Joint Strike Fighter
Significant Challenges Remain as DOD Restructures Program Gao ID: GAO-10-520T March 11, 2010This testimony discusses our work on the F-35 Lightning II, also known as the Joint Strike Fighter (JSF). The JSF is the Department of Defense's (DOD) most costly and ambitious aircraft acquisition. DOD is seeking to simultaneously develop and field three aircraft variants for the Air Force, Navy, Marine Corps, and eight international partners. The JSF program is to provide critical replacement aircraft that will serve as the heart of future tactical air forces. It will require a long-term commitment to very large annual funding outlays. The current estimated investment is $323 billion to develop and procure 2,457 aircraft.
Our work has found that, although the department has recently directed a number of strong actions that should improve JSF program outcomes in the future, development costs have continued to increase and key events were missed. Although improving, manufacturing inefficiencies and parts problems persist, slowing delivery of test aircraft and, in turn, delaying development flight tests. DOD's restructuring actions should help, but there is still substantial overlap of development, test, and production activities while DOD continues to push ahead and invest in large quantities of production aircraft far ahead of completing testing. The JSF program continues to struggle with increased costs and slowed progress--negative outcomes that were foreseeable as events have unfolded over several years. Total estimated acquisition costs have increased $46 billion and development extended 2.5 years, compared to the program baseline approved in 2007. DOD is now taking some positive steps that, if effectively implemented, should improve outcomes and provide more realistic cost and schedule estimates. Manufacturing JSF test aircraft continues to take more time, money, and effort than budgeted. By December 2009, only 4 of 13 test aircraft had been delivered and total labor hours to build the aircraft had increased more than 50 percent above earlier estimates. Late deliveries hamper the development flight test program and affect work on production aircraft, even as plans proceed to significantly ramp-up annual procurement rates. Some improvement is noted, but continuing manufacturing inefficiencies, parts problems, and engineering technical changes indicate that design and production processes may lack the maturity needed to efficiently produce aircraft at planned rates. Although DOD's restructuring actions should help, there is still substantial overlap of development, test, and production activities while DOD continues to push ahead and invest in large quantities of production aircraft before variant designs are proven and system performance verified. Given the extended development time and reduced near term procurement, DOD still intends to procure up to 307 aircraft at an estimated cost of $58.2 billion before completing development flight testing by the beginning of fiscal year 2015.
GAO-10-520T, Joint Strike Fighter: Significant Challenges Remain as DOD Restructures Program
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Testimony:
Before the Committee on Armed Services, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EST:
Thursday, March 11, 2010:
Joint Strike Fighter:
Significant Challenges Remain as DOD Restructures Program:
Statement of Michael Sullivan, Director:
Acquisition and Sourcing Management:
GAO-10-520T:
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to discuss our work on the F-35
Lightning II, also known as the Joint Strike Fighter (JSF). The JSF is
the Department of Defense's (DOD) most costly and ambitious aircraft
acquisition. DOD is seeking to simultaneously develop and field three
aircraft variants for the Air Force, Navy, Marine Corps, and eight
international partners. The JSF program is to provide critical
replacement aircraft that will serve as the heart of future tactical
air forces. It will require a long-term commitment to very large
annual funding outlays. The current estimated investment is $323
billion to develop and procure 2,457 aircraft.
Through March of 2009, GAO has issued five annual reviews of the JSF
program under congressional mandate.[Footnote 1] We have consistently
reported on the elevated risk of poor program outcomes from the
substantial overlap of development, test, and production activities
and our concerns about the Government investing in large numbers of
production aircraft before variant designs are proven and performance
verified in testing. In our March 2009 report,[Footnote 2] we again
noted development cost increases, additional delays in manufacturing
and testing schedules, and the government's increased financial risk
from plans to increase procurement in advance of testing. DOD
concurred with, but has not yet implemented, our two recommendations
to report on plans for transitioning from cost-reimbursement to fixed-
price contracts for aircraft procurement and to ensure that the prime
contractor performs detailed schedule risk analyses to provide
important insight into use of management reserve funds and
manufacturing progress.
