percent of the General Electric's business in a given year comes
from DOD contracts, then at least 25 percent of its titanium purchases
must be procured from domestic sources.[Footnote 14]
Similar to the Buy American Act, the Specialty Metals clause contains a
provision related to "qualifying country" suppliers. It provides that
the clause does not apply to specialty metals melted in a qualifying
country or incorporated in products or components manufactured in a
qualifying country.[Footnote 15] As a result, a qualifying country
subcontractor would have greater latitude under the clause than a U.S.
subcontractor. Specifically, the specialty metals incorporated into an
article manufactured by a qualifying country may be from any
source,[Footnote 16] while an article manufactured by a U.S.
subcontractor must incorporate specialty metals from a domestic or
qualifying country source. (See fig. 1.):
Figure 1: Example of Specialty Metals Clause Application:
[See PDF for image]
[End of figure]
The data we collected on JSF subcontracts show that by
December 31, 2003, the prime contractors and their teammates had
awarded over $14 billion in subcontracts for the development phase
of the program. These subcontracts were for everything from the
development of subsystems--such as radar, landing gear, and
communications systems--to engine hardware, engineering services,
machine tooling, and raw materials. The recipients of these contracts
included suppliers in 16 foreign countries and the United States;
73.9 percent of the subcontracts by dollar value went to U.S. companies
and 24.2 percent went to companies in the United Kingdom (the largest
foreign financial contributor to the JSF program). (See appendix I for
Joint Strike Fighter Partner Financial Contributions and Estimated
Aircraft Purchases and appendix II for Joint Strike Fighter System
Development and Demonstration Subcontract Awards). Finally, 2,597 of
4,488 subcontracts or purchase orders we obtained information on went
to U.S. small businesses. Although these businesses received only
2.1 percent of the total dollar value of the subcontracts awarded, DOD
and contractor officials have indicated that all companies in the
development phase are in good position to receive production contracts,
provided that cost and schedule goals are met.[Footnote 17]
The gathering of these data, which most of the contractors have made
available to the JSF Program Office and DCMA, has increased the breadth
of knowledge available to DOD and the program office on the JSF
supplier base. Neither DOD nor the JSF program office previously
collected this information because, according to program officials,
this information is not necessary in order to manage the program. At
least one major subcontractor, on its own initiative, is now separately
tracking JSF subcontracts on a monthly basis.
JSF Program Office Maintains Subcontract Information on Specific Areas
of Interest:
While the JSF Program Office maintains more information on
subcontractors than required by acquisition regulations, this
information does not provide the program with a complete picture of the
supplier base. The JSF Program Office collects and maintains data on
subcontract awards for specific areas of interest--international
suppliers and U.S. small businesses. The program office has used the
award fee process to incentivize the prime contractors to report on
both small business awards through the third tier and subcontract
opportunities and awards to international suppliers.[Footnote 18] In
addition, the program office has some visibility over certain
subcontracts through mechanisms such as monthly supplier
teleconferences, integrated product teams, informal notifications of
subcontract awards, and DCMA reports on the performance of major
suppliers. Finally, the JSF Program Office maintains limited
information on the companies responsible for supplying critical
technologies.
The JSF Program Office's information on the suppliers of key or
critical technologies is based on lists that the prime contractors
compile as part of the program protection strategy. These program
protection requirements--not the supplier base--are the focus of DOD's
and the JSF Program Office's approach toward critical technologies. DOD
acquisition regulations require program managers to maintain lists of a
program's key technologies or capabilities to prevent the unauthorized
disclosure or inadvertent transfer of leading-edge technologies and
sensitive data or systems. The lists include the names of key
technologies and capabilities, the reason the technology is sensitive
and requires protection, and the location where the technology resides.
The lists do not provide visibility into the lower-tier subcontracts
that have been issued for developing or supplying these technologies.
Given the limited supplier information these lists provide, the JSF
Program Office is aware of two instances where a foreign company is the
developer or supplier of an unclassified critical technology for the
program.[Footnote 19] In both cases, a U.S. company is listed as a
codeveloper of the technology.
Conclusions:
The JSF program has the potential to significantly impact the U.S.
defense industrial base. Suppliers chosen during the JSF development
phase will likely remain on the program through production, if they
meet cost and schedule targets, and will reap the benefits of contracts
potentially worth over $100 billion. Therefore, contracts awarded now
will likely affect the future shape of the defense industrial base.
