Tactical Aircraft
Opportunity to Reduce Risks in the Joint Strike Fighter Program with Different Acquisition Strategy Gao ID: GAO-05-271 March 15, 2005Under the Ronald W. Reagan National Defense Authorization Act of 2005, GAO is required to to review the Joint Strike Fighter (JSF) program annually for the next 5 years. This is the first GAO report, and it (1) analyzes the JSF program's business case for delivering new capabilities to the warfighter and (2) determines whether the JSF program's acquisition strategy follows an evolutionary, knowledge-based approach. Also, the act requires GAO to certify whether we had access to sufficient information to make informed judgments on the matters contained in our report.
GAO found that the original business case for the JSF program has proven to be unexecutable. DOD now plans to buy 535 fewer aircraft than originally planned. Due to increases in total program costs and program acquisition unit costs, the DOD has reduced buying power and is now buying fewer JSF's at a higher investment than originally planned. The first delivery of initial operational capabilities to the warfighter have been delayed 2 years so far. The program's current acquisition strategy does not fully follow the intent of DOD's evolutionary, knowledge-based acquisition policy that is based on best practices. An evolutionary, knowledge-based strategy will be necessary to successfully execute a new business case in the future. Instead, the program plans to concurrently develop the JSF technologies, integrate and demonstrate the expected product design, and produce deliverable fighters, which is a risky approach. Finally, as a result of a lengthy program replanning effort that had been in process during most of 2004, GAO did not have access to the cost estimate expected to be contained in the JSF's Selected Acquisition Report, to be delivered by Congress in the spring of 2005. At the time of GAO's review, JSF program officials were still collecting the necessary information to develop and complete the estimate. Therefore, GAO's review was limited to the estimated program costs contained in the December 31, 2003, Selected Acquisition Report.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-05-271, Tactical Aircraft: Opportunity to Reduce Risks in the Joint Strike Fighter Program with Different Acquisition Strategy
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
March 2005:
Tactical Aircraft:
Opportunity to Reduce Risks in the Joint Strike Fighter Program with
Different Acquisition Strategy:
GAO-05-271:
GAO Highlights:
Highlights of GAO-05-271, a report to Congressional Committees
Why GAO Did This Study:
The Department of Defense‘s (DOD) Joint Strike Fighter (JSF) program
aims to develop and field more than 2,400 stealthy fighter planes with
greater capabilities than DOD‘s aging tactical aircraft. JSF is DOD‘s
most costly aircraft program, with estimated life-cycle costs
approaching $600 billion.
Since the program began, in 1996, JSF has experienced significant cost
and schedule overruns. While the program has worked to prepare more
accurate cost and delivery estimates, upcoming investment decisions
will indicate the level of risk DOD is willing to accept as the program
moves forward and annual outlays significantly increase.
GAO is required by law to review the JSF program annually for the next
5 years. This first report analyzes JSF‘s business case for delivering
new capabilities to the warfighter and determines whether JSF‘s current
acquisition strategy follows best practices.
What GAO Found:
Several program changes have made the original JSF business case
unexecutable. Since initial estimates in 1996, development costs have
grown over 80 percent, or $20 billion. Program acquisition unit costs
have increased by 23 percent, or $19 million, since 2001. In addition,
delivery of the first JSFs to the warfighter has been delayed 2 years
so far. Continued program uncertainties make it difficult to estimate
the resources needed for the program. For example, the full impact of
recent aircraft design changes on the program may not be fully
understood for some time, and the Navy, Air Force, and Marines”the
program‘s primary customers”have not determined the number of aircraft
they expect to buy. Given the uncertainties, the program could use more
time to gain knowledge before moving forward. DOD will also be
challenged to deliver on future business case agreements if program
accountability continues to be compromised by frequent changes in
program management.
Original and Latest Development Cost Estimates:
[See PDF for image]
[End of figure]
The program‘s current acquisition strategy does not follow a knowledge-
based, evolutionary approach as dictated by best practices and DOD
policy. Such a strategy is key to successfully executing a new JSF
business case. However, JSF preliminary plans call for the developer to
manufacture about 20 percent of the JSF fleet in the low-rate initial
production phase”at a cost of about $50 billion”while still developing
JSF technologies and integrating and demonstrating the product design,
making cost and schedule increases likely. To achieve low-rate
production capacity, DOD will need to invest in personnel, facilities,
and tooling”increasing its production investment from $100 million a
month in 2007 to $1 billion a month in 2013---before flight testing is
completed. Problems discovered late in flight tests could result in
further cost increases and delivery delays, as well as reduced quality
and reliability. To execute its strategy, the JSF program will need to
compete with other large programs for scarce funding, which could be a
significant challenge because JSF‘s funding profile assumes an
unprecedented $225 billion over the next 2 decades”an average of $10
billion a year. Finally, the strategy assumes the use of a cost
reimbursement contract for initial production, placing a high burden of
risk on the government, given the large number of aircraft.
What GAO Recommends:
GAO recommends that DOD establish an executable program consistent with
best practices and DOD policy regarding knowledge-based, evolutionary
acquisitions. If DOD moves the program forward without capturing
adequate knowledge, it should not make investments to increase
production capability until it has. DOD partially concurred but
believes its current practices achieve the recommendations‘ objectives.
www.gao.gov/cgi-bin/getrpt?GAO-05-271.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Michael J. Sullivan at
(202) 512-4841 or sullivanm@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
More Resources Are Now Needed to Deliver Planned Capabilities:
JSF's Current Acquisition Strategy May Not Provide for Successful
Program Execution:
Conclusions:
Recommendations for Executive Actions:
Agency Comments and Our Evaluation:
Appendix I: Comments from the Department of Defense:
Appendix II: Scope and Methodology:
Appendix III: Projected Time Frames for Demonstration of Critical
Technologies:
Appendix IV: Measures of JSF Program Cost and Schedule Changes:
Tables:
Table 1: Military Services' Planned Use for the Joint Strike Fighter:
Table 2: Changes in JSF Program Purchase Quantities, Costs, and
Delivery Estimates:
Table 3: Changes in Unit Flyaway Cost for JSF Variants:
Table 4: Knowledge Attainment on JSF Program at Critical Junctures:
Figures:
Figure 1: Development Costs:
Figure 2: Changes to the Program Schedule:
Figure 3: JSF Acquisition Approach Compared with Best Practices
Approach for an Evolutionary, Knowledge-Based Acquisition Process:
Figure 4: Overlap of JSF Low-Rate Production and System Development and
Demonstration Activities:
Figure 5: JSF Program's Annual Funding Requirements:
Abbreviations:
DOD: Department of Defense:
JSF: Joint Strike Fighter:
OSD: Office of the Secretary of Defense:
United States Government Accountability Office:
Washington, DC 20548:
March 15, 2005:
Congressional Committees:
The Joint Strike Fighter (JSF) program is the Department of Defense's
(DOD) most costly aircraft acquisition. The program's goals are to
develop and field more than 2,400 stealthy strike fighter aircraft for
the Navy, Air Force, and Marine Corps and potentially several hundred
more aircraft for U.S. allies. The JSF is intended to provide greater
capability and to replace DOD's aging fighter and attack aircraft. DOD
estimates that the total cost to develop and procure its fleet of
aircraft will reach $245 billion, with total costs to maintain and
operate the JSF adding another $344 billion over its life cycle. This
expense must be measured against other DOD and national priorities as
the government moves into lean budget years. The JSF will be competing
for a decreasing share of the federal budget available for
"discretionary" spending. This includes defense spending and is in
contrast to "mandatory" spending, such as Social Security and Medicare/
Medicaid. In fiscal year 2004, discretionary spending accounted for
about 39 percent of the federal budget. The Congressional Budget Office
projects that discretionary spending, as a percentage of the overall
budget, is likely to decrease in the future.[Footnote 1]
Since the program began, in November 1996, it has experienced technical
challenges that have resulted in significant cost increases and
schedule overruns. During most of 2004, program officials worked to
understand and define current development risks in order to prepare
more accurate cost and delivery estimates. The upcoming investment
decisions to begin manufacturing development prototypes and to begin
long-lead funding for production aircraft in 2006 will be prominent
indicators of the risk DOD is willing to accept as the JSF program
moves forward and annual outlays needed to support the program
significantly increase.
The Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005 (P.L. 108-375) requires us to review the JSF program annually for
the next 5 years.[Footnote 2] This is our first report, and it (1)
analyzes the JSF program's business case[Footnote 3] for delivering new
capabilities to the warfighter and (2) determines whether the JSF
program's acquisition strategy follows an evolutionary, knowledge-
based approach. The best practice is to establish an incremental--or
evolutionary--approach to meet these needs by delivering increasingly
better performance over time as funding and technologies permit and
provide specific knowledge about the system at key decision points in
the acquisition process.
The act also requires us to certify whether we had access to sufficient
information to make informed judgments on the matters contained in our
report. As a result of a lengthy program replanning effort that had
been in process during most of 2004, we did not have access to the cost
estimate expected to be contained in JSF's Selected Acquisition Report,
to be delivered to Congress in the spring of 2005. At the time of our
review, JSF program officials were still collecting the necessary
information to develop and complete this estimate. Therefore, our
review was limited to the estimated program costs contained in the
December 31, 2003, Selected Acquisition Report. We did, however, have
access to top-level program and preliminary schedule information
reflecting the status of the replanning effort. Recognizing this
limitation in scope, we did have access to sufficient information to
make informed judgments on the matters covered in this report. We
performed our work from June 2004 through March 2005 in accordance with
generally accepted government auditing standards. For more on our scope
and methodology, see appendix II.
Results in Brief:
The original business case for the JSF program has proven to be
unexecutable. DOD now plans to buy 535 fewer aircraft than originally
planned. Development costs have grown over 80 percent, from $25 billion
to $45 billion, since the program started in 1996. Total program costs
have increased by 5 percent, or $12 billion, and program acquisition
unit costs have increased by 23 percent, or $19 million, since first
estimates in 2001. This has resulted in a reduction in buying power in
that DOD is now buying fewer JSFs at a higher investment than
originally planned. The first delivery of initial operational
capabilities to the warfighter has been delayed 2 years so far. DOD may
not know for some time what the program will cost or when it will be
able to deliver needed capabilities. The program is still redesigning
the three variants of the aircraft that it plans to deliver and is
examining the software development and flight test programs. The
services--the program's customers--have not determined the exact
quantities of each variant they expect to buy. Finally, DOD's past
practice of changing JSF program managers approximately every 2 years
decreases accountability and, if continued, will make it more difficult
to deliver on future business case agreements.
The program's current acquisition strategy does not fully follow the
intent of DOD's evolutionary, knowledge-based acquisition policy that
is based on best practices. An evolutionary, knowledge-based strategy
will be necessary to successfully execute a new business case in the
future. Instead, the program plans to concurrently develop the JSF
technologies, integrate and demonstrate the expected product design,
and produce deliverable fighters--a risky approach. JSF's acquisition
strategy is to have the developer manufacture nearly 20 percent of the
planned JSF fleet at a cost of approximately $50 billion beginning in
2007, well before system development and demonstration is expected to
be completed in 2013. To achieve planned low-rate initial production
capacity, DOD must make significant investments in tooling, facilities,
and personnel. Once the production decision is made, DOD's planned
investment for production will increase from $100 million a month in
2007 to about $1 billion a month before testing is completed in 2013.
Because this substantial investment in procurement will take place
while the program is still designing and testing the development
aircraft, it increases the likelihood of costly design changes to
production aircraft and manufacturing processes, reduced quality and
reliability, and further delays in the delivery of JSFs to the
warfighter. Moreover, the program acquisition strategy assumes an
unprecedented $225 billion in acquisition funding over the next 22
years, or an average of $10 billion a year. As a result, the JSF
program will need to successfully compete with many other large
programs for scarce funding during this same time frame. Finally, the
strategy assumes the use of a cost reimbursement-type contract for
initial production, placing a high risk burden on the government during
the early production phase.
We are recommending that DOD establish an executable program consistent
with best practices and DOD policy regarding evolutionary acquisitions.
DOD officials should define an affordable first increment, with its own
business case, that clearly defines the warfighters' most immediate
needs and accurately identifies the resources required to deliver on
this needed capability. We are also recommending DOD develop and
implement a knowledge-based acquisition approach, as called for by best
practices and DOD's acquisition policy, an approach that ensures
attainment and use of demonstrated product knowledge before making
future investments for each product increment. Before increasing the
investment in production resources (tooling, materials, and personnel)
greater than that already in place to support the manufacturing of
development test aircraft, the Secretary of Defense should ensure
knowledge consistent with best practices is captured.
DOD partially concurred with our recommendations, stating that the
department is confident management practices and processes currently in
place achieve the objective of our recommendations. It also stated that
the JSF acquisition strategy and execution activities ensure the
department commits resources only after determining that specific
developmental or knowledge-based criteria are achieved. We continue to
believe that our recommendations would reduce risks and save time and
money over the life of the program through a more rigorous and
comprehensive application of an evolutionary, knowledge-based process,
a process anchored with high standards for capturing knowledge at
critical junctures and used for making investment decisions in the
future.
Background:
JSF is a joint, multinational acquisition program for the Air Force,
Navy, Marine Corps, and eight cooperative international partners. The
program began in November 1996 with a 5-year competition between
Lockheed Martin and Boeing to determine the most capable and affordable
preliminary aircraft design. Lockheed Martin won the competition, and
the program entered system development and demonstration in October
2001.
The program's objective is to develop and deploy a technically superior
and affordable fleet of aircraft that support the warfighter in
performing a wide range of missions in a variety of theaters. The
single-seat, single-engine aircraft is being designed to be self-
sufficient or part of a multisystem and multiservice operation, and to
rapidly transition between air-to-surface and air-to-air missions while
still airborne. To achieve its mission, the JSF will incorporate low
observable technologies, defensive avionics, advanced onboard and
offboard sensor fusion,[Footnote 4] and internal and external weapons.
The JSF aircraft design has three variants: conventional takeoff and
landing variant for the Air Force, aircraft carrier-suitable variant
for the Navy, and short takeoff and vertical landing variant for the
Marine Corps, the United Kingdom, and the Air Force. These aircraft are
intended to replace aging fighter and attack aircraft currently in the
inventory (see table 1).
Table 1: Military Services' Planned Use for the Joint Strike Fighter:
Service: Air Force;
Planned use: Replacement for the F-16 and A-10;
complement the F/A-22.
Service: Marine Corps;
Planned use: Replacement for the AV-8B and F/A- 18 A/C/D.
Service: Navy;
Planned use: Complement the F/A-18 E/F.
Service: United Kingdom;
Planned use: Replacement for the Sea Harrier and GR-7.
Source: DOD data.
[End of table]
In 2004, DOD extended the JSF program schedule to address problems
discovered during systems integration and the preliminary design
review. Design efforts revealed significant airframe weight problems
that affected the aircraft's ability to meet key performance
requirements. Software development and integration also posed a
significant development challenge. Program officials delayed the
critical design reviews, first flights of development aircraft, and the
low-rate initial production decision to allow more time to mitigate
design risk and gather more knowledge before continuing to make major
investments. As a result, the initial operational capability date was
delayed. DOD is in the process of reestablishing resource levels needed
to deliver capabilities, given current and expected future conditions.
The new business case will be presented to the Office of the Secretary
of Defense (OSD) decision makers this spring.
A key to successful product development is the formulation of a
business case that matches requirements with resources--proven
technologies, sufficient engineering capabilities, time, and funding--
-when undertaking a new product development. First, the user's needs
must be accurately defined, alternative approaches to satisfying these
needs properly analyzed, and quantities needed for the chosen system
must be well understood. The developed product must be producible at a
cost that matches the users' expectations and budgetary resources.
Finally, the developer must have the resources to design and deliver
the product with the features that the customer wants and to deliver it
when it is needed. If the financial, material, and intellectual
resources to develop the product are not available, development does
not go forward. If the business case measures up, the organization
commits to the development of the product, including the financial
investment. This calls for a realistic assessment of risks and costs;
doing otherwise undermines the intent of the business case and invites
failure. Program managers in organizations employing best practices are
incentivized to identify risk early, be intolerant of unknowns, and be
conservative in their estimates. Ultimately, preserving the business
case strengthens the ability of managers to say no to pressures to
accept high risks or unknowns.
More Resources Are Now Needed to Deliver Planned Capabilities:
A key objective of the JSF acquisition program is to develop and
produce fighter aircraft with greater capabilities and lower
acquisition and ownership costs than previous fighter aircraft and to
deliver the aircraft in time to replace DOD's aging fleet. However,
since the program began in 1996, several program decisions have
resulted in increased program costs, reduced procurement quantities,
and delayed delivery dates--making the original business case
unexecutable. Continued program uncertainties about the aircraft
redesign, software development, flight test program, and procurement
quantities make it difficult to estimate the total amount of resources
needed. Given the uncertainties, the program needs more time to gain
knowledge before committing to a new, more accurate business case. The
current pause to replan JSF development and production provides the
program this opportunity. Finally, frequent changes in JSF program
management, if continued, will compromise efforts to execute the
business case agreements.
