Tactical Aircraft
Status of the F/A-22 and JSF Acquisition Programs and Implications for Tactical Aircraft Modernization Gao ID: GAO-05-390T March 3, 2005The F/A-22 and Joint Strike Fighter (JSF)--two of the Department of Defense's (DOD) major tactical aircraft fighter programs--are intended to replace aging tactical fighter aircraft with highly advanced, stealthy aircraft. The two programs combined have a potential future investment of more than $240 billion. Later this month, GAO plans to issue comprehensive reports on the numerous setbacks each of these programs has experienced since they were initiated and their effect on the F/A-22 and JSF business cases. This testimony highlights key concerns in the F/A-22 and JSF programs and discusses the implications of these concerns on DOD's overall investment strategy for modernizing its tactical fixed wing aircraft.
Significant changes in the F/A-22 program have severely weakened its original business case. Since the F/A-22 program began in 1986, new threats emerged and mission requirements changed; to keep the F/A-22 viable, the Air Force has planned for large investments in new capabilities. Significant delays and cost increases have affected affordability, reducing planned deliveries from 750 F/A-22 aircraft to fewer than 180. The recent budget decision to terminate procurement of the F/A-22 after fiscal year 2008 and the prospect of additional funding cuts also have significant implications for the program's viability and modernization efforts. JSF's original business case, established when the program began in 1996, is unexecutable. The cost estimate to develop the aircraft has increased 80 percent, operational capability has been pushed out 2 years, and expected acquisition quantities have been cut by 535 aircraft. The JSF program is approaching key investment decisions that will greatly influence the efficiency of the remaining funding--over 90 percent of the $245 billion estimated total program costs. This sizable investment greatly raises the stakes to meet future promises. While DOD has been working to resolve early design and performance problems, continuing program uncertainties suggest DOD could use more time to gain knowledge before it commits to a new business case and moves forward. To reduce the risk of further cost and schedule growth, any new business case must include an acquisition strategy that adopts an evolutionary, knowledge-based approach to product development. Currently, the JSF program plans to make key production decisions before critical knowledge is captured. Taken together, the status and problems in these two programs have broader implications for the DOD tactical fixed wing aircraft modernization program, raising questions as to whether its overarching goals to reduce average aircraft age and ownership costs while maintaining the force structure are now achievable. The 2005 Quadrennial Defense Review provides an opportunity for DOD to assess needs and plans and to weigh options for accomplishing its tactical aircraft goals.
GAO-05-390T, Tactical Aircraft: Status of the F/A-22 and JSF Acquisition Programs and Implications for Tactical Aircraft Modernization
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Testimony:
Before the Subcommittee on Tactical Air and Land Forces, Committee on
Armed Services, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 9:00 a.m. EST:
Thursday, March 3, 2005:
Tactical Aircraft:
Status of the F/A-22 and JSF Acquisition Programs and Implications for
Tactical Aircraft Modernization:
Statement of Michael Sullivan and Allen Li, Directors, Acquisition and
Sourcing Management Issues:
GAO-05-390T:
GAO Highlights:
Highlights of GAO-05-390T, a testimony to before the Subcommittee on
Tactical Air and Land Forces, Committee on Armed Services, House of
Representatives
Why GAO Did This Study:
The F/A-22 and Joint Strike Fighter (JSF)”two of the Department of
Defense‘s (DOD) major tactical aircraft fighter programs”are intended
to replace aging tactical fighter aircraft with highly advanced,
stealthy aircraft. The two programs combined have a potential future
investment of more than $240 billion.
Later this month, GAO plans to issue comprehensive reports on the
numerous setbacks each of these programs has experienced since they
were initiated and their effect on the F/A-22 and JSF business cases.
This testimony highlights key concerns in the F/A-22 and JSF programs
and discusses the implications of these concerns on DOD‘s overall
investment strategy for modernizing its tactical fixed wing aircraft.
What GAO Found:
Significant changes in the F/A-22 program have severely weakened its
original business case. Since the F/A-22 program began in 1986, new
threats emerged and mission requirements changed; to keep the F/A-22
viable, the Air Force has planned for large investments in new
capabilities. Significant delays and cost increases have affected
affordability, reducing planned deliveries from 750 F/A-22 aircraft to
fewer than 180. The recent budget decision to terminate procurement of
the F/A-22 after fiscal year 2008 and the prospect of additional
funding cuts also have significant implications for the program‘s
viability and modernization efforts.
