Joint Strike Fighter
Implications of Program Restructuring and Other Recent Developments on Key Aspects of DOD's Prior Alternate Engine Analyses Gao ID: GAO-11-903R September 14, 2011After supporting a Joint Strike Fighter (JSF) acquisition strategy that called for a competitive engine development of the F135 and F136 engines, the Department of Defense (DOD) stopped requesting funding for the F136 alternate engine in its fiscal year 2007 budget request, but the Congress continued to fund it through the 2010 budget. In February 2010, DOD projected that it would cost an additional $2.9 billion through 2016 to support an alternate engine program. DOD decided that an engine competition would not likely generate enough long-term savings to justify this up-front investment and subsequently terminated the alternate engine program. In 2010, at congressional request, we reviewed the basis for DOD's $2.9 billion funding projection and reported that the projection did not include the same level of fidelity and precision normally associated with a detailed, comprehensive cost estimate and that the amount of up-front investment needed could be lower if two key assumptions in DOD's analysis were changed. Moreover, since DOD's projection and our last review, several fundamental changes in the JSF aircraft and engine programs have taken place. We examined the potential implications of these changes to the $2.9 billion funding projection. We also examined the potential implications for DOD's broader cost-benefit analysis that captures the long-term costs and benefits of the competitive engine program.
In early 2010, DOD determined that it would need an additional $2.9 billion to support an alternate engine program up to the point where it believed it could begin competition in 2017. Since then, there have been major changes to the JSF aircraft and engine program costs, schedules, and procurement plans. Specifically, (1) defense officials substantially restructured the JSF program, adding cost and time to development and changing the procurement profile to buy fewer aircraft and engines over the next 5 years; (2) more engine production cost data are available; and (3) the F136 alternate engine contractor offered to fund development costs for 2011 and 2012 with its own corporate funds. These and other changes could affect portions of the department's $2.9 billion projection and would have to be addressed and quantified in order to make a more up-to-date and complete funding projection. While there have been significant changes made to the JSF aircraft and engine programs, DOD has not updated its funding projection and has no plans to do so. DOD has not done a complete analysis of the potential life-cycle costs and benefits of the competitive engine strategy in over 4 years. A cost-benefit analysis is an important tool for making investment decisions. DOD's $2.9 billion funding projection through 2016 comprises only a portion of the information that would be needed for such an analysis. DOD maintains that while there have been significant changes made to the JSF aircraft and engine programs, there is still not a compelling business case to continue supporting both engines, and DOD does not plan to update its cost-benefit analysis. Thus, whether a more current, comprehensive analysis that includes all life-cycle costs, benefits, and risks would result in a more definitive business case--one way or another--remains an unanswered question. In commenting on a draft of this report, DOD reiterated its position that the up-front costs to support the alternate engine were not affordable and that a new analysis reflecting recent changes would not likely alter its position. We continue to believe that acquisition decisions should weigh both near-term and long-term costs and benefits and that an updated analysis would provide important information for making these decisions. We are not making recommendations in this report.
GAO-11-903R, Joint Strike Fighter: Implications of Program Restructuring and Other Recent Developments on Key Aspects of DOD's Prior Alternate Engine Analyses
This is the accessible text file for GAO report number GAO-11-903R
entitled 'Joint Strike Fighter: Implications of Program Restructuring
and Other Recent Developments on Key Aspects of DOD's Prior Alternate
Engine Analyses' which was released on September 19, 2011.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as
part of a longer term project to improve GAO products' accessibility.
Every attempt has been made to maintain the structural and data
integrity of the original printed product. Accessibility features,
such as text descriptions of tables, consecutively numbered footnotes
placed at the end of the file, and the text of agency comment letters,
are provided but may not exactly duplicate the presentation or format
of the printed version. The portable document format (PDF) file is an
exact electronic replica of the printed version. We welcome your
feedback. Please E-mail your comments regarding the contents or
accessibility features of this document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
GAO-11-903R:
United States Government Accountability Office:
Washington, DC 20548:
September 14, 2011:
The Honorable Carl Levin:
Chairman:
Committee on Armed Services:
United States Senate:
Subject: Joint Strike Fighter: Implications of Program Restructuring
and Other Recent Developments on Key Aspects of DOD's Prior Alternate
Engine Analyses:
Dear Mr. Chairman:
After supporting a Joint Strike Fighter (JSF) acquisition strategy
that called for a competitive engine development of the F135 and F136
engines, the Department of Defense (DOD) stopped requesting funding
for the F136 alternate engine in its fiscal year 2007 budget request,
but the Congress continued to fund it through the 2010 budget.