The JSF supplier base information currently maintained by the JSF
Program Office is focused on specific areas of interest and does not
provide a broad view of the industrial base serving the program. In our
July 2003 report, we recommended that the JSF Program Office assume a
more active role in collecting information on and monitoring the prime
contractors' selection of suppliers to address potential conflicts
between the international program and other program goals. DOD
concurred with our recommendation, but did not specify how it plans to
collect and monitor this information. Collecting this information will
be an important first step for providing DOD with the knowledge base it
needs to assess the impact of the program on the industrial base.
Agency Comments and Our Evaluation:
We provided DOD a draft of this report for review. DOD provided only
technical comments, which we incorporated as appropriate.
Scope and Methodology:
To obtain information on the Buy American Act and the Preference for
Domestic Specialty Metals clause implementing Berry Amendment
provisions, we reviewed applicable laws and regulations. We interviewed
DOD officials in the JSF Program Office, the Office of the Deputy Under
Secretary of Defense (Industrial Policy), the Office of the Director of
Defense Procurement and Acquisition Policy, and the Defense Contract
Management Agency to obtain information on the applicability of the Buy
American Act and other domestic source restrictions, critical foreign
technologies, and DOD oversight of subcontracts. We reviewed prime
contracts for the JSF program and met with JSF prime contractors,
including Lockheed Martin and the engine contractors, Pratt & Whitney
and General Electric, to discuss the applicability of the Buy American
Act and other domestic source restrictions and to collect data on
first-tier subcontract awards for the System Development and
Demonstration phase. Furthermore, we collected data on subcontract
awards for the JSF System Development and Demonstration phase from
companies that were identified as partners or teammates by Lockheed
Martin, Pratt & Whitney, and General Electric. These companies included
Northrop Grumman, BAE Systems, Rolls Royce plc, Hamilton Sundstrand,
and Rolls Royce Corporation. We did not independently verify
subcontract data but, instead, relied on DCMA's reviews of contractors'
reporting systems to assure data accuracy and completeness. We
performed our review from August 2003 to March 2004 in accordance with
generally accepted government auditing standards.
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this report. We will then send copies of this report
to interested congressional committees; the Secretary of Defense; the
Secretaries of the Navy and the Air Force; the Commandant of the Marine
Corps; and the Director, Office of Management and Budget. We will also
make copies available to others upon request. In addition, this report
will be available at no charge on the GAO Web site at http://
www.gao.gov.
If you or your staff have any questions regarding this report, please
contact me at (202) 512-4841; or Thomas J. Denomme, Assistant Director,
at 202-512-4287. Major contributors to this report were Robert L.
Ackley, Shelby S. Oakley, Sylvia Schatz, and Ronald E. Schwenn.
Sincerely yours,
Signed by:
Katherine V. Schinasi,
Managing Director:
Acquisition and Sourcing Management:
[End of section]
Appendix I: Joint Strike Fighter Partner Financial Contributions and
Estimated Aircraft Purchases:
Table 1: Joint Strike Fighter Partner Financial Contributions and
Estimated Aircraft Purchases:
Dollars in millions.
United Kingdom;
System development and demonstration: Partner level: Level I;
System development and demonstration: Financial contributions[A]:
$2,056;
System development and demonstration: Percentage of total costs: 5.1%;
Production: Projected quantities[B]: 150;
Production: Percentage of total quantities: 4.7%.
Italy;
System development and demonstration: Partner level: Level II;
System development and demonstration: Financial contributions[A]:
$1,028;
System development and demonstration: Percentage of total costs: 2.5%;
Production: Projected quantities[B]: 131;
Production: Percentage of total quantities: 4.1%.
Netherlands;
System development and demonstration: Partner level: Level II;
System development and demonstration: Financial contributions[A]: $800;
System development and demonstration: Percentage of total costs: 2.0%;
Production: Projected quantities[B]: 85;
Production: Percentage of total quantities: 2.7%.
Turkey;
System development and demonstration: Partner level: Level III;
System development and demonstration: Financial contributions[A]: $175;
System development and demonstration: Percentage of total costs: 0.4%;
Production: Projected quantities[B]: 100;
Production: Percentage of total quantities: 3.2%.