JSF‘s original business case, established when the program began in
1996, is unexecutable. The cost estimate to develop the aircraft has
increased 80 percent, operational capability has been pushed out 2
years, and expected acquisition quantities have been cut by 535
aircraft. The JSF program is approaching key investment decisions that
will greatly influence the efficiency of the remaining funding”over 90
percent of the $245 billion estimated total program costs. This sizable
investment greatly raises the stakes to meet future promises. While DOD
has been working to resolve early design and performance problems,
continuing program uncertainties suggest DOD could use more time to
gain knowledge before it commits to a new business case and moves
forward. To reduce the risk of further cost and schedule growth, any
new business case must include an acquisition strategy that adopts an
evolutionary, knowledge-based approach to product development.
Currently, the JSF program plans to make key production decisions
before critical knowledge is captured.
JSF Program‘s Annual Funding Requirements from 2005 to 2027:
[See PDF for image]
[End of figure]
Taken together, the status and problems in these two programs have
broader implications for the DOD tactical fixed wing aircraft
modernization program, raising questions as to whether its overarching
goals to reduce average aircraft age and ownership costs while
maintaining the force structure are now achievable. The 2005
Quadrennial Defense Review provides an opportunity for DOD to assess
needs and plans and to weigh options for accomplishing its tactical
aircraft goals.
What GAO Recommends:
GAO is making recommendations in its two tactical aircraft reports to
be issued later this month. For the F/A-22 program, GAO is reiterating
its 2004 recommendation for DOD to establish a new business case”one
that justifies the continued expenditure of funds on the F/A-22. For
the JSF program, GAO is recommending that DOD establish an executable
business case that is consistent with best practices and DOD policy
regarding knowledge-based, evolutionary acquisitions, before the
program moves forward.
www.gao.gov/cgi-bin/getrpt?GAO-05-390T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Allen Li at (202) 512-
4841 or lia@gao.gov, or Michael J. Sullivan at (202) 512-4841 or
sullivanm@gao.gov.
[End of section]
We are pleased to be here today to participate in the Subcommittee's
hearing on the status of two of the Department of Defense's (DOD) major
tactical aircraft fighter programs, the F/A-22 and the F-35, also known
as the Joint Strike Fighter (JSF)[Footnote 1]. Both programs are
intended to replace aging tactical fighter aircraft with highly
advanced, stealthy aircraft. These two programs represent a potential
future investment for DOD of about $240 billion to modernize tactical
fixed wing aircraft.
Our statement today will highlight key concerns in the F/A-22 and JSF
programs. Our work has shown that because of the significant changes in
the F/A-22 development and procurement programs and key investment
decisions remaining, a new business case is needed to justify aircraft
quantities and investments in new capabilities. Changes in the JSF
program and DOD's intent to begin producing aircraft with at least 6
years of development remaining suggest that the JSF does not yet have
the knowledge to justify future investments. In addition to
highlighting specific F/A-22 and JSF program issues, we will discuss
the implications these development programs have on DOD's overall
investment strategy for modernizing the tactical fixed wing aircraft.
Our statement is primarily based on our recent evaluations and
forthcoming reports on the F/A-22 and JSF programs.[Footnote 2] We
performed the work associated with this statement in accordance with
generally accepted government auditing standards.
Summary:
The F/A-22 has been in development for 19 years, and cost increases and
delays have created affordability concerns that reduced the number of
aircraft planned for acquisition. A changing world environment and
threats over this time frame have compelled the Air Force to plan for
large investments in new capabilities to keep the F/A-22 viable.
Termination of F/A-22 procurement after fiscal year 2008 has also
placed modernization plans in doubt. The original business case
elements--needs and resources---set at the outset of the program are no
longer valid, and a new business case is needed to justify future
investments for aircraft quantities and modernization efforts. The F/A-
22's acquisition approach was not knowledge-based or evolutionary. It
attempted to develop revolutionary capability in a single step, causing
significant technology and design uncertainties and, eventually,
significant cost overruns and schedule delays. Lessons from the F/A-22
program can be applied to the JSF program to improve on its outcomes.
While relatively early in its acquisition program, the JSF program has
experienced design and weight problems that, if not solved, will affect
aircraft performance. These problems have led to increased development
and procurement costs and schedule delays so far. In addition, the
program's customers are still not sure how many aircraft they will
need. The combination of cost overruns and quantity reductions has
already diluted DOD's buying power and made the original JSF business
case unexecutable. Given continuing program uncertainties, DOD could
use more time right now to gain knowledge before it commits to a new
business case for its substantial remaining investments. The JSF's
current acquisition strategy does not embrace evolutionary, knowledge-
based techniques intended to reduce risks. Key decisions, like the
planned 2007 production decision, are expected to occur before critical
knowledge is captured. Time taken now to gain knowledge will avoid
placing sizable investments in production capabilities at risk to
expensive changes.