[Footnote 1] In February 2010, DOD projected that it would cost an
additional $2.9 billion through 2016 to support an alternate engine
program. DOD decided that an engine competition would not likely
generate enough long-term savings to justify this up-front investment
and subsequently terminated the alternate engine program. In 2010, at
your request, we reviewed the basis for DOD's $2.9 billion funding
projection and reported that the projection did not include the same
level of fidelity and precision normally associated with a detailed,
comprehensive cost estimate and that the amount of up-front investment
needed could be lower if two key assumptions in DOD's analysis were
changed.[Footnote 2] Moreover, since DOD's projection and our last
review, several fundamental changes in the JSF aircraft and engine
programs have taken place. At your request, we examined the potential
implications of these changes to the $2.9 billion funding projection.
We also examined the potential implications for DOD's broader cost-
benefit analysis that captures the long-term costs and benefits of the
competitive engine program.
In performing our review, we obtained data and met with officials in
the Office of the Secretary of Defense, Cost Assessment and Program
Evaluation, regarding their $2.9 billion funding projection and also
discussed any analyses or efforts to estimate changes to their funding
projection resulting from recent events. We also met with
representatives from the Office of the Under Secretary of Defense for
Acquisition, Technology and Logistics and the JSF joint program
office. We reviewed DOD's 2007 cost-benefit analysis of the JSF
alternate engine program and its 2009 limited update. Also, in
performing our review, we used data and information collected over the
past several years from our body of work reviewing the overall JSF and
alternate engine programs (see the list of related GAO products at the
end of this report).
We conducted this performance audit from June 2011 to September 2011
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. We are not
making recommendations in this report.
Summary:
In early 2010, DOD determined that it would need an additional $2.9
billion to support an alternate engine program up to the point where
it believed it could begin competition in 2017. Since then, there have
been major changes to the JSF aircraft and engine program costs,
schedules, and procurement plans. Specifically, (1) defense officials
substantially restructured the JSF program, adding cost and time to
development and changing the procurement profile to buy fewer aircraft
and engines over the next 5 years; (2) more engine production cost
data are available; and (3) the F136 alternate engine contractor
offered to fund development costs for 2011 and 2012 with its own
corporate funds. These and other changes could affect portions of the
department's $2.9 billion projection and would have to be addressed
and quantified in order to make a more up-to-date and complete funding
projection. While there have been significant changes made to the JSF
aircraft and engine programs, DOD has not updated its funding
projection and has no plans to do so.
DOD has not done a complete analysis of the potential life-cycle costs
and benefits of the competitive engine strategy in over 4 years. A
cost-benefit analysis is an important tool for making investment
decisions. DOD's $2.9 billion funding projection through 2016
comprises only a portion of the information that would be needed for
such an analysis. DOD maintains that while there have been significant
changes made to the JSF aircraft and engine programs, there is still
not a compelling business case to continue supporting both engines,
and DOD does not plan to update its cost-benefit analysis. Thus,
whether a more current, comprehensive analysis that includes all life-
cycle costs, benefits, and risks would result in a more definitive
business case--one way or another--remains an unanswered question. In
commenting on a draft of this report, DOD reiterated its position that
the up-front costs to support the alternate engine were not affordable
and that a new analysis reflecting recent changes would not likely
alter its position. We continue to believe that acquisition decisions
should weigh both near-term and long-term costs and benefits and that
an updated analysis would provide important information for making
these decisions.