This testimony is based on our sixth annual review, which will be
released later this month. GAO's work for this report began under a
request from the Chairman and Ranking Member of the House Armed
Services Air and Land Subcommittee. Subsequently, we received a new
mandate in the National Defense Authorization Act for Fiscal Year 2010
to annually review the JSF program through 2015.[Footnote 3] We
examined (1) program cost, schedule, and performance; (2)
manufacturing plans and results; and (3) test plans and progress. To
conduct this work, we tracked and compared current cost and schedule
estimates with those of prior years, identified changes, and
determined causes. We obtained program status reports, manufacturing
data, and test planning documents. We conducted our own analyses of
the information. We discussed results to date and future plans to
complete JSF development and move further into procurement with DOD,
JSF, and contractor officials. We conducted this performance audit
from May 2009 to March 2010. Our work was performed in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
In brief, Mr. Chairman, our work has found that, although the
department has recently directed a number of strong actions that
should improve JSF program outcomes in the future, development costs
have continued to increase and key events were missed. Although
improving, manufacturing inefficiencies and parts problems persist,
slowing delivery of test aircraft and, in turn, delaying development
flight tests. DOD's restructuring actions should help, but there is
still substantial overlap of development, test, and production
activities while DOD continues to push ahead and invest in large
quantities of production aircraft far ahead of completing testing. In
light of these circumstances, we are recommending in our forthcoming
JSF report that DOD (1) make a new, comprehensive and independent
assessment of the costs and schedule to complete the program,
including military construction, JSF-related expenses in other
budgets, and life cycle costs; and (2) reassess warfighter
requirements and, if necessary, defer some capabilities to future
increments. GAO will also suggest that Congress consider requiring
that DOD establish a management tool for tying annual procurement
requests to demonstrated progress in testing and manufacturing. The
report is currently at DOD for comment which we expect to receive soon.
Cost Increases and Schedule Delays Increase Risk of Not Meeting
Warfighter Requirements on Time:
The JSF program continues to struggle with increased costs and slowed
progress--negative outcomes that were foreseeable as events have
unfolded over several years. Total estimated acquisition costs have
increased $46 billion and development extended 2 ½ years, compared to
the program baseline approved in 2007. DOD is now taking some positive
steps that, if effectively implemented, should improve outcomes and
provide more realistic cost and schedule estimates. Officials
increased time and funding for system development, added 4 aircraft to
the flight test program, and reduced near-term procurement quantities
by 122 aircraft. Restructuring is not done and further cost growth and
schedule extensions are likely. There is a substantial risk that the
program will not deliver the expected number of aircraft and required
capabilities on time. Dates for achieving initial operational
capabilities may have to be extended or some requirements deferred to
future upgrades. Also, aircraft unit costs will likely exceed the
thresholds established by the statutory provision commonly referred to
as Nunn-McCurdy[Footnote 4] and require the Department to certify the
need for the JSF to Congress. Program setbacks in costs, deliveries,
and performance directly impact modernization plans and retirement
schedules of the legacy aircraft the JSF is slated to replace.
Table 1 summarizes changes in program cost, quantities, and schedules
at key stages of acquisition. The 2004 replan estimates reflect a
quantity reduction and a major restructuring of the program after
integration efforts and design review identified significant weight
problems. The 2007 data is the current approved acquisition baseline
and the 2011 budget request reflects cost increases stemming from a
major reassessment of the program by a joint team comprised of OSD,
Air Force, and Navy representatives.
Table 1: Changes in Reported JSF Program Costs, Quantities, and
Deliveries:
Expected quantities: Development quantities;
October 2001 (system development start): 14;
December 2003 (2004 Replan): 14;
March 2007 (Approved Baseline): 15;
Fiscal Year 2011 Budget Request: 14.
Expected quantities: Procurement quantities (U.S. only);
October 2001 (system development start): 2,852;
December 2003 (2004 Replan): 2,443;
March 2007 (Approved Baseline): 2,443;
Fiscal Year 2011 Budget Request: 2,443.