JSF's Original Business Case Is Unexecutable:
Several significant changes to the JSF acquisition program have made
DOD's original business case unexecutable. Purchase quantities have
been reduced by more than 500 aircraft, total program costs have
increased by about $12 billion, and delivery of the aircraft has been
delayed by about 2 years (see table 2 and app. IV for more details).
These changes have effectively reduced DOD's buying power for its
investment, as it now plans to buy fewer aircraft with a greater
financial investment.
Table 2: Changes in JSF Program Purchase Quantities, Costs, and
Delivery Estimates:
Expected quantities: Development quantities;
November 1996 (program start): 10;
October 2001 (system development start): 14;
As of January 2005: 15.
Expected quantities: Procurement quantities (U.S. only);
November 1996 (program start): 2,978;
October 2001 (system development start): 2,852;
As of January 2005: 2,443.
Total quantities;
November 1996 (program start): 2,988;
October 2001 (system development start): 2,866;
As of January 2005: 2,458.
Cost estimates (then year dollars in billions): Development;
November 1996 (program start): $24.8;
October 2001 (system development start): $34.4;
As of January 2005: $44.8.
Cost estimates (then year dollars in billions): Procurement;
November 1996 (program start): Not available;
October 2001 (system development start): $196.6;
As of January 2005: $199.8.
Cost estimates (then year dollars in billions): Other;
November 1996 (program start): Not available;
October 2001 (system development start): $2.0;
As of January 2005: $0.2.
Cost estimates (then year dollars in billions): Total program;
November 1996 (program start): Not available;
October 2001 (system development start): $233.0;
As of January 2005: $244.8.
Unit cost estimates (then year dollars in millions): Program
acquisition;
November 1996 (program start): Not available;
October 2001 (system development start): $81;
As of January 2005: $100.
Unit cost estimates (then year dollars in millions): Total ownership;
November 1996 (program start): Not available;
October 2001 (system development start): $217;
As of January 2005: $240.
Estimated delivery dates: First aircraft delivery;
November 1996 (program start): 2007;
October 2001 (system development start): 2008;
As of January 2005: 2009.
Estimated delivery dates: Initial operational capability;
November 1996 (program start): 2010;
October 2001 (system development start): 2010-2012;
As of January 2005: 2012-2013.
Source: GAO analysis of DOD data.
[End of table]
Reduced Quantities and Increased Costs Have Lessened the JSF Program's
Buying Power:
The JSF acquisition program's estimated development and procurement
costs have increased. In addition, the number of aircraft it plans to
deliver has been reduced. As a result, unit costs for the JSF aircraft
have increased substantially, thereby reducing the program's buying
power. The most significant quantity reduction occurred after system
development began in 2001, when the program reduced the number of
aircraft it plans to procure from 2,852 to 2,443, or by 14 percent. The
Navy--concerned that it could not afford the number of tactical
aircraft it planned to purchase--reduced the number of JSF aircraft for
joint Navy and Marine Corps operations from 1,089 to 680 by reducing
the number of backup aircraft needed. However, the Navy has not
indicated to the developer the exact mix of the carrier and short
takeoff and vertical landing variants it intends to purchase.
The cost estimate to fully develop the JSF has increased by over 80
percent. DOD expected that by using a joint development program for the
three variants instead of three separate programs, JSF development
costs could be cut by about 40 percent. However, cost increases have
nearly eroded all of the estimated savings. Development costs were
originally estimated at $24.8 billion. By the 2001 system development
decision, these costs had increased by $9.6 billion largely because of
a 36-month schedule extension to allow more time to mature the mission
systems and a more mature cost estimate.
By 2004, costs increased an additional $10.4 billion to $44.8 billion.
The program office cited several reasons, including efforts to achieve
greater international commonality, optimize engine interchangeability,
refine the estimating methodology, and extend the schedule for
unexpected design work. Almost half of this increase, $4.9 billion, was
a result of an approximately 18-month delay for unexpected design work
caused by increased aircraft weight that degraded the aircraft's key
performance capabilities. Figure 1 compares the original and latest
development cost estimates.
Figure 1: Development Costs:
[See PDF for image]
[End of figure]
Current estimates for the program acquisition unit cost are about $100
million, and the total estimated cost to own an aircraft over its life
cycle is $240 million--an increase of 23 percent and 11 percent,
respectively. In 1996, the program established unit flyaway
cost[Footnote 5] goals for each variant, expecting the variants to have
a high degree of commonality and to be built on a common production
line. However, commonality among the variants has decreased, and the
cost to produce the aircraft has increased (see table 3). The unit
flyaway cost for the conventional takeoff and landing variant has
increased by 42 percent; the cost for the short takeoff and vertical
landing variant has increased by a range of 37 to 55 percent; and the
cost for the carrier variant has increased by a range of 29 to 43
percent. According to program data, a large part of the cost increase
since the start of development can be attributed to labor costs for
building the airframe and to the costs for producing the complex
mission systems.
Table 3: Changes in Unit Flyaway Cost for JSF Variants:
Variant: (Unit flyaway costs are stated in millions of fiscal year 2002
dollars): Conventional takeoff and landing;
November 1996 (program start): $31.5;
October 2001 (system development start): $37.0;
As of January 2005: $44.8.
Variant: (Unit flyaway costs are stated in millions of fiscal year 2002
dollars): Short takeoff and vertical landing;
November 1996 (program start): $33.7-39.3;
October 2001 (system development start): $45.8;
As of January 2005: $54.0-61.1.
Variant: (Unit flyaway costs are stated in millions of fiscal year 2002
dollars): Carrier;
November 1996 (program start): $34.9-42.7;
October 2001 (system development start): $47.8;
As of January 2005: $55.0-61.0.
Source: DOD data.
[End of table]
With reduced quantities and increased program costs, the JSF program is
now buying fewer aircraft at a higher cost, thereby reducing the
program's buying power. How effectively DOD manages its JSF funds will
determine whether it receives a good return on its investment. A sound
and executable business case is needed to effectively do this. Our
reviews over the past 20 years have consistently found that DOD's
weapon system acquisitions take much longer and cost more than
originally planned, causing disruptions and increasing pressures to
make unplanned trade-offs to accommodate the resulting budget needs.
Operational Capabilities Have Been Delayed:
The timely delivery of the JSF to replace aging legacy aircraft was
cited as a critical need by the warfighter at the program start. When
the program was initiated, in 1996, it planned to deliver initial
operational capabilities to the warfighter in 2010. However, largely
because of technical challenges, the program has delayed the delivery
of operational aircraft, and current estimates put delivery at 2012 to
2013. Because of these delays, the services may have to operate legacy
aircraft longer than expected. These challenges have also delayed
interim milestones such as the start of system development, design
reviews, and production decisions. Figure 2 illustrates changes to the
overall program schedule since it began in 1996 through 2004.
Figure 2: Changes to the Program Schedule (1996 through 2004):
[See PDF for image]
[End of figure]
Program Uncertainties Make It Difficult to Estimate Resources:
The full impact on costs, schedules, and aircraft performance brought
about by recent design changes and aggressive software development and
flight test programs add risks that may not be fully understood for
some time. Continuing uncertainties about total quantities and types of
the three JSF variants that the services and the international partners
expect to purchase in the future also make it difficult to accurately
estimate costs and schedules.
Aircraft Design, Software Development, and Flight Test Program Not
Fully Understood:
In December 2003, DOD estimated program costs based on a notional idea
of a restructured program. The cost estimates not only lacked detail
but were based on a different aircraft design, development schedule,
and procurement plan than what is now being considered. Over the past
year, DOD has been working to restructure the JSF program to
accommodate changes in the aircraft's design; until this restructuring
is completed, it will be difficult to accurately estimate program
costs. The need for design changes largely resulted from the increased
weight of the short takeoff and vertical landing variant and the impact
it was having on key performance parameters. The other JSF variants'
designs were affected as well. The program plans to have a more
comprehensive cost estimate in the spring of 2005. However, a detailed
assessment has not been conducted to determine the exact impact that
the restructured program will have on meeting performance
specifications. Until the detailed design efforts are complete--after
the critical design review in February 2006--the program will have
difficulty assessing the impact of the design changes on performance.