Background:
DOD leaders often reference three different analyses when explaining
their decision not to proceed with a competitive engine program. In
early 2007, DOD completed a detailed comparison of the expected life-
cycle costs and benefits from sole source and competitive engine
options. Officials followed this analysis in late 2009 with a limited
update reflecting more current development cost estimates but did not
update procurement or operations and support costs. From each
analysis, officials concluded that there was not a compelling business
case either for or against competition. In February 2010, DOD
submitted the results of a third analysis, this one a projection of
the amount of additional funding that it believed would be needed
through fiscal year 2016 to finish system development and
demonstration, allow sufficient time for the contractor to gain
production experience before DOD begins the competition, and create a
logistics support system for the alternate engine. This analysis
produced the $2.9 billion funding projection that DOD officials cite
as unaffordable and a primary reason for terminating the alternate
engine program. Table 1 compares key aspects of DOD's three alternate
engine-related analyses.
Table 1: Comparison of DOD's Three Key Competitive Engine Analyses:
Date completed:
Detailed life-cycle cost-benefit analysis: Early 2007;
Limited update to cost-benefit analysis: Late 2009;
Funding projection to support fiscal year 2011 budget request: Early
2010.
Primary focus:
Detailed life-cycle cost-benefit analysis: Cost-benefit analysis
comparing development, procurement, operating, and support costs of
competitive and single source approaches;
Limited update to cost-benefit analysis: Limited update to 2007 cost-
benefit analysis to reflect more recent actual development cost data;
no change to procurement, operating, or support cost projections;
Funding projection to support fiscal year 2011 budget request: Budget
excursion to estimate amount of additional near-term (FY11-FY16)
funding needed to prepare the alternate engine for competition. This
was a funding projection and not a cost-benefit analysis.
JSF program structure:
Detailed life-cycle cost-benefit analysis: Reflected program structure
as of 2007;
Limited update to cost-benefit analysis: Reflected program structure
as of 2007;
Funding projection to support fiscal year 2011 budget request:
Reflected program quantity and procurement cost changes as of 2010,
but major program restructuring was still ongoing.
Summary finding:
Detailed life-cycle cost-benefit analysis: Analysis slightly favored a
single source approach, but it also identified other considerations
that could favor competition;
Limited update to cost-benefit analysis: Analysis indicated that a
competitive engine strategy was slightly more attractive than a single
source strategy;
Funding projection to support fiscal year 2011 budget request:
Projection that $2.9 billion would be needed from fiscal years 2011
through 2016 to prepare the F136 for competition.
Type of analysis and data sources:
Detailed life-cycle cost-benefit analysis: Largely based on historical
analogy; little JSF actual engine data available;
Limited update to cost-benefit analysis: Largely based on historical
analogy; limited JSF engine procurement data available. Relied heavily
on 2007 analysis;
Funding projection to support fiscal year 2011 budget request: Largely
based on historical analogy; limited JSF engine procurement data
available. Relied heavily on 2007 analysis.
Sources: DOD (data); GAO (presentation).
[End of table]
DOD's $2.9 Billion Funding Projection Has Not Been Updated to Reflect
Recent, Significant Changes in the JSF Program:
DOD has not updated its projection of the amount of additional funding
needed to support the F136 alternate engine program to a point where
DOD believes it could begin a competition. As we reported last year,
DOD's projection of $2.9 billion was not based on, nor intended to be,
a detailed comprehensive cost estimate but more of a general level
projection of the funding needed to put the F136 alternate engine on a
competitive level with the F135 primary engine. We also reported that
if two key assumptions were changed--a reduction to the number of
years of noncompetitive procurements and the need for government-
funded component improvement programs--the estimate could be lower.
Since the estimate was prepared, the JSF aircraft and engine programs
have experienced substantial changes that could materially affect
funding requirements. The Secretary of Defense stated in April 2011
that nothing had occurred in the past year that would appreciably
change the projection or the decision to end the alternate engine
program. However, a number of significant changes have, in fact, been
made to the program, but the department has not developed a new
funding projection. Table 2 summarizes the key elements of DOD's 2010
funding projection.
Table 2: DOD's Projection of the Additional Funding Needed to Support
the Alternate Engine Program, Which Was Completed in Early 2010:
(Then year dollars)
Development total:
Additional funding projected by DOD (FY 2011-FY 2016): $1.533 billion:
* System development and demonstration;
Additional funding projected by DOD (FY 2011-FY 2016): $1.188 billion.