Total quantities:
October 2001 (system development start): 2,866;
December 2003 (2004 Replan): 2,457;
March 2007 (Approved Baseline): 2,458;
Fiscal Year 2011 Budget Request: 2,457.
Cost Estimates (then-year dollars in billions): Development;
October 2001 (system development start): $34.4;
December 2003 (2004 Replan): $44.8;
March 2007 (Approved Baseline): $44.8;
Fiscal Year 2011 Budget Request: $49.3.
Cost Estimates (then-year dollars in billions): Procurement;
October 2001 (system development start): 196.6;
December 2003 (2004 Replan): 199.8;
March 2007 (Approved Baseline): 231.7;
Fiscal Year 2011 Budget Request: 273.3.
Total program acquisition (see note):
October 2001 (system development start): $231.0;
December 2003 (2004 Replan): $244.6;
March 2007 (Approved Baseline): $276.5;
Fiscal Year 2011 Budget Request: $322.6.
Unit Cost Estimates (then-year dollars in millions): Program
acquisition;
October 2001 (system development start): $81;
December 2003 (2004 Replan): $100;
March 2007 (Approved Baseline): $113;
Fiscal Year 2011 Budget Request: $131.
Unit Cost Estimates (then-year dollars in millions): Average
procurement;
October 2001 (system development start): 69;
December 2003 (2004 Replan): 82;
March 2007 (Approved Baseline): 95;
Fiscal Year 2011 Budget Request: 112.
Estimated delivery dates: First operational aircraft delivery;
October 2001 (system development start): 2008;
December 2003 (2004 Replan): 2009;
March 2007 (Approved Baseline): 2010;
Fiscal Year 2011 Budget Request: 2010.
Estimated delivery dates: Initial operational capability;
October 2001 (system development start): 2010-2012;
December 2003 (2004 Replan): 2012-2013;
March 2007 (Approved Baseline): 2012-2015;
Fiscal Year 2011 Budget Request: 2012-2015.
Source: GAO analysis of DOD data.
Note: Military construction costs, typically part of total program
acquisition costs, are not included in this table. Construction costs
associated with the JSF program are incomplete and have been
inconsistently portrayed at various stages.
[End of table]
Table 2 shows the extension of major milestone dates for completing
key acquisition activities. The February 2010 restructure reflects the
direction ordered by the Secretary in an acquisition decision
memorandum issued on February 24 and revised on March 3. Completing
system development and approving full-rate production is now expected
in April 2016, about 2 ½ years later than planned in the acquisition
program baseline approved in 2007.
Table 2: Changes in Major Milestones:
Major Milestones: Development Testing Complete;
Program of record December 2007: October 2012;
Program of record December 2008: October 2013;
Restructure February 2010: November 2014.
Major Milestones: Initial Operational Test and Evaluation Complete;
Program of record December 2007: October 2013;
Program of record December 2008: October 2013;
Restructure February 2010: January 2016.
Major Milestones: System Development and Demonstration Phase Complete;
Program of record December 2007: October 2013;
Program of record December 2008: October 2014;
Restructure February 2010: April 2016.
Major Milestones: Full-Rate Production Decision;
Program of record December 2007: October 2013;
Program of record December 2008: October 2014;
Restructure February 2010: April 2016.
Source: GAO analysis of DOD data.