While the program office anticipates that recent design changes will
allow the aircraft to meet key performance parameters, preliminary
program data indicate that the design is still not meeting several
speed, maneuverability, and radar cross section
specifications.[Footnote 6] In addition, program officials noted that
they will not know with certainty if the weight problems have been
resolved until after the plane is manufactured and weighed in mid-2007.
Program officials recognize that JSF's development schedule is
aggressive and are examining ways to reduce program requirements while
keeping costs and schedules constant. Design and software teams have
found greater complexity and less efficiency as they develop the 17
million lines of software needed for the system. Program analysis also
indicated that some aircraft capabilities will have to be deferred to
stay within cost and schedule constraints. As a result, the program
office is working with the warfighters to determine what capabilities
could be deferred to later in the development program or to follow on
development efforts while still meeting the warfighter's basic needs.
Many of these capabilities are related to the software-intensive
mission systems suite. They are also examining the content and schedule
of the planned 7-year, 10,000-hour flight test program. According to
the program office, the test program was already considered aggressive,
and recent program changes have only increased the risks of completing
it on time.
Quantities of Variants Still Unknown:
Continued uncertainty about the number and mix of variants the services
plan to purchase also affects JSF's acquisition plans. While the Air
Force has announced its intention to acquire the short takeoff and
vertical landing variant, it has yet to announce when or how many it
expects to buy or how this purchase will affect the quantity of the
conventional takeoff and landing variant it plans to buy.[Footnote 7]
DOD's 2003 acquisition report states that the annual total quantity and
mix of JSF variants and their related procurement costs for Navy and
Marine Corps JSF purchases remains to be determined. Foreign partners
have expressed intent to buy about 700 aircraft between 2012 and 2015,
but no formal agreements have been signed at this time.
The upcoming 2005 Quadrennial Defense Review--an examination of U.S.
defense needs conducted every 4 years--could also affect the
procurement quantities and schedule.
Frequently Changing Program Managers Reduces Accountability:
Since the JSF program began, a little over 8 years ago, the program has
had five program managers--a new program manager assigned about every 2
years. The development program is estimated to last another 9 years,
and it is likely that the program manager currently involved in
decisions about key program elements such as design, cost, and schedule
will not be responsible for seeing JSF through its completion. In other
words, plans accepted now will likely become the responsibility of
future program managers.
Leading commercial firms limit product development cycle times, thereby
increasing the possibility that program managers will remain on
programs until they are complete. Holding one program manager
accountable for the content of the program when key decisions are made
encourages that person to raise issues and problems early and
realistically estimate the resources needed to deliver the program.
This puts the manager in a good position to deliver a high-quality
product on time and within budget. We note that the law governing the
defense acquisition workforce recognizes the need for long-term
assignments in the performance of the program manager
function.[Footnote 8] Specifically, the assignment period for program
managers is required to be at least until completion of the major
milestone that occurs closest in time to the date on which the manager
has served in the position for 4 years.
JSF's Current Acquisition Strategy May Not Provide for Successful
Program Execution:
The JSF program does not have an evolutionary, knowledge-based
acquisition strategy that fully follows the intent of DOD's acquisition
policy. This type of strategy is necessary for having an executable
business case in the future. The current strategy includes plans to
make large production commitments well before system development and
testing have been completed, significantly increasing the risk of
further delays and cost increases due to design changes and
manufacturing inefficiencies. It is also dependent on an aggressive
test aircraft delivery schedule and an optimistic funding profile that
assumes an unprecedented $225 billion over the next 22 years, or an
average of $10 billion a year. DOD plans to bear the financial risk of
concurrently developing and initially producing the JSF on a cost
reimbursement basis with the prime contractor, an uncommon practice for
such a large number of units, until the design and manufacturing
processes are mature. Program officials currently have an opportunity
to change the acquisition strategy. DOD policy and best practices call
for programs to use an acquisition strategy that reflects an
evolutionary, knowledge-based approach--that is, one that ensures
appropriate technology, design, and manufacturing knowledge are
captured at key milestones before committing to increased investments.
Our past work has shown that when programs demonstrate a high level of
knowledge before making significant commitments, they are able to
deliver products within identified resources.
JSF Program Not Fully Employing an Evolutionary, Knowledge-Based
Approach:
In recent years, DOD has revised its acquisition policy to support an
evolutionary, knowledge-based approach for acquiring major weapon
systems based on best practices.[Footnote 9] JSF's acquisition strategy
does not fully follow the intent of this policy. Instead, it strives to
achieve the ultimate JSF capability within a single product development
increment. While the acquisition strategy calls for delivering a small
number of aircraft with limited capabilities, the program has committed
to deliver the full capability by the end of system development and
demonstration in 2013 within an established cost and schedule, contrary
to an evolutionary approach. The JSF program bypassed early
opportunities to trade or defer to later increments those features and
capabilities that could not be readily met. The planned approach will
not capture adequate knowledge about technologies, design, and
manufacturing processes for investment decisions at key investment
junctures. Figure 3 shows a comparison of an evolutionary, knowledge-
based process based on best practices and JSF's more concurrent
approach.
Figure 3: JSF Acquisition Approach Compared with Best Practices
Approach for an Evolutionary, Knowledge-Based Acquisition Process:
[See PDF for image]
[End of figure]
Successful commercial companies use an evolutionary acquisition
approach where new products are developed in increments based on
available resources. Companies have found that trying to capture the
knowledge required to stabilize the design of a product that requires
significant amounts of new content is an unmanageable task if the goal
is to reduce cycle times and get the product to the customer as quickly
as possible. With an evolutionary acquisition approach, design elements
that are not currently achievable are planned for and managed as
increments in future generations of the product, and each increment is
managed as a separate knowledge-based acquisition, with separate
milestones, costs, and schedules.
Programs that attain the right knowledge at the right time reduce the
risk of incurring design, development, and manufacturing problems that
result in cost and schedule overruns. Our past work has shown that to
ensure successful program outcomes, a high level of demonstrated
knowledge must be attained at three key junctures for each increment in
the program.
* At knowledge point 1, the customer's needs should match the
developer's available resources--mature technologies, engineering
knowledge, time, and funding--before system development starts. This is
indicated by a demonstration that technologies needed to meet essential
product requirements work in their intended environment and the
producer has completed a preliminary design of the product that shows
that the design is feasible.
* At knowledge point 2, the product's design is stable and has
demonstrated that it is capable of meeting performance requirements
before transitioning from system integration to system demonstration.
This is best indicated by a prototype demonstration of the design and
release of 90 percent of the engineering drawings to manufacturing
organizations.
* At knowledge point 3, the product must be producible within cost,
schedule, and quality targets and demonstrated to be reliable and work
as intended before production begins. This is indicated by a
demonstration of an integrated product in its intended environment and
by bringing critical manufacturing processes under statistical control.
JSF Began System Development Well before Knowledge Point 1:
The start of the JSF system development was approved in 2001--well
before a match was made between the customer's requirements and the
resources needed to meet those requirements. Many of the technologies
needed for the product's full capabilities were demonstrated only in a
lab environment or ground testing and not in the form, fit, or
functionality needed for the intended product design. Also, while the
program had a proposed technical solution to meet the warfighter's
requirements, it did not deliver a preliminary design based on sound
systems engineering principles. At the JSF preliminary design review,
held about 1½ years after development started, significant design
issues surfaced, potentially affecting the critical performance
capabilities of the aircraft. The program has worked to find solutions
to design problems, but at a substantial cost. The detailed design work
has fallen behind schedule, delaying the critical design reviews for 16
to 22 months. Table 4 compares the product knowledge available at the
JSF system development start and the knowledge expected to be available
to support future decision points based on the current acquisition
plan.
Table 4: Knowledge Attainment on JSF Program at Critical Junctures:
Decision points: Investment decision;
Development start--2001: Develop a product that meets customer
expectations within available resources; Requires a significant
financial commitment to design, integrate, and demonstrate that the
product will meet the user's requirements and can be manufactured on
time, with high quality, and at cost that provides an acceptable return
on investment;
Design review--2006: Transition from system integration to system
demonstration; Requires significant investment to start building and
testing production representative prototypes in a manufacturing
environment;
Production start--2007: Produce and deliver a product to the user;
Requires significant investments for materials and resources such as
additional tooling to build the product at planned rates, facilities,
personnel, training, and support.