* Engine component improvement program;
Additional funding projected by DOD (FY 2011-FY 2016): $345 million.
Procurement total:
Additional funding projected by DOD (FY 2011-FY 2016): $1.381 billion:
* Noncompetitive procurement of engines (including spares);
Additional funding projected by DOD (FY 2011-FY 2016): $747 million.
* Production tooling;
Additional funding projected by DOD (FY 2011-FY 2016): $133 million.
* Support;
Additional funding projected by DOD (FY 2011-FY 2016): $500 million.
Total:
Additional funding projected by DOD (FY 2011-FY 2016): $2.914 billion.
Sources: DOD (data); GAO (presentation).
Note: Some numbers may not add to totals because of rounding.
[End of table]
Prior GAO Assessment of DOD's $2.9 Billion Funding Projection:
In 2010, at your request, we reviewed the basis for DOD's $2.9 billion
funding projection and its key assumptions. We reported that the
projection--referred to as a budget excursion by DOD cost analysts--
was intended to provide a general sense of the funding needed to
support the F136 alternate engine program to the point where DOD
believed it could begin a competition, but it did not include the same
level of fidelity and precision normally associated with a detailed,
comprehensive cost estimate. We also reported that the projection
should be viewed as one point within a range of possible costs
depending on the factors and assumptions used, and not as an absolute
amount. We noted that if two key assumptions in DOD's analysis were to
change, the projected amount of up-front investment needed could be
lower. These assumptions were that (1) 4 years of noncompetitive
procurements of both engines would be needed to allow the alternate
engine contractor sufficient time to gain production experience and
complete developmental qualification of the engine and (2) the
government would need to fund quality and reliability improvements for
engine components. We pointed out that past studies and historical
data indicated that it could take less than 4 years of noncompetitive
procurements and that competition could obviate the need for
government-funded component improvement programs. We stated that
providing decision makers with a range of costs around a point
estimate would be more useful than providing only the point estimate,
particularly when information on cost, schedule, and technical risks
is limited.
Program Changes and Potential Implications to DOD's Funding Projection:
At the time DOD prepared its funding projection in early 2010, the JSF
acquisition program was in the midst of a complex and comprehensive
restructuring. As a result, according to DOD, it was unable to invest
the time and resources that normally would be part of a more
comprehensive cost estimate and instead relied heavily on data,
assumptions, and methodologies from its 2007 cost-benefit analysis.
Since the funding projection was prepared, most of the JSF
restructuring has been completed, making substantive changes in
aircraft and engine costs and schedules. Specifically, near-term
aircraft and engine purchases were significantly reduced, development
and test times were extended, and estimated costs for development,
procurement, and sustainment were increased. The department also
terminated the F136 engine contract in April 2011, and is no longer
funding F136 design and development activities. Following the contract
termination, the F136 contractor announced a proposal to continue
development of the engine through fiscal year 2012 using its own
funds--although the scope of this proposed development work and
funding is not clear.
These JSF aircraft and engine program changes would likely affect the
amount of near-term funding needed to support the F136 alternate
engine program. Three specific examples and their potential
implications on DOD's $2.9 billion projection are discussed below:
* DOD's projection included more than $700 million in government
funding for F136 system development and demonstration during fiscal
years 2011 and 2012. DOD officials state that if the F136 contractor
fully funds its own development efforts through 2012, and does not
pass the cost back to the government through increased overhead rates
or procurement prices, then the near-term funding projection could be
reduced by approximately $700 million. However, the actual scope of
the work and level of funding that the F136 contractor is actually
considering is unclear. It is also not clear how the contractor would
continue to ensure that its efforts were adequately integrated with
the overall JSF development program. At the time of our review,
neither DOD cost analysts nor JSF program office representatives had
met with the F136 contractor to discuss its concept. In addition, DOD
cost analysts have not conducted a detailed assessment of the status
of F136 development in about 2 years. DOD cost analysts emphasize that
F136 design, development, and testing progress is a key unknown that
would need to be updated if a new projection was to be made. An
accurate understanding of the F136 contractor's proposal and an
updated assessment of F136 development progress would be needed to
accurately determine when the alternate engine could be ready for
competition and how much additional near-term funding might be needed.