Taken together, the current status and continuing risk in these two
programs have broader implications to the DOD tactical fixed wing
aircraft modernization program, raising questions as to whether its
overarching goals are now achievable. Decreases in quantities alone--
about 30 percent since original plans--raise questions about how well
the aircraft will complement our tactical air forces in the future.
Background:
The F/A-22 aircraft program is acquiring the Air Force's next
generation, multi-mission fighter for about $63.8 billion.[Footnote 3]
The continued need for the F/A-22, its increasing costs, and the
quantities required to perform its mission have been the subject of a
continuing debate within DOD and the Congress. Supporters cite its
advanced features--stealth, supercruise speed, maneuverability, and
integrated avionics--as integral to the Air Force's Global Strike
initiative and for maintaining air superiority over potential future
adversaries for years to come.[Footnote 4] Critics, on the other hand,
argue that the Soviet threat it was originally designed to counter no
longer exists and that its remaining budget dollars could better be
invested in enhancing current air assets and acquiring new and more
transformational capabilities that will allow it to meet evolving
threats. The debate continues as a December 2004 budget decision by the
Office of the Secretary of Defense (OSD) reduced F/A-22 funding and the
number of aircraft to be acquired. A full-rate production decision is
scheduled to occur in March 2005, but the Air Force already has 98
aircraft on contract.
The JSF program is the DOD's most costly aircraft acquisition program.
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.
International participation in the development of this system is a
vital part of the acquisition strategy. 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.
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, the program worked to
understand and define current development risks in order to prepare
more accurate cost and delivery estimates to support development and
production investment decisions planned over the next 2 years.
A key to successful acquisition programs is the development of a
business case that should match 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 must be 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, a
program incurs substantial risk in moving forward.
A New Business Case Is Needed to Justify Continued Investment in the F/
A-22 Program:
Since its inception in 1986, the F/A-22 aircraft program has
encountered numerous and continuing management and technical
challenges. Changing threats, missions, and requirements have severely
weakened the original business case. Program milestones have slipped
substantially, development costs have more than doubled, and a
modernization program was added. The recent budget decision to
terminate procurement after fiscal year 2008, the prospect of
additional cuts because of ceilings on program cost, and upcoming
defense reviews have significant implications for the program's
viability and the future of modernization efforts.
In March 2004, we reported that the significant changes in the F/A-22's
cost, quantity, capabilities, and mission and the persistent problems
and delays in its development and testing schedules called for a new
business case to justify the continued need for the F/A-22. [Footnote
5] We recommended that OSD direct the Air Force to consider
alternatives and examine the constraints of future defense spending. In
subsequent testimony, we reiterated this position, stating that
competing priorities--both internal and external to DOD's budget--
require a sound and sustainable business case for DOD's acquisition
programs based in comprehensive needs assessments and a thorough
analysis of available resources.[Footnote 6] In response to our
recommendation, DOD stated its routine budgeting processes annually
addressed business case issues on the F/A-22. We disagreed, as we do
not think those processes provide the breadth or depth of analysis
needed to develop a comprehensive new business case.
Problems in the F/A-22 Program Strain Future Viability:
When initiated, the F/A-22 acquisition program planned to complete
development in 1995, achieve initial operational capability by March
1996, and ultimately procure 750 aircraft. The Air Force currently
plans to complete development in 2005, achieve initial operational
capability by December 2005, and procure 178 aircraft.
Amidst concerns about escalating costs and schedule, the Congress
placed cost limitations on both development and production budgets in
1997,[Footnote 7] later removing the development cost cap.[Footnote 8]
According to the Air Force, the current production cost cap is $37.3
billion. Affordability concerns have, in part, led to the steady
decrease in procurement quantities. Two major reviews of defense force
structure and acquisition plans--the 1993 Bottom-Up Review and the 1997
Quadrennial Defense Review (QDR)--significantly reduced F/A-22
quantities. OSD's "buy to budget" acquisition strategy essentially
placed a ceiling on total program costs resulting in reducing
quantities, and in December 2004, Program Budget Decision 753 reduced
F/A-22 funding by $10.5 billion, further reducing in all likelihood
procurement quantities from 275 to 178 aircraft.[Footnote 9] The
December 2004 budget decision also ended procurement in fiscal year
2008, instead of fiscal year 2011.