Decision points: Best practice;
Development start--2001: Attain knowledge point 1; Separate technology
and product development, deliver mature technology, and have
preliminary design based on systems engineering principles;
Design review--2006: Attain knowledge point 2; Completion of 90 percent
of engineering drawing packages for structures and systems, critical
design review completed, and design prototyped;
Production start--2007: Attain knowledge point 3; One hundred percent
of critical manufacturing processes under statistical control,
demonstration of a fully integrated product in its operational
environment to show it will work as intended, and reliability goals
demonstrated.
Decision points: JSF practice;
Development start--2001: Knowledge point 1 was not attained; Failed to
separate technology and product development. Critical technologies not
mature and sound preliminary design not established. Several
technologies not expected to be mature until after production begins;
Design review--2006: Knowledge point 2 will not be attained under
current plan; The program estimates 35 percent of the engineering
drawing packages are expected to be released at the critical design
review. Also, prototype testing will not be done prior to the design
review. The design will not be stable until after production begins;
Production start--2007: Knowledge point 3 will not be attained under
current plan; The program does not expect to demonstrate that the
critical processes are under statistical control until 2009. The
program expects to demonstrate that a fully integrated aircraft will
work as intended and meets reliability goals in 2010-2012 time frame.
Source: GAO data and analysis of DOD data.
[End of table]
JSF Program Plans to Commit Significant Resources to System
Demonstration before Reaching Knowledge Point 2:
Knowing that a product's design is stable before system demonstration
reduces the risk of costly design changes occurring during the
manufacturing of production representative prototypes--when investments
in acquisitions become even more significant. The JSF program expects
to have all critical drawings and a small number of other drawings
completed by the planned February 2006 critical design review--the
milestone at which design stability is determined.[Footnote 10]
However, these drawings represent only about 35 percent of the total
drawings needed to complete the JSF design. While program officials
believe that having 35 percent of the total drawings will allow them to
track JSF's design stability, we have found that programs that moved
forward with less than 90 percent of the total drawings at the start of
the product demonstration phase were challenged to stabilize the design
at the same time they were trying to build and test the product. This
overlap frequently results in costly design changes and parts shortages
during manufacturing, which, in turn, result in labor inefficiencies,
schedule delays, and quality problems.[Footnote 11] The F/A-22 and PAC-
3 missile are prime examples of programs that failed to complete 90
percent of their drawings by the critical design review and suffered
substantial cost increases and schedule delays.
Using prototypes to demonstrate the design is a best practice that
provides additional evidence of design stability. JSF will not have
this type of demonstration before the critical design review. Prototype
testing allows the design to be demonstrated before making costly
investments in materials, manufacturing equipment, and personnel to
begin building production representative prototypes for the system
demonstration phase. The JSF program is building an early prototype of
the conventional takeoff and landing variant and plans to use this
prototype to validate performance predictions, manufacturing processes,
and reliability and maintainability models.[Footnote 12] According to
the current schedule, however, the first demonstrations will occur
after the critical design review, after most of the design drawings
have been released, and after manufacturing has begun for many of the
remaining test aircraft. Any significant design problems found during
the prototype demonstrations would likely require more time and money
for redesign efforts and retrofitting of test aircraft already in the
manufacturing process.
JSF Program Plans to Enter Production before Knowledge Point 3:
In addition to lacking mature technologies and design stability, the
JSF program will lack critical production knowledge when it plans to
enter low-rate initial production in 2007. Between 2007 and 2013, when
the program is scheduled to move to full-rate production, it expects to
buy nearly 500 JSF aircraft--20 percent of its planned total buys--at a
cost of roughly $50 billion. Under the program's preliminary plan, it
expects to increase low-rate production from 5 aircraft a year to 143
aircraft a year, significantly increasing the financial investment
after production begins.[Footnote 13] Between 2007 and 2009, the
program plans to increase low-rate production spending from about $100
million a month to over $500 million a month, and before development
has ended and an integrated aircraft has undergone operational
evaluations, DOD expects to spend nearly $1 billion a month. To achieve
its production rate, the program will invest significantly in tooling,
facilities, and personnel. According to contractor officials, an
additional $1.2 billion in tooling alone would be needed to ramp up the
production rate to 143 aircraft a year. Over half of this increase
would be needed by 2009--more than 2 years before operational flight
testing begins.
Despite this substantial investment, the key event to support the
decision to enter low-rate production in 2007 is the JSF's first
flight. Significant commitments will thus be made to JSF production
before requisite knowledge is available. This is a much lower standard
than called for by best practices. The following are examples of
technology, design, and production knowledge that will not have been
achieved at the time JSF enters low-rate initial production.
Technology: According to information provided by the program office,
only one of JSF's eight critical technologies is expected to be
demonstrated in an operational environment by the 2007 low-rate
production decision. The remaining seven technologies, which include
the complex mission systems and prognostics and health maintenance
systems, are not expected to be mature prior to entering production.
(See app. III for program office's projected time frames for
demonstrating the eight critical technologies.)
Design: Low levels of design knowledge will continue beyond the
production decision. Only about 40 percent of the 17 million lines of
code needed for the system's software will have been released. The
complex software needed to integrate the advanced mission systems is
not scheduled for release until about 2010--3 years after JSF is
scheduled to enter production. In addition, most structural fatigue
testing and radar cross section testing of full-up test articles--
needed to verify the stability of the aircraft's structural design--are
not planned to be completed until 2010.
Production: The program will not demonstrate that critical
manufacturing processes are in statistical control when it enters
production. At that time, only one test aircraft will be completed and
delivered. According to the contractor, manufacturing processes will
not be under statistical control until after all of the system
development and demonstration aircraft have been built. Also, flight
testing of a fully configured and integrated JSF (with critical mission
systems and prognostics technologies) is not scheduled until 2011.
Operational testing to evaluate the effectiveness and suitability of
the integrated system will continue until the full-rate production
decision in 2013.
The JSF, like many past DOD weapons programs, is very susceptible to
discovering costly problems late in development when the more complex
software and advanced capabilities are tested. In the case of the JSF,
several hundred aircraft costing several billions of dollars may
already be on order or delivered, making any changes that result from
testing costly to incorporate. Figure 4 shows the proposed low-rate
initial production plan and how it overlaps with development and test
activities.
Figure 4: Overlap of JSF Low-Rate Production and System Development and
Demonstration Activities (Includes U.S. and U.K. Quantities):
[See PDF for image]
[End of figure]
Failing to Meet Aggressive Delivery Schedule Could Delay Flight Testing:
If the JSF program cannot meet aggressive delivery schedules for test
aircraft, flight testing will be delayed. Flight testing provides key
knowledge about JSF performance needed to make investment decisions for
production. The JSF program is attempting to develop three different
aircraft, for three different services. All want to fly at supersonic
speeds, shoot air-to-air missiles, and drop bombs on a target, but they
all have vastly different operational concepts. While each of the
variants may look similar externally, subtle design differences provide
many needed capabilities that are unique to each service. As a result,
the program will attempt to design, build, and test simultaneously
three distinct aircraft designs. This difficult task is further
complicated by plans to manufacture and deliver in a 5-year period, 15
flight test aircraft and 8 ground test articles. When compared with
schedules of other programs with fewer variables, JSF's schedule is
aggressive. For example, the F/A-22 program took almost 8 years to
manufacture and deliver nine flight test aircraft and two ground test
articles of a single aircraft design.
While the first aircraft had only been in assembly for about 8 months,
it was already behind schedule as of January 2005. According to the
Defense Contract Management Agency, based on the manufacturing status
of the center fuselage, wing, forward fuselage, and software
development, the first flight, scheduled for August 2006, could be
delayed from 2 to 6 months. Late engineering releases to the
manufacturing floor have resulted in parts shortages and manufacturing
inefficiencies. According to contractor data, as of January 2005, it
had taken about 50 percent more labor hours than planned to complete
manufacturing efforts.
Program Funding Level Assumptions May Be Difficult to Achieve:
To execute its current acquisition strategy, the JSF program must
obtain on average over $10 billion annually in acquisition funds over
the next 2 decades. Regardless of likely increases in program costs,
the sizable continued investment in JSF--estimated at roughly $225
billion over 22 years[Footnote 14]--must be viewed within the context
of the fiscal imbalance facing the nation within the next 10 years. The
JSF program will have to compete with many other large defense
programs, such as the Army's Future Combat System and the Missile
Defense Agency's ballistic missile defense system, for funding during
this same time frame. There are also important competing priorities
external to DOD's budget. Fully funding specific programs or activities
will undoubtedly create shortfalls in others.
Funding challenges will be even greater if the program fails to
translate current cost estimates into actual costs. For example, we
estimate that another 1-year delay in JSF development would cost $4
billion to $5 billion based on current and expected development
spending rates. A 10 percent increase in production costs would amount
to $20 billion. The JSF program's latest planned funding profile for
development and procurement--as of December 2003--is shown in figure 5.