[End of table]
Manufacturing and Engineering Challenges Continue To Slow Aircraft
Deliveries And Hold The Production Schedule At Risk:
Manufacturing JSF test aircraft continues to take more time, money,
and effort than budgeted. By December 2009, only 4 of 13 test aircraft
had been delivered and total labor hours to build the aircraft had
increased more than 50 percent above earlier estimates. Late
deliveries hamper the development flight test program and affect work
on production aircraft, even as plans proceed to significantly ramp-up
annual procurement rates. Some improvement is noted, but continuing
manufacturing inefficiencies, parts problems, and engineering
technical changes indicate that design and production processes may
lack the maturity needed to efficiently produce aircraft at planned
rates. An independent manufacturing review team determined that the
planned production ramp rate was unachievable absent significant
improvements. While the restructuring has reduced near-term
procurement, annual aircraft quantities are still substantial. In
addition, the program is procuring a substantial number of low rate
production (LRIP) aircraft using cost-reimbursement contracts, a
contract type that places most of the cost risk on the
government.[Footnote 5] Continued use of cost reimbursement contracts
beyond initial LRIP quantities indicate that uncertainties in contract
performance exist that do not permit costs to be estimated with
sufficient accuracy for the contractor to assume the risk under a
fixed price contract. Figure 1 compares labor hour estimates for test
aircraft in 2007 and the revised manufacturing plan in 2009.
Figure 1: JSF Labor Hours for Manufacturing Test Aircraft:
[Refer to PDF for image: multiple line graph]
Aircraft: BF-1;
2007 budget, labor hours: 342,647;
2009 estimated actual hours: 341,296.
Aircraft: BF-2;
2007 budget, labor hours: 233,319;
2009 estimated actual hours: 331,238.
Aircraft: BF-3;
2007 budget, labor hours: 179,892;
2009 estimated actual hours: 292,318.
Aircraft: BF-4;
2007 budget, labor hours: 155,420;
2009 estimated actual hours: 296,165.
Aircraft: AF-1;
2007 budget, labor hours: 187,781;
2009 estimated actual hours: 288,772.
Aircraft: AF-2;
2007 budget, labor hours: 145,607;
2009 estimated actual hours: 259,655.
Aircraft: AF-3;
2007 budget, labor hours: 130,955;
2009 estimated actual hours: 264,973.
Aircraft: CF-1;
2007 budget, labor hours: 239,351;
2009 estimated actual hours: 274,391.
Aircraft: CF-2;
2007 budget, labor hours: 125,602;
2009 estimated actual hours: 228,672.
Aircraft: CF-3;
2007 budget, labor hours: 118,153;
2009 estimated actual hours: 200,933.
Aircraft: BF-5;
2007 budget, labor hours: 102,505;
2009 estimated actual hours: 203,701.
Aircraft: AF-4;
2007 budget, labor hours: 91,218;
2009 estimated actual hours: 178,723.
Source: GAO analysis of DOD data.
BF= Short take-off and vertical landing aircraft for the Marine Corps.
AF= Conventional take-off and landing aircraft for the Air Force.
CF= Carrier variant for the Navy.
[End of figure]
Little Progress in Development Testing While Program Continues To Face
Technical Challenges:
Although DOD's restructuring actions should help, there is still
substantial overlap of development, test, and production activities
while DOD continues to push ahead and invest in large quantities of
production aircraft before variant designs are proven and system
performance verified. Given the extended development time and reduced
near term procurement, DOD still intends to procure up to 307 aircraft
at an estimated cost of $58.2 billion before completing development
flight testing by the beginning of fiscal year 2015 (see figure 2). At
the same time, progress on flight testing is behind schedule--slowed
by late aircraft deliveries and low productivity, the flight test
program completed only 10 percent of the sorties planned during 2009.
Other technical challenges include (1) relying on an extensive but
largely unproven and unaccredited network of ground test laboratories
and simulation models to evaluate system performance; (2) developing
and integrating very large and complex software requirements; and (3)
maturing several critical technologies essential to meet operational
performance and logistical support requirements. Collectively, testing
and technical challenges will likely add more costs and time to
development, slowing delivery of capabilities to warfighters and
hampering start up of pilot and maintainer training and initial
operational testing.
Table 3: JSF Procurement Investments and Progress of Flight Testing:
Cumulative procurement:
2007: $0.9 billion;
2008: $3.6 billion;
2009: $7.1 billion;
2010: $14.4 billion;
2011: $23.6 billion;
2012: $33.2 billion;
2013: $45.2 billion;
2014: $58.2 billion;
2015: $72.4 billion.