Decreased procurement quantities, along with increased development and
production costs and increased costs to modernize and enhance
capability, have led to rising acquisition unit costs. Figure 1
illustrates the downward trend in procurement quantities and the upward
trend in acquisition unit costs.[Footnote 10]
Figure 1: Quantity and Total Acquisition Unit Cost of F/A-22s:
[See PDF for image]
[End of figure]
In arguing for reversal of the December 2004 budget decision to stop
procurement of the F/A-22 in 2008, Air Force officials note that the
decision obviates production economies and efficiencies that it
expected to achieve through a multiyear procurement contract that was
to begin in fiscal year 2008. Officials also stated that cutting
production quantities from the final years of the program limit
expected savings in annual unit procurement costs. As with many DOD
acquisitions, Air Force program officials had assumed in future budgets
that the costs for buying F/A-22s would decrease as a result of
manufacturing efficiencies, reduced fixed costs, productivity projects,
and more economical buying quantities. For example, the average
recurring cost for the F/A-22 in 2003 was about $178 million, while the
average flyaway unit costs for future annual buys were projected to
decrease to $127 million, $111 million, and $108 million in fiscal
years 2007, 2008, and 2009 respectively.[Footnote 11]
The F/A-22 program changes have also resulted in schedule delays for
completing development testing, operational testing, and, consequently,
the full-rate production decision. That decision is currently planned
for later this month but could slip again given the unsettled
environment. Before full-rate production can start, the Office of the
Director of Operational Test and Evaluation must report to the Congress
and defense leadership on the results of the recently completed initial
operational test and evaluation.[Footnote 12] In addition, the F/A-22
program must demonstrate it satisfies criteria established by the
Defense Acquisition Board in November 2004, which include delivering a
fully resourced plan for follow-on testing to correct deficiencies
identified in initial operational testing and evaluation, achieving
design stability of the avionics software, demonstrating mature
manufacturing processes, and validating technical order data.[Footnote
13]
Final reports detailing the results from initial operational testing
and evaluation were not available for our review, but Air Force test
officials told us that testing showed the F/A-22 was "overwhelmingly
effective" as an air superiority fighter and that its supporting
systems were "potentially suitable" pending the correction of
identified deficiencies. Operational testing of the limited ground
attack capability in the current design was not conducted but is
scheduled during follow-on testing planned to start in July
2005.[Footnote 14] Air Force officials believe that test results
support making the full-rate production decision planned in late March
2005. They also believe that deficiencies identified in aircraft
reliability and maintainability (including maintaining low observable
characteristics) and in the integrated diagnostic systems are readily
correctible and the aircraft should meet the needs of the warfighter by
the scheduled initial operational capability date in December 2005.
However, whether the Air Force can accomplish all of this by December
2005 remains to be seen.
Future of Modernization Plans in Doubt:
Originally, the F/A-22 was intended to replace the F-15 and achieve air-
to-air superiority to counter large numbers of advanced Soviet fighters
in conventional warfare. However, over the 19 years that the aircraft
has been in development, the projected Cold War threats never
materialized and new threats emerged, changing tactical fighter
requirements and operational war plans. The Air Force now plans to
implement a Global Strike concept of operations by developing a robust
air-to-ground attack capability to allow the aircraft to counter a
greater variety of targets, such as surface-to-air missiles systems,
that pose a significant threat to U.S. aircraft. It also plans to equip
most of the F/A-22 fleet with improved capabilities to satisfy expanded
warfighter requirements and to take on new missions, including
intelligence data gathering and the suppression of enemy air defenses
and interdiction.
To implement its Global Strike concept, the Air Force established a
time-phased modernization program. Table 1 shows how the Air Force
intends to integrate new capabilities incrementally.
Table 1: Planned Modernization Enhancements for the F/A-22 Program:
Fiscal year when enhancements are expected to be incorporated: 2007;
Configuration[B]: Block 20;
Capabilities increment: Global Strike Basic;
Quantities[C]: 56;
Examples of enhancements to be added: Update air-to-air capabilities
and improve capabilities to launch the Joint Direct Attack Munition at
faster airspeeds and longer distances.
Fiscal year when enhancements are expected to be incorporated: 2011[A];
Configuration[B]: Block 30;
Capabilities increment: Global Strike Enhanced;
Quantities[C]: 91;
Examples of enhancements to be added: Enhance air-to-ground capability
by adding improved radar capabilities to seek and destroy advanced
surface-to-air missile systems;
integrate additional air-to-ground weapons.
Fiscal year when enhancements are expected to be incorporated: 2013;
Configuration[B]: Block 40;
Capabilities increment: Global Strike Full;
Examples of enhancements to be added: Increase capability to suppress
or destroy the full range of air defenses and improve speed and
accuracy of targeting.
Fiscal year when enhancements are expected to be incorporated: 2015;
Configuration[B]: Block 40;
Capabilities increment: Enhanced Intelligence, Surveillance, and
Reconnaissance;
Quantities[C]: 128;
Examples of enhancements to be added: Add capability for full
intelligence, surveillance, and reconnaissance integration for
increased target sets and lethality.
Sources: Air Force and Office of Secretary of Defense.
[A] Global Strike Enhanced includes two increments of capability, with
the first increment incorporated in fiscal year 2009 and the second in
2011.