Figure 5: JSF Program's Annual Funding Requirements (as of December
2003):
[See PDF for image]
[End of figure]
Current Strategy Requires Prolonged Reliance on Cost Reimbursement
Contract:
The program's acquisition strategy is to concurrently develop, test,
and produce the JSF aircraft, creating a risky approach. Because of
this risk, the program office plans to place initial production orders
on a cost reimbursement basis. According to program officials, a cost
reimbursable contract is necessary during the initial production phase
because of the uncertainties inherent in concurrent development and
production programs that prevent the pricing of initial production
orders on a fixed-price basis. Cost reimbursement contracts provide for
payment of allowable incurred costs, to the extent prescribed in the
contract. They are used when uncertainties involved in contract
performance do not permit costs to be estimated with sufficient
accuracy to use any type of fixed-price contract. Cost reimbursement
contracts require only the contractor's "best efforts," thus placing a
greater cost risk on the buyer--in this case, DOD. In contrast, a fixed-
price contract provides for a pre-established price and places more
risk and responsibility for costs and resulting profit or loss on the
contractor and provides more incentive for efficient and economical
performance. However, to negotiate a fixed-price contract requires
certainty about the item to be purchased, which in the case of the JSF
will not be possible until late in the development program.
The program plans to transition to a fixed-price contract once the air
vehicle has a mature design, has been demonstrated in flight test, and
is producible at established cost targets. According to program
officials, this transition will occur sometime before full-rate
production begins in 2013. The program office believes the combination
of the early concept development work, the block development approach,
and what it characterizes as the relatively small numbers of aircraft
in the initial production buys allow decisions to be made earlier than
normal with an acceptable level of risk.
Conclusions:
The JSF program is at a crossroads. DOD has not been able to deliver on
its initial promises, and the sizable investment DOD plans to make over
the next few years greatly raises the stakes to meet future promises.
Given the many uncertainties surrounding JSF's development, program
officials need more time to gain knowledge before committing to a
business case. JSF's failure to adequately match requirements and
resources has already resulted in increases in cost, schedule, and
performance estimates, and a reduction in DOD's buying power. The new
business case must also be accompanied by an acquisition strategy that
adopts an evolutionary approach to product development--one that
enables knowledge-based investment decisions to maximize remaining
program dollars. While the warfighter may not receive the ultimate
capability initially, an evolutionary approach provides a useful
product sooner and in sufficient quantities to start replacing the
rapidly aging legacy fighter and attack force. The decisions DOD makes
now and over the next 2 years will greatly influence the efficiency of
its remaining funding--over 90 percent of the $245 billion estimated
total program costs. Chief among these are the investments needed to
increase production to 143 aircraft a year, increasing production
expenditures from $100 million a month to $1 billion a month by 2013.
While delays are never welcomed, time taken by DOD now to gain more
knowledge and reduce risk before increasing its investment may well
save time and money later in development and production. Now is the
time to get the strategy right for delivering on the remainder of the
investment. With an evolutionary, knowledge-based plan in place, DOD
managers will be in a better position to succeed in delivering the
warfighter needed capabilities within budgeted resources.
Recommendations for Executive Actions:
Given that DOD has invested only about 10 percent of the estimated cost
to develop and produce the JSF aircraft, and that significant
investments are planned in the next few years that can lock the program
into a higher-risk acquisition, we recommend the Secretary of Defense
take the following two actions to increase the likelihood of having a
successful program outcome by delivering capabilities to the warfighter
when needed and within available resources Establish an executable
program consistent with best practices and DOD policy regarding
evolutionary acquisitions. DOD officials should define an affordable
first increment, with its own business case that clearly defines the
warfighter's most immediate needs and accurately identifies the
resources required to deliver on this needed capability. The business
case should be established with a high degree of confidence based on
known constraints about technology, engineering knowledge, time, and
money. For those warfighter needs that cannot be accommodated within
this first increment, the program should outline a strategy to meet
these needs through subsequent increments, each dependent on having
sufficient product knowledge to start system development and
demonstration. Each increment should be managed as a distinct
acquisition with its own business case for supporting the investment.
Develop and implement a knowledge-based acquisition approach, as called
for by best practices and DOD's acquisition policy, an approach that
ensures attainment and use of demonstrated product knowledge before
making future investments for each product increment. Before increasing
the investment in production resources (tooling, materials, and
personnel) greater than investments already in place to support the
manufacturing of development test aircraft, the Secretary should ensure
knowledge consistent with best practices is captured. This should help
minimize the number of low-rate initial production aircraft DOD
procures on a cost reimbursement basis, reducing the potential
financial risk to the government.
Agency Comments and Our Evaluation:
The Office of the Under Secretary of Defense (Acquisition, Technology,
and Logistics), provided us with written comments on a draft of this
report. The comments appear in appendix I.
DOD partially concurred with our recommendation that the Secretary
establish an executable program that includes an affordable first
increment with its own business case that clearly defines the
warfighter's most immediate needs and accurately identifies the
resources required to deliver on this capability. DOD stated that the
JSF program acquisition strategy is based on an appropriate balance of
technical, cost, and schedule risk considerations to achieve program
objectives. Warfighter representatives are involved in determining the
content for each block capability, and technology maturity is factored
into the decision plan that has been endorsed by DOD leadership. DOD
stated its JSF management practices achieve the objectives of the GAO
recommendation.
We believe DOD's acquisition strategy will not provide the full
benefits of an evolutionary approach as suggested by DOD's policy and
best practices. DOD has not structured the JSF development program into
increments managed as separate acquisitions with their own cost,
schedule, and decision milestones, making the likelihood of successful
program outcomes low. The JSF strategy resembles other past major
acquisition programs that have attempted to achieve the ultimate
capability in a single development increment. DOD has allowed
technology development to spill over into product development,
weakening any foundation for program cost or schedule estimates. This
has led to poor outcomes for other programs, such as the F/A-22 and
Comanche, where lengthy and costly development efforts resulted in
either program cancellation or a significant reduction in the number of
systems to be acquired, a real loss in DOD buying power. Without a true
evolutionary approach supported by a business case for each increment,
it will be difficult for the JSF program to meet product requirements
within current estimates of time and money.
DOD also partially concurred with our recommendation to develop and
implement a knowledge-based acquisition approach, which ensures
attainment and use of demonstrated product knowledge before making
future investments for each product increment. The department agrees
that a knowledge-based approach is critical to making prudent
acquisition decisions and stated that its current JSF acquisition
strategy incorporates this type of approach. The department admits it
has accepted some concurrency between development and production to
reduce schedule and cost, but it will consider the production readiness
of the JSF design at the low-rate and full-rate production decision
milestones. It states that the new program plan includes clear entry
and exit criteria for critical milestones to ensure technologies are
mature and required incremental objectives are achieved before
obligating funds. DOD stated that it conducts regular program reviews,
and the Defense Acquisition Board will review program readiness prior
to making any milestone decision. The frequent rotation of program
leadership ensures ongoing cooperative oversight of emerging challenges
and program decisions, and ensures accountability for the
implementation of those decisions. Finally, DOD states that the
acquisition strategy is consistent with acquisition directives and
ensures the department commits resources only after determining that
specific developmental or knowledge-based criteria are achieved.
We believe the JSF's acquisition strategy will not capture the right
knowledge at the right time for informed decisions on future
investments--over $200 billion dollars. The program does not have the
practices in place to capture knowledge at key junctures. DOD will not
have captured knowledge before production starts that ensures the
design is mature, reliable, and works or that manufacturing processes
are in control---keys to successful outcomes in the production phase.
Further, the large investments planned in production capability for the
JSF over the next few years are vulnerable to costly changes as the
aircraft is still being designed and tested. DOD has historically
developed new weapon systems in a highly concurrent environment that
usually forces acquisition programs to manage technology, design, and
manufacturing risk at the same time. While DOD believes it can manage
the risk of concurrent development and production by holding regular
program reviews and with entrance and exit criteria for decisions,
DOD's own experience has shown this approach to be risky and often not
totally effective. This has been DOD's traditional approach to weapons
acquisition, the same approach that has led to programs costing
significantly more than planned and taking much longer to develop. This
environment has made it difficult to make informed decisions because
appropriate knowledge has not been available at key decision points. If
decisions are tied to the availability of critical knowledge, program
managers can be held accountable for the timely capture of that
knowledge instead of less precise or ill-defined criteria included in
risk reduction plans. DOD's practice of frequently changing program
managers also decreases accountability because commitments made today
will likely not be carried through by the same managers who made the
commitments.