Australia;
System development and demonstration: Partner level: Level III;
System development and demonstration: Financial contributions[A]: $144;
System development and demonstration: Percentage of total costs: 0.4%;
Production: Projected quantities[B]: 100;
Production: Percentage of total quantities: 3.2%.
Norway;
System development and demonstration: Partner level: Level III;
System development and demonstration: Financial contributions[A]: $122;
System development and demonstration: Percentage of total costs: 0.3%;
Production: Projected quantities[B]: 48;
Production: Percentage of total quantities: 1.5%.
Denmark;
System development and demonstration: Partner level: Level III;
System development and demonstration: Financial contributions[A]: $110;
System development and demonstration: Percentage of total costs: 0.3%;
Production: Projected quantities[B]: 48;
Production: Percentage of total quantities: 1.5%.
Canada;
System development and demonstration: Partner level: Level III;
System development and demonstration: Financial contributions[A]: $100;
System development and demonstration: Percentage of total costs: 0.2%;
Production: Projected quantities[B]: 60;
Production: Percentage of total quantities: 1.9%.
Total partner;
System development and demonstration: Partner level: ;
System development and demonstration: Financial contributions[A]:
$4,535;
System development and demonstration: Percentage of total costs: 11.2%;
Production: Projected quantities[B]: 722;
Production: Percentage of total quantities: 22.8%.
United States;
System development and demonstration: Financial contributions[A]:
$35,965;
System development and demonstration: Percentage of total costs: 88.8%;
Production: Projected quantities[B]: 2,443;
Production: Percentage of total quantities: 77.2%.
Sources: DOD and JSF Program Office.
[A] Chart values do not reflect nonfinancial contributions from
partners.
[B] Partner quantities are preliminary and were developed for U.S.
planning purposes. The estimates were developed by the United States in
collaboration with partner countries, but no specific national
agreements or arrangements have been established with partner countries
for production; therefore, these projected production quantities are
subject to change.
[End of table]
[End of section]
Appendix II: Joint Strike Fighter System Development and Demonstration
Subcontract Awards:
Table 2: JSF Development Phase Subcontract Awards to the United States,
Qualifying Countries, and Nonqualifying Countries:
Countries: United States;
Subcontract awards: $10,361,670,423;
Percentage: 73.9%.
Countries: Qualifying countries: United Kingdom, Italy, Netherlands,
Turkey, Australia, Norway, Denmark, Canada, France, Germany, Israel,
Spain, Switzerland;
Subcontract awards: $3,664,193,630;
Percentage: 26.1%.
Countries: Nonqualifying countries: India, Poland, Russia;
Subcontract awards: $496,071;
Percentage: 0%.
Countries: Total subcontract awards;
Subcontract awards: $14,026,360,123[A];
Percentage: 100.0%.
Sources: JSF prime contractors--Lockheed Martin, Pratt & Whitney, and
General Electric--and their self-identified teammates--BAE Systems,
Northrop Grumman, Rolls Royce plc, Hamilton Sundstrand, and Rolls Royce
Corporation (data); GAO (analysis).
Note: Information is based on subcontracts awarded for the System
Development and Demonstration phase between October 26, 2001 and
December 31, 2003. These awards include the first-tier of the JSF
supplier base and portions of the second-tier.
[A] Total does not add due to rounding.
[End of table]
Table 3: JSF Development Phase Subcontract Awards to the United States
and Other Partner and Nonpartner Countries:
Countries: United States;
Subcontract awards: $10,361,670,423;
Percentage: 73.9%.
Countries: Partner countries: United Kingdom, Italy, Netherlands,
Turkey, Australia, Norway, Denmark, Canada;
Subcontract awards: $3,620,103,309;
Percentage: 25.8%.
Countries: Nonpartner countries: France, Germany, India, Israel,
Poland, Russia, Spain, Switzerland;
Subcontract awards: $44,586,392;
Percentage: 0.3%.
Countries: Total subcontract awards;
Subcontract awards: $14,026,360,123[A];
Percentage: 100.0%.
Sources: JSF prime contractors--Lockheed Martin, Pratt & Whitney, and
General Electric--and their self-identified teammates--BAE Systems,
Northrop Grumman, Rolls Royce plc, Hamilton Sundstrand, and Rolls
Royce Corporation (data); GAO (analysis).