[B] The Air Force plans to have three configurations (called blocks)
that include specific enhancements developed in the modernization
program.
[C] Quantities in each configuration reflect Air Force plans prior to
the December 2004 budget decision that reduced quantities.
[End of table]
In March 2003, OSD's Cost Analysis Improvement Group (CAIG) estimated
that the Air Force would need $11.7 billion for the planned
modernization programs through fiscal year 2018.[Footnote 15] The Air
Force's latest estimate includes about $4.1 billion through fiscal year
2011 for the first two modernization increments (blocks 20 and 30) and
about $1.3 billion through fiscal year 2011 for the latter two
increments (block 40). The Air Force will continue to manage blocks 20
and 30 as part of the F/A-22 acquisition program. To manage block 40
efforts, OSD has directed the Air Force to establish a separate
modernization program.[Footnote 16] Future modernization costs beyond
2011 have not been fully definitized and are subject to change. The
modernization program manager projected annual funding of $700 to $750
million would be needed for the currently planned modernization program
after 2011.
The December 2004 budget decision places much of the modernization
program in doubt, particularly the latter stages. This is because that
decision terminated F/A-22 procurement after fiscal year 2008 and many
of these new and advanced capabilities had been planned for aircraft
that now will not be bought. Therefore, if the budget cut is sustained,
the current modernization program will be obsolete and the funding for
advanced capabilities planned to be incorporated after fiscal year 2008
would be available for other uses.
The budget decision causes a ripple effect on other resource plans tied
to the modernization. For example, it brings into question the need for
(1) upgrades to the computer architecture and processors estimated to
cost between $400 million and $500 million; (2) upgrades to government
laboratory and test range infrastructure like software avionics
integration labs, flying test beds, and test ranges estimated to cost
about $1.8 billion; and (3) changes in other activities supporting
modernization enhancements in the production line, retrofit of
aircraft, and establishing depot maintenance support estimated at more
than $1.6 billion.
New JSF Business Case and Acquisition Strategy Is Critical for Program
Success:
Unlike the F/A-22 program, which is near the end of development, the
JSF program is approaching key investment decisions that will greatly
influence the efficiency of the remaining funding---over 90 percent of
the $245 billion estimated total program costs---and determine the risk
DOD is willing to accept. DOD has not been able to deliver on its
initial promise, and the sizable investment greatly raises the stakes
to meet future promises. Given continuing program uncertainties, DOD
could use more time to gain knowledge before it commits to a new
business case and moves forward. Any new business case must be
accompanied by an acquisition strategy that adopts an evolutionary
approach to product development--one that enables knowledge-based
decisions to maximize the return on remaining dollars--as dictated by
best practices.
DOD Needs More Time to Develop a New JSF Business Case:
Increased program costs, delayed schedules, and reduced quantities have
diluted DOD's buying power and made the original JSF business case
unexecutable. Program instability at this time makes the development of
a new and viable business case difficult to prepare. The cost estimate
to fully develop the JSF has increased by over 80 percent. Development
costs were originally estimated at roughly $25 billion. By the 2001
system development decision, these costs increased almost $10 billion,
and by 2004, costs increased an additional $10 billion, pushing total
development cost estimates to nearly $45 billion. Current estimates for
the program acquisition unit cost are about $100 million, a 23 percent
increase since 2001. Ongoing OSD cost reviews could result in further
increases to the estimated program cost. At the same time, procurement
quantities have been reduced by 535 aircraft and the delivery of
operational aircraft has been delayed. Figure 2 shows how costs,
quantities, and schedules have changed since first estimates.
Figure 2: Measures of JSF Cost and Schedule Changes:
[See PDF for image]
[End of figure]
Ongoing program uncertainties--including uncertainties about the
aircraft's design and procurement quantities--make it difficult to
understand what capabilities can be delivered with future investments.
For example, DOD has been working over the past year 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 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, it 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 are also examining ways to reduce program
requirements while keeping cost 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 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. It may be some time before DOD knows when and what
capabilities it will be able to deliver. The content and schedule of
the planned 7-year, 10,000-hour flight test program is also being
examined. 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.
Finally, uncertainty about the number and mix of variants the services
plan to purchase will also affect 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. The number
and mix of JSF variants that the Navy and Marine Corps intend to
purchase--and their related procurement costs--also remain
undetermined. 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--could also affect the procurement
quantities and schedule. In developing a reliable business case,
knowing the quantities to be purchased is equally as important as other
elements. Without knowing types and quantities the program manager
cannot accurately estimate costs or plan for production.