We are sending copies of this report to the Secretary of Defense;
the Secretaries of the Air Force, Army, and Navy;
and the Director of the Office of Management and Budget. We will also
provide copies to others on request. In addition, the 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 concerning this report, please
contact me at (202) 512-4841 or Michael Hazard at (937) 258-7917. Other
staff making key contributions to this report were Marvin Bonner,
Matthew Drerup, Matthew Lea, David Schilling, Karen Sloan, and Adam
Vodraska.
Signed by:
Michael J. Sullivan:
Director:
Acquisition and Sourcing Management:
List of Congressional Committees:
The Honorable John Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services United States Senate:
The Honorable Ted Stevens:
Chairman:
The Honorable Daniel K. Inouye:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Duncan Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
The Honorable C.W. Bill Young:
Chairman:
The Honorable John P. Murtha:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Appendix I: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
ACQUISITION, TECHNOLOGY AND LOGISTICS:
3000 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3000:
FEB 24, 2005:
Mr. Michael J. Sullivan:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, D.C. 20548:
Dear Mr. Sullivan:
This is the Department of Defense (DoD) response to the Government
Accountability Office (GAO) draft report, 'TACTICAL AIRCRAFT: DoD Has
Opportunity to Reduce Risks in the Joint Strike Fighter (JSF) Program
With Different Acquisition Strategy,' dated January 27, 2005, (GAO Code
120355/GAO-05-271). The Department of Defense partially concurs with
the two recommendations in the draft report (see enclosure).
The first GAO recommendation is to manage risk with a "first increment"
aircraft that meets only the warfighters' most immediate needs. The
Department partially concurs.
The ongoing program replan includes a "first increment" block plan. It
incorporates restructured spiral development with sequential capability
increments to meet the most immediate, achievable warfighting
requirements while limiting developmental risk. The re-plan strategy is
a balance of technical, cost and schedule risk that incorporates a best
practice, evolutionary approach to system acquisition as outlined in
the latest Department regulations and instructions.
The second GAO recommendation is to develop and implement a knowledge-
based acquisition approach which ensures attainment and use of
demonstrated product knowledge before making future investments for
each product "increment." The Department partially concurs.
The Department agrees that a knowledge-based approach is critical to
making prudent acquisition decisions. The current acquisition strategy
incorporates this type of approach with small incremental steps
designed to meet the requirements for System Development and
Demonstration. The Department has accepted some concurrency between
development and production to reduce schedule and cost. The Department
will consider the production readiness of the JSF design at the low
rate and full rate production decision milestones based on the
program's status at that time. The Defense Acquisition Board will
review program readiness in detail and all aspects of concurrency risk
will receive careful scrutiny prior to making the necessary milestone
decisions.
The Department appreciates the opportunity to comment on the draft
report.
Sincerely,
Signed by:
Glenn F. Lamartin:
Director:
Defense Systems:
Enclosure: As stated:
GAO DRAFT REPORT - DATED JANUARY 27, 2005:
GAO CODE 120355/GAO-05-271:
"TACTICAL AIRCRAFT: DoD Has Opportunity to Reduce Risks in the Joint
Strike Fighter Program With Different Acquisition Strategy"
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The Government Accountability Office (GAO)
recommended that the Secretary of Defense establish an executable
program consistent with best practices and DoD policy regarding
evolutionary acquisitions. DoD officials should define an affordable
first increment, with its own business case that clearly defines the
warfighters' most immediate needs and accurately identifies the
resources required to deliver on this needed capability. (p. 21/GAO
Draft Report):
DOD RESPONSE: Partially Concur. The JSF Block plan provides a spiral
development approach to acquisition based on an appropriate balance of
technical, cost, and schedule risk considerations to achieve program
objectives.
JSF program replan includes a block approach to support System
Development and Demonstration and Initial Operational Capability.
Warfighter representatives are integral to the discussion of content
for each block of capability, and technology maturity is factored into
the decision plan. The Acting Under Secretary of Defense for
Acquisition, Technology and Logistics (USD(AT&L)) endorsed the path
forward to resolve the remaining elements of the replan. This replan
includes a risk management approach to block capability, the integrated
test and evaluation schedule, and funding. The OSD Cost Analysis
Improvement Group (CAIG) estimate for the JSF will be presented at the
next Defense Acquisition Board (DAB) review to ensure cost risks are
understood. The Acting USD(AT&L) also requested that the Joint Program
Office update the JSF acquisition strategy for his approval consistent
with the President's Budget 2006 submission.
These activities are core tenets of evolutionary acquisition. The
Department is confident management practices currently in place achieve
the objectives of this GAO recommendation.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
develop and implement a knowledge-based acquisition approach, as called
for by best practices and DoD's acquisition policy, which ensures
attainment and use of demonstrated product knowledge before making
future investments for each product increment. Before increasing the
investment in production resources (tooling, materials, and personnel)
greater than that already in place to support the manufacturing of
development test aircraft, the Secretary should ensure knowledge
consistent with best practices is captured. (p. 22/GAO Draft Report):
DOD RESPONSE: Partially Concur. The Department agrees that a knowledge-
based approach is critical to making prudent acquisition decisions. The
current acquisition strategy incorporates this type of approach with
small incremental steps designed to meet the requirements for System
Development and Demonstration.
The program replan consists of clear entry and exit criteria for
critical milestones to ensure technologies are mature, and required
incremental objectives are achieved before obligating funds on
subsequent contracts. The Department conducts acquisition reviews via
Integrating Integrated Product Teams (IIPT) and Overarching Integrated
Product Teams (OIPT), which support Defense Acquisition Board (DAB)
reviews. Configuration Steering Board (CSB) and Service Acquisition
Executive (SAE) bodies meet quarterly to decide on proposed program
changes and ensure associated risks are understood and appropriately
resourced.
Prior to any updates of desired warfighting capabilities, operational
requirements assessments are conducted through an active process of
Operational Advisory Group and Senior Warfighting Group reviews. Their
recommendations are submitted via the CSB, SAE, IIPT, OIPT, and DAB to
ensure risks and costs are considered, and if accepted, budgeted.
The Department has implemented best practices throughout the execution
of this important program. One example is the convention of program
management oversight periodically alternating between the Departments
of the Navy and the Air Force, with a Program Director (PD) who reports
to the other Department's Acquisition Executive. This ensures ongoing
cooperative oversight management of emerging challenges, decisions in
execution, and accountability, for the successfal implementation of
those decisions across the entire span of the program. The knowledge
that oversight will alternate between SAES helps ensure consistent and
constant cooperative oversight on the part of both SAES as well as the
PD. The value of this process has been demonstrated in the five SAE and
PD leadership transitions that have been smoothly and seamlessly
executed to-date. The standard JSF practice of the Deputy Program
Director becoming the PD also significantly contributes to continuity
and accountability in program execution.
JSF Program acquisition strategy and execution activities are
consistent with the Department's acquisition directives, and ensure the
Department commits resources only after determining that specific
developmental or knowledge based criteria are achieved.
[End of section]
Appendix II: Scope and Methodology:
To determine the status of the Joint Strike Fighter (JSF) business case
for delivering new capabilities to the warfighter, we compared the
original program estimates with current estimates. For development, we
used the program estimates that justified the program when it started
in 1996. This was the point at which JSF transitioned from a technology
development environment to an acquisition program environment, with the
commitment to delivery a family of strike aircraft that meet the Air
Force, Navy, and Marine Corps needs. At that time, total production,
acquisition, and ownership costs had not been estimated. However, the
program had estimated the unit flyaway costs for each variant. The
total production, acquisition, and ownership estimates were first
established to support the decision to enter the system development and
demonstration phase in 2001. We used these estimates as the baseline
for these costs. We identified changes in costs, quantities, and
schedules as well as the causes for the changes. We also identified
program conditions that may affect these estimates in the future. To
accomplish this, we reviewed management plans, cost reports, progress
briefings, program baselines, risk reports, and independent program
assessments. We also interviewed officials from the Department of
Defense's (DOD) acquisition program management office and prime
contractor.