Note: Information is based on subcontracts awarded for the System
Development and Demonstration phase between October 26, 2001 and
December 31, 2003. These awards include the first-tier of the JSF
supplier base and portions of the second-tier.
[A] Total does not add due to rounding.
[End of table]
FOOTNOTES
[1] U.S. General Accounting Office, Joint Strike Fighter Acquisition:
Cooperative Program Needs Greater Oversight to Ensure Goals Are Met,
GAO-03-775 (Washington, D.C.: July 21, 2003).
[2] 41 U.S.C. sections 10a-10d.
[3] Defense Federal Acquisition Regulation Supplement (DFARS) 252.225-
7014, Alternate I.
[4] 10 U.S.C. section 2533a.
[5] The February 12 briefing reported on four questions: (1) How do the
Buy American Act and Berry Amendment apply to the development phase of
the JSF program? (2) How does DOD oversee JSF subcontracting? (3) What
JSF subcontracts have been awarded? (4) What foreign technologies are
critical to the JSF program? These four questions have been
consolidated into two objectives for this report.
[6] Lockheed Martin's development contract has been modified multiple
times since it was signed in October 2001. These modifications have
increased the value of the base contract by hundreds of millions of
dollars.
[7] The F135 (Pratt & Whitney) and F136 (General Electric/Rolls Royce
Corporation) engines integrate with common propulsion system
components to form the complete JSF propulsion systems. In addition to
the F135 engine, Pratt & Whitney is also responsible for developing
certain common propulsion system components that will interface with
both engine cores. These include the lift fan system, roll posts, three
bearing swivel duct, conventional exhaust duct, and exhaust nozzles,
among other components.
[8] According to program officials, the 22 test articles acquired under
the Lockheed Martin development contract are government-owned assets in
possession of the contractor. Under a cost-type contract, the
government acquires ownership as it pays the contractor.
[9] 41 U.S.C. section 10d.
[10] "Qualifying countries" include Australia, Belgium, Canada,
Denmark, Egypt, France, Germany, Greece, Israel, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and
the United Kingdom. Acquisitions from Austria and Finland may also be
exempted from the Buy American Act on a case-by-case basis. DFARS
225.872-1.
[11] To comply with the Buy American Act, companies must certify in
their contract proposals that the manufactured end products they are
offering to the U.S. government qualify as domestic end products. To
qualify as a domestic end product, the product must meet two criteria.
The end product must be manufactured in the United States, and the cost
of its U.S. and qualifying country components must exceed 50 percent of
the cost of all its components. DFARS 225.101.
[12] Specialty metals are defined as certain metal alloys, steel
alloys, titanium and titanium alloys, and zirconium and zirconium base
alloys produced in the United States, U.S. possessions, or Puerto Rico.
U.S. possessions include American Samoa, the Commonwealth of Northern
Mariana Islands, Guam, and the U.S. Virgin Islands, among other areas.
[13] Class deviations are deviations from the Federal Acquisition
Regulation or the Defense Federal Acquisition Regulation Supplement
that affect more than one contract action. FAR 1.404.
[14] According to the Defense Contract Management Agency (DCMA), in
granting this class deviation, it determined that the DFARS specialty
metals clause was more stringent than the statute it implements. DCMA
granted this class deviation on a "permanent" basis and is responsible
for monitoring General Electric's compliance with its terms.
[15] These are the same qualifying countries that are mentioned in
reference to the Buy American Act. (See footnote 10.)
[16] Potential sources would not include those prohibited under FAR
52.225-13, Restrictions on Certain Foreign Purchases. Such prohibited
sources would include, for example, Cuba and North Korea.
[17] The JSF Program Office has requested that the prime contractors
strive for 20-30 percent small business participation through the third
tier of the supplier base for the life of the JSF program (including
the development phase and production). This small business
participation percentage is based on "eligible subcontract dollars" and
does not include certain subcontracts, such as those awarded to or
awarded by international suppliers, in its calculations. We included
all the subcontracts and purchase orders we obtained information on in
our small business calculations.
[18] This small business reporting includes information on six small
business categories and subcategories--small disadvantaged businesses,
woman-owned small businesses, historically underutilized business
zones, historically black colleges and universities/minority
institutions, veteran-owned small businesses, and service-disabled
veteran-owned small businesses.
[19] We did not obtain information on classified critical technologies
as part of this review.
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