Timely Capture of Product Knowledge Needed to Support Future Business
Decisions:
In recent years, DOD has revised its weapons acquisition policy to
support an evolutionary, knowledge-based strategy based on best
practices--key to executing a future business case and making more
informed business decisions.[Footnote 17] With an evolutionary
acquisition approach, new products are developed in increments based on
available resources. Design elements that are not currently achievable
are planned for and managed as separate acquisitions in future
generations of the product with separate milestones, costs, and
schedules. While JSF's acquisition strategy calls for initially
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 for a single increment, contrary to an evolutionary
approach.
In addition, JSF's planned approach will not capture adequate knowledge
about technologies, design, and manufacturing processes for investment
decisions at key investment junctures. 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. Table 2 compares best practice and JSF knowledge
expectations at each critical point.
Table 2: Knowledge Attainment on JSF Program at Critical Junctures:
Best practice:
Knowledge point 1: Should be achieved at development start; Knowledge
point 2: Should be achieved by the design review; Knowledge point 3:
Should be achieved by the start of production.
Knowledge point 1: Separate technology and product development, deliver
mature technology, and have preliminary design based on systems
engineering principles;
Knowledge point 2: Completion of 90 percent of engineering drawing
packages for structures and systems, critical design review completed,
and design prototyped;
Knowledge point 3: 100 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.
JSF Practice:
Knowledge point 1: Knowledge point 1 was not attained at milestone B in
2001;
Knowledge point 2: Knowledge point 2 will not be attained by design
review in 2006 under current plan;
Knowledge point 3: Knowledge point 3 will not be attained by start of
production in 2007 under current plan.
Knowledge point 1: 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;
Knowledge point 2: The program estimates 35 percent of the engineering
drawing packages are expected to be released at the critical design
reviews. Also, prototype testing will not be done prior to the design
review. The design will not be stable until after production begins;
Knowledge point 3: Program does not expect to demonstrate that the
critical processes are under statistical control until 2009. Program
expects to demonstrate that a fully integrated aircraft will work as
intended and meets reliability goals in 2010-2012 timeframe.
Source: GAO data and analysis of DOD data:
[End of table]
As shown in table 2, the JSF program will lack critical production
knowledge when it plans to enter low-rate initial production in 2007.
The department has included about $152.4 million in its fiscal year
2006 budget request to begin long lead funding for low-rate initial
production. This production decision is critical and knowledge required
to be captured by Knowledge Point 3 in our best practice model should
be achieved before it is made. If production begins without knowledge
that the design is mature, critical manufacturing processes are under
control, and reliability is demonstrated, costly changes to the design
and manufacturing processes can occur, driving up costs and delaying
delivery of the needed capability to the warfighter. The size of the
potential risk is illustrated in the production ramp-up and investments
planned after this decision is made. Between 2007 (the start of low-
rate production) and 2013 (the scheduled start of full-rate production)
DOD plans to buy nearly 500 JSF aircraft--20 percent of its planned
total buys--at a cost of roughly $50 billion. The program 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 18] 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. Figure 3 shows the planned
production ramp up along with the concurrently planned development
program for the JSF.
Figure 3: 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]
Following are examples of technology, design, and production knowledge
that should be but will not be captured when the low-rate production
decision is scheduled to be made.
* Only one of JSF's eight critical technologies is expected to be
demonstrated in an operational environment by the 2007 production
decision.
* Only about 40 percent of the 17 million lines of code needed for the
system's software will have been released, and 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.
Further, most structural fatigue testing and radar cross section
testing of full-up test articles are not planned to be completed until
2010.
* The program will not demonstrate that critical manufacturing
processes are in statistical control, and flight testing of a fully
configured and integrated JSF (with critical mission systems and
prognostics technologies) is not scheduled until 2011.
Further, because of the risk created by the extreme overlap of
development and production, the program office plans to place initial
production orders on a cost reimbursement contract, placing a higher
cost risk burden on the government than is normal. These 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 and place
greater cost risk on the buyer--in this case, DOD. In the case of the
JSF, a fixed price contract will not be possible until late in the
development program.
JSF's Substantial Funding Requirements May Be Difficult to Sustain in
the Current Fiscal Environment:
Regardless of likely increases in program costs, the sizable continued
investment in JSF must be viewed within the context of the fiscal
imbalance facing the nation over the next 10 years. The JSF program
will have to compete with many other large defense programs as well as
other priorities external to DOD's budget. JSF's acquisition strategy
assumes an unprecedented $225 billion in funding over the next 22
years, or an average of $10 billion a year (see fig. 4).[Footnote 19]
Figure 4: JSF Program's Annual Funding Requirements (as of December
2003):
[See PDF for image]
[End of figure]
Funding challenges will be even greater if the program fails to stay
within current cost and schedule estimates. The consequences of an even
modest cost increase or schedule delay would be dramatic. 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.