To evaluate whether the current acquisition plan follows an
evolutionary, knowledge-based approach to meeting business case goals
in the future, we applied GAO's methodology for assessing risks in
major weapon systems. This methodology is derived from best practices
and experiences of leading commercial firms and successful defense
acquisition programs. We reviewed Office of the Secretary of Defense
(OSD), program office, and prime contractor processes and management
actions. We compared the program's plans and results to date against
best practice standards in capturing product knowledge in terms of
technology, design, and production maturity information and in applying
knowledge to support major program investment decisions. We reviewed
management plans, acquisition strategies, test plans, risk assessments,
and program status briefings. We identified gaps in product knowledge,
reasons for these gaps, and the risks associated with moving forward
with inadequate knowledge at future decision points. We also reviewed
DOD's acquisition policy to determine whether JSF's approach met its
intent.
In performing our work, we obtained information and interviewed
officials from the JSF Joint Program Office, Arlington, Virginia;
Lockheed Martin Aeronautical Systems, Fort Worth, Texas; Defense
Contract Management Agency, Fort Worth, Texas; Institute for Defense
Analyses, Alexandria, Virginia; and offices of the Director,
Operational Test and Evaluation, and Acquisition, Technology and
Logistics, which are part of the Office of Secretary of Defense in
Washington, D.C.
[End of section]
Appendix III: Projected Time Frames for Demonstration of Critical
Technologies:
Critical technologies: Integrated flight propulsion control;
Technology description: Includes integration of propulsion, vehicle
management system, and other subsystems as they affect aircraft
stability, control, and flying qualities (especially short takeoff and
vertical landing). Aircraft improvements are to reduce pilot workload
and increase flight safety;
Actual or planned date technology demonstrated in relevant
environment[A]: First quarter 2006;
Actual or planned date technology demonstrated in operational
environment[B]: Third quarter 2007.
Critical technologies: Prognostics and health management;
Technology description: Involves the ability to detect and isolate the
cause of aircraft problems and then predict when maintenance activity
will have to occur on systems with pending failures. Life-cycle cost
savings are dependent on prognostics and health management through
improved sortie generation rate, reduced logistics and manpower
requirements, and more efficient inventory control;
Actual or planned date technology demonstrated in relevant
environment[A]: Third quarter 2009;
Actual or planned date technology demonstrated in operational
environment[B]: Third quarter 2010.
Critical technologies: Integrated support system;
Technology description: Involves designing an integrated support
concept that includes an aircraft with supportable stealth
characteristics and improved logistics and maintenance functions. Life-
cycle cost savings are expected from improved logistics and maintenance
functions. Life- cycle cost savings are expected from low observable
maintenance techniques and streamlined logistics and inventory systems;
Actual or planned date technology demonstrated in relevant
environment[A]: Third quarter 2010;
Actual or planned date technology demonstrated in operational
environment[B]: Third quarter 2011.
Critical technologies: Subsystems;
Technology description: Includes areas of electrical power, electrical
wiring, environmental control systems, fire protection, fuel systems,
hydraulics, landing gear systems, mechanisms and secondary power.
Important for reducing aircraft weight, decreasing maintenance cost,
and improving reliability;
Actual or planned date technology demonstrated in relevant
environment[A]: Demonstrated in 2002;
Actual or planned date technology demonstrated in operational
environment[B]: Demonstrated in 2004.
Critical technologies: Integrated core processor;
Technology description: Includes the ability to use commercial-based
processors in an open architecture design to provide processing
capability for radar, information management, communications, etc. Use
of commercial processors reduces development and production costs, and
an open architecture design reduces future development and upgrade
costs;
Actual or planned date technology demonstrated in relevant
environment[A]: Third quarter 2009;
Actual or planned date technology demonstrated in operational
environment[B]: First quarter 2011.
Critical technologies: Radar;
Technology description: Includes advanced integration with
communication, navigation, and identification functions and electronic
warfare functions through improved apertures, antennas, modules,
radomes, etc. Important for reducing avionics cost and weight, and
decreasing maintenance cost through improved reliability;
Actual or planned date technology demonstrated in relevant
environment[A]: Fourth quarter 2007;
Actual or planned date technology demonstrated in operational
environment[B]: Fourth quarter 2008.
Critical technologies: Mission systems integration;
Technology description: Involves decreasing pilot workload by providing
information for targeting, situational awareness, and survivability
through fusion of radar, electronic warfare, and communication,
navigation, and identification data. Improvements are achieved through
highly integrated concept of shared and managed resources, which reduce
production costs, aircraft weight, and volume requirements, in addition
to providing improved reliability;
Actual or planned date technology demonstrated in relevant
environment[A]: First quarter 2010;
Actual or planned date technology demonstrated in operational
environment[B]: Fourth quarter 2011.
Critical technologies: Manufacturing;
Technology description: Involves lean, automated, highly efficient
aircraft fabrication and assembly techniques. Manufacturing costs
should be less through improved flow time, lower manpower requirements,
and reduced tooling cost;
Actual or planned date technology demonstrated in relevant
environment[A]: Second quarter 2007;
Actual or planned date technology demonstrated in operational
environment[B]: Second quarter 2007.
Source: Joint Strike Fighter Program Office.
[A] Technology is in a form that closely represents the form, fit, and
function needed for the JSF and is demonstrated in an environment that
closely approximates the realities of its intended use but is short of
the eventual operating environment itself, such as in a high-fidelity
laboratory.
[B] Technology is in the form, fit, and function needed for the JSF and
is demonstrated in an operational environment similar to that intended
for the JSF, such as on a surrogate platform or test bed.
[End of table]
[End of section]
Appendix IV: Measures of JSF Program Cost and Schedule Changes:
[See PDF for image]
[End of figure]
[End of section]
FOOTNOTES
[1] Congressional Budget Office, The Budget and Economic Outlook: An
Update. (Washington, DC: September 2004).
[2] Section 213 of the act requires us to assess the extent to which
the system development and demonstration program is currently meeting
key cost, schedule, and performance goals; the likelihood that the
program will be completed within estimated costs; and the program's
current acquisition plan leading to production.
[3] The business case is demonstrated evidence that (1) the warfighter
need exists and that it can best be met with the chosen concept, and
(2) the concept can be developed and produced within existing
resources--including design knowledge, demonstrated technologies,
adequate funding, and adequate time to deliver the product.
[4] Sensor fusion is the ability to take information from both multiple
onboard and offboard aircraft sensors and display the information in an
easy-to-use format for the pilot. This is vitally important, since the
JSF is a single-seat aircraft, and the pilot needs help to carry out
multiple types of missions.
[5] Unit flyaway costs include the recurring costs to produce the basic
aircraft, propulsion system, and mission systems. Unit flyaway costs
are stated in fiscal year 2002 dollars.
[6] Prior to these changes, the program was not meeting about 25
percent of the contract performance specifications.
[7] In December 2004, Air Combat Command officials told us that the Air
Force is considering buying about 250 short takeoff and landing JSFs
and about 1,300 conventional takeoff and landing JSFs. However, these
numbers are not official.
[8] 10 U.S.C. section 1734 states this required assignment period can
be waived "in exceptional circumstances."
[9] DOD Directive 5000.1, The Defense Acquisition System (May 2003);
DOD Instruction 5000.2, Operation of the Defense Acquisition System
(May 2003). The directive establishes evolutionary acquisition
strategies as the preferred approach to satisfying DOD's operational
needs. The directive also requires program managers to provide
knowledge about key aspects of a system at key points in the
acquisition process. The instruction implements the directive and
establishes detailed policy for evolutionary acquisition.
[10] Critical drawings are primarily of structural parts weighing more
than 5 pounds. The February 2006 critical design review is for both the
conventional takeoff and landing variant and the short takeoff and
vertical landing variant. The carrier variant will have its own design
review about 1 year later.
[11] Drawings include details on the parts and work instructions needed
to make the product and reflect the results of testing. Completed
drawings allow suppliers to produce the parts so they can be available
to the manufacturer when needed for installation on the product.
[12] Manufacturing of the first conventional take-off and landing
prototype is currently under way. This aircraft, however, does not
include many of the design changes that resulted from the redesign
efforts to reduce airframe weight. According to program officials,
essentially every drawing used to build this aircraft was affected by
the redesign effort.
[13] The preliminary plan was what was being considered at the time of
our review. Since then, in its fiscal year 2006 budget submission, DOD
has reduced the planned procurement quantities for the U.S. by 38
aircraft through fiscal year 2011. The preliminary figures also
includes planned quantities for the United Kingdom of 2 aircraft in
fiscal year 2009, 4 aircraft in fiscal year 2010, 9 aircraft in fiscal
year 2011, 9 aircraft in fiscal year 2012, and 10 aircraft in fiscal
year 2013.
[14] This figured is based on DOD's December 2003 JSF cost estimate.
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