Cumulative aircraft procured:
2007: 2;
2008: 14;
2009: 28;
2010: 58;
2011: 101;
2012: 146;
2013: 217;
2014: 307;
2015: 420.
Development flight testing schedule:
2007, continuing through 2015.
Source: GAO analysis of DOD data.
Note: U.S. Investments Only.
[End of table]
Concluding Remarks:
The JSF is DOD's largest and most complex acquisition program and a
linchpin of the United States and its allies' long-term plans to
modernize tactical air forces. It will require exceptional levels of
funding for a sustained period through 2034, competing against other
defense and non-defense priorities for the federal discretionary
dollar. DOD leadership has taken some recent positive steps that, if
effectively implemented, should improve outcomes and provide for a
more realistic, executable program. However, we believe additional
steps are needed to ensure the JSF program is able to meet warfighter
expectations. To date, the Department does not have a full,
comprehensive cost estimate for completing the program. Credible cost
and schedule estimates are critical because they allow DOD management
to make sound trade-off decisions against competing demands and allow
Congress to perform oversight and to hold DOD accountable. Because of
the significance that the JSF is expected to have on the future of the
tactical aircraft fleet, the services should have a high degree of
confidence in their ability to meet their initial operational
capability requirements and to acquire JSFs in quantity so that DOD
can plan its overall tactical aircraft force structure strategy.
However, the Department has not defined what are reasonable
expectations for achieving initial operational capabilities for each
of the services given the substantial changes to the program already
experienced and future changes directed by the recent restructuring.
Finally, while the Department has reduced near term procurement
quantities, there is still substantial overlap of development, test,
and production activities now stretching into 2016. Constant program
changes and turbulence have made it difficult to accurately and
confidently measure progress and maturity of the aircraft system. The
program has often fallen short of expectations in regards to its
annual plans. Tying annual investments more directly to demonstrated
progress in developing, testing, and manufacturing aircraft may be a
prudent fiscal measure for ensuring government funds are invested
wisely.
In light of these circumstances, we are recommending in our
forthcoming JSF report that DOD (1) make a new, comprehensive and
independent assessment of the costs and schedule to complete the
program, including military construction, JSF-related expenses in
other budgets, and life cycle costs; and (2) reassess warfighter
requirements and, if necessary, defer some capabilities to future
increments. GAO may also have a matter for congressional consideration
to address some of the issues raised in this testimony.
Mr. Chairman, this completes my prepared statement. I would be pleased
to respond to any questions you or other Members of the Committee may
have.
For further information on this statement, please contact Michael
Sullivan at (202) 512-4841 or sullivanm@gao.gov. Contact points for
our Office of Congressional Relations and Public Affairs may be found
on the last page of this statement. Individuals making key
contributions to this statement are Bruce Fairbairn, Ridge Bowman,
Charlie Shivers, David Adams, Lindsay Taylor, W. Kendal Roberts, Matt
Lea, and Greg Campbell.
[End of section]
Footnotes:
[1] Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, § 213 (2004).
[2] GAO, Joint Strike Fighter: Accelerating Procurement before
Completing Development Increases the Government's Financial Risk,
[hyperlink, http://www.gao.gov/products/GAO-09-303] (Washington, D.C.:
Mar. 12, 2009).
[3] National Defense Authorization Act for Fiscal Year 2010, Pub. L.
No. 111-84 § 244 (2009).
[4] 10 U.S.C. § 2433 establishes the requirement for DOD to perform
unit cost reports on major defense acquisition programs or designated
major defense subprograms. If a program exceeds cost growth thresholds
specified in the law, this is known as a Nunn-McCurdy breach. DOD is
required to report breaches to Congress and, in certain circumstances,
DOD must reassess the need for the program and submit a certification
to Congress in order to continue with acquisition.
[5] According to the Federal Acquisition Regulation, this contract
type is suitable for use only when uncertainties in contract
performance do not permit costs to be estimated with sufficient
accuracy to use a fixed price contract. Federal Acquisition Regulation
§ 16.301-2.
[End of section]
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