Implications for the Current Status of Tactical Aircraft Programs:
Continuing changes and uncertainties in the F/A-22 and JSF programs
present significant challenges to DOD in achieving its modernization
plans which attempt to blend many factors within affordability
constraints. Factors in the decision making process can include
aircraft age, ownership costs, readiness, force structure, operating
concepts, competing needs, available funds, defense policy, and
others.[Footnote 20] Today, both F/A-22 and JSF programs include
significantly fewer aircraft than originally planned---30 percent fewer
or over 1,000 aircraft. Deliveries intended to provide an operational
capability have also been delayed in both programs, almost 10 years in
the case of the F/A-22, requiring legacy systems to operate longer than
planned. As legacy tactical aircraft age and near the end of their
useful life, they require ever increasing investments to keep them
ready and capable as the threat evolves--the cost of ownership.
The reduced F/A-22 force size, now fewer than 180 F/A-22 aircraft
instead of 750 aircraft planned at the start of the program, could
affect the Air Force's force structure and employment strategy. The Air
Force still maintains it has a nominal requirement for 381 aircraft to
meet its new Air and Space Expeditionary Forces--the operational
mechanism through which the Air Force allocates forces to meet the
combatant commanders' force rotation requirements--and Global Strike
concept of operations. The Air Force planned on 10 F/A-22 squadrons to
support this operational concept. Using the Air Force's normal methods
for calculating force requirements, only about 110 aircraft of the
total aircraft procured would be classified as available for combat and
assignment to operational units[Footnote 21]--yielding only 4 or 5
typical fighter squadrons for assigning across the planned 10 air and
space expeditionary units. The reduced fleet size may require the Air
Force to consider the F/A-22 as a low-density/high-demand asset, which
would require changes in these expected management and employment
strategies. It also has implications for related resources and plans,
including military personnel requirements, numbers of operating
locations, support equipment, spare parts, and logistical support
mechanisms.
Other factors will come to play in the 2005 Quadrennial Defense Review.
OSD has directed the review to include an assessment of joint air
dominance in future warfare and the contributions provided by all
tactical aircraft. An announced defense policy goal is to redirect
investment from areas of conventional warfare, where the United States
enjoys a strong combat advantage, toward more transformational
capabilities needed to counter "irregular" threats, such as the
insurgency in Iraq and the ongoing war on terror. DOD is also
conducting a set of joint capability reviews to ensure acquisition
decisions are based on providing integrated capabilities rather than
focused on individual weapons systems. The study results, although
still months away, could further affect the future of the F/A-22 and
JSF programs including the F/A-22's modernization plan. In these
analyses, the new tactical aircraft will also have to compete for
funding, priority, and mission assignments with operational systems,
such as the F-15 and F/A-18, and other future systems, such as the
Joint Unmanned Combat Air Systems.
The upcoming Quadrennial Defense Review provides an opportunity for DOD
to assess tactical fixed wing aircraft modernization plans and weigh
options for accomplishing its specific as well as overarching tactical
aircraft goals. It is critical that their investment be well managed
and balanced against DOD's other priorities. Through the review, DOD
can seek answers to overall investment strategy questions:
* What is the role of tactical aircraft in relation to other defense
capabilities?
* Will planned investments in tactical aircraft allow DOD to achieve
these capabilities and overall transformational goals?
* Where disconnects exist between goals and expected investment
outcomes, what are the impacts and how will DOD compensate to minimize
future security and investment risks?
If DOD fails to answer these questions and continues with its current
modernization strategy, it will likely arrive in the future with needs
similar to those that exist today but with fewer options and resources
to resolve those needs. As DOD evaluates its tactical aircraft
investment alternatives, knowledge at the program level is needed to
understand how the F/A-22 and JSF can help achieve overall tactical
aircraft modernization goals. More specific questions need to be
answered for these programs including:
* Is the F/A-22 the most cost-effective alternative to fill gaps in
ground attack and intelligence gathering requirements?
* How many F/A-22s are needed and affordable to carry out the
aircraft's original mission, air superiority, and new ground attack and
intelligence gathering missions?
* If requirements for the new F/A-22 capabilities are legitimate and
not solvable by other means, does the Air Force have the resources
(mature technologies, design knowledge, time, and money) to begin
investments in a new development program for the F/A-22 enhancements?
* What is the immediate need for JSF aircraft? Deliver of its ultimate
capability or replacing aging aircraft with an initial capability? Does
the acquisition plan satisfy this need?
* Does the program have the required knowledge about needed quantities
and capabilities and resources (mature technologies, design knowledge,
time, and money) to develop a reliable business case at this time?
* Does DOD have the right acquisition strategy to develop and produce a
JSF that will maximize its return on the more than $220 billion
investment that remains in this program?
While the JSF program started off with a higher-risk approach by
starting system development with immature technologies, now is the time
to implement an evolutionary and knowledge-based acquisition strategy
to manage the system development phase and stabilize the design before
making large investments in tooling, labor, and facilities to test and
manufacture the aircraft. The JSF is relatively early in its system
development and demonstration phase and has an opportunity to learn
from the F/A-22 program experience. It must take the time needed now to
gather knowledge needed to resolve key issues that could ultimately
result in additional cost increases, delays, and performance problems.
Our F/A-22 and JSF reports planned to be issued on March 15, 2005, will
include recommendations that DOD answer some of these questions before
significant additional investments are made.
Mr. Chairman, this concludes our prepared statement. We would be happy
to respond to any questions that you or other members of the
Subcommittee may have. If you have future questions about our work on
the F/A-22 or JSF, please call Allen Li at (202) 512-4841.
FOOTNOTES
[1] The third major program, the FA-18EF, currently in production, is
not a subject of this testimony.
[2] Reports are expected to be released on March 15, 2005.
[3] This amount consists of $61.3 billion currently budgeted for the
basic program and the initial stages of the modernization efforts, $1.3
billion for future start-up costs of a separate acquisition program for
the latter stages of modernization, and $1.2 billion in costs to
retrofit aircraft with enhanced capabilities and activate depot
maintenance activities.
[4] Global Strike is one of six complementary concepts of operations
laying out the Air Force's ability to rapidly plan and deliver limited-
duration and extended attacks against targets.
[5] GAO, Tactical Aircraft: Changing Conditions Drive Need for New F/A-
22 Business Case, GAO-04-391 (Washington, D.C.: Mar. 15, 2004).
[6] GAO, Tactical Aircraft: Status of the F/A-22 and Joint Strike
Fighter Programs, GAO-04-597T (Washington, D.C.: Mar. 25, 2004).
[7] Pub. L. 105-85 (Nov. 18, 1997), section 217.
[8] Pub. L. 107-107 (Dec. 28, 2001), section 213.
[9] Program Budget Decision 753 reduced the procurement quantity to 179
aircraft. Subsequently, the Air Force transferred one aircraft to be
used as a permanent test bed, reducing the procurement quantity to 178.
The recent crash of an F/A-22 has reduced planned operational aircraft
to 177.
[10] Program acquisition unit cost includes funding for development,
procurement, related military construction, and initial modernization
divided by total production quantity.
[11] Flyaway unit costs include the cost to produce the basic aircraft,
propulsion, and mission systems.
[12] Statute 10 U.S.C. 2399 provides that a major defense acquisition
program may not proceed beyond low-rate initial production until
initial operational test and evaluation is completed and the
congressional defense committees have received the report of testing
results from the Director of Operational Test and Evaluation. This
report is to contain an opinion of test adequacy and whether the test
results confirm that the system actually tested is operationally
effective and suitable for combat.
[13] The F/A-22 initial operational test and evaluation was conducted
by the Air Force Operational Test and Evaluation Center from April
through December 2004 to support the full-rate production decision
planned for March 2005. Its operational test plan was designed to
assess the F/A-22's combat effectiveness and suitability in an
operationally representative environment.
[14] Air-to-ground attack capabilities are increasingly emphasized by
the Air Force, and future enhancements are planned for 80 percent of
the modernized F/A-22s. More robust ground attack and intelligence
gathering capabilities will be tested in the future as they are
developed.
[15] The OSD CAIG acts as the principal advisory body to the milestone
decision authority on program cost. The CAIG estimate included costs
for development, procurement, and retrofit of modernized aircraft.
[16] In November 2004, the acting Under Secretary of Defense for
Acquisition, Technology and Logistics, directed the Air Force to hold
separate milestone reviews for the latter stages of the modernization
program to be consistent with DOD acquisition policy. The Air Force
plans to manage these efforts as a separate acquisition program.
[17] 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. For example, program managers are required to
reduce integration risk and demonstrate product design prior to the
design readiness review and to reduce manufacturing risk and
demonstrate producibility prior to full-rate production. The
instruction implements the directive and establishes detailed policy
for evolutionary acquisition.
[18] This 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.
[19] This is based on DOD's December 2003 JSF cost estimate.
[20] GAO, Tactical Aircraft: Modernization Plans Will Not Reduce
Average Age of Aircraft, GAO-01-163 (Washington, D.C.: Feb. 9, 2001).
Today acquisition plans include 3,083 aircraft (F/A-22, FA-18EF, and
JSF). The Air Force has been discussing buying fewer JSF, which would
further lower the amount of planned new tactical aircraft.
[21] The remaining aircraft are used for training and development
activities and to account for aircraft in for maintenance and those
held in reserve for normal attrition.