* DOD's projection assumed that 743 engines (including U.S.,
international partner, and spare engines) would be noncompetitively
procured from fiscal year 2013 through fiscal year 2016. This
accounted for an estimated $747 million in additional procurement
costs. According to DOD cost officials, noncompetitive procurements
reduce the number of engines any one contractor would produce,
affecting manufacturing efficiencies and increasing prices for both
competitors during the noncompetitive period. In addition, the greater
number of noncompetitive procurements means that fewer engines would
be available for future competition. DOD's recent JSF restructuring
and changes in the international partners' procurement plans have
reduced the number of JSF aircraft and engines to be purchased through
2016. Based on the procurement plans contained in DOD's fiscal year
2012 budget submission, the JSF program now expects to procure
approximately 610 engines (U.S., international, and spares) from
fiscal year 2013 through fiscal year 2016.[Footnote 3] If competition
begins in 2017--as previously assumed by DOD--there would be 133 fewer
engines (743 minus 610) procured in a noncompetitive environment. This
would likely reduce the amount of up-front investment needed because
of noncompetitive effects and result in additional engines being
available for competition in the future. However, it is not known how
it would affect the F136 contractor's ability to mature its engine
design and production processes before beginning competition.
* DOD's projection relied largely on the same historical data that had
been used to support the 2007 cost-benefit analysis because limited
actual production cost data for the F135 primary engine and F136
alternate engine were available. DOD's projection also assumed that
the initial F136 engine procurement unit prices would be the same as
the F135's unit prices at the same stage of the program, and that both
engines would follow the same price curves. DOD now has actual F135
production data from the first three engine procurement lots that
could be used to inform its funding projection. According to DOD cost
analysts, in preparing the latest JSF program cost estimate they did a
detailed, comprehensive analysis of the projected procurement unit
costs for the F135 based largely on actual cost data. DOD analysts
recognize that the F136 engine is a different design and that the
contractor will use different manufacturing processes that could
result in different unit prices and price curves. However, the
analysts emphasize that they have not done a detailed fact-finding
effort on the F136 program for about 2 years, and they are not sure if
any new data are available that would allow them to assume different
unit prices or price curves at this time. Thus, the effect of actual
engine production costs on DOD's projection is not known.
More detailed and updated information that reflects recent program
restructuring and other developments would likely change DOD's $2.9
billion funding projection. DOD analysts responsible for developing
the funding projection acknowledge that many of their original
assumptions would likely be affected by recent program changes. As
noted above, some of the changes could reduce the amount of up-front
investment needed, such as the F136 contractor's proposal to fund its
own development efforts, but other changes, such as slower-than-
planned JSF development progress and recent schedule extensions, could
increase the amount. Regardless, DOD has not updated its funding
projection and does not have a plan to do so at this time.
DOD's Detailed Cost-Benefit Analysis Is Dated:
Although there have been many changes to the JSF program, DOD has not
conducted a detailed, comprehensive analysis of the total life-cycle
costs and benefits of a competitive engine program since early 2007.
In late 2009, DOD did update the 2007 analysis to reflect changes in
estimated development costs but did not update estimated operational
support and procurement costs. This update also did not reflect
schedule changes made in the JSF program since 2007. An up-to-date,
comprehensive analysis that takes into consideration both the total
costs and benefits during the entire life-cycle of both engines would
be an important tool for making investment decisions. Such an analysis
would compare the total expected costs of competitive and
noncompetitive options against the total expected benefits to
determine whether the benefits from competition outweigh the costs and
by how much. DOD's $2.9 billion projection represents additional costs
over a 6-year period, which is only a portion of the information
needed to complete a comprehensive life-cycle cost-benefit analysis.
Over the past 4 years, JSF flight test information, design and
production data, as well as updated acquisition and sustainment cost
information have become available. As noted, the program has also gone
through many significant schedule and procurement profile changes
since 2007. For example, the program's development completion has
slipped by over 5 years and procurement quantities through 2016 have
decreased by roughly one-third. DOD analysts acknowledge that much of
the 2007 study was based largely on historical data of prior engine
programs with little actual data from the F135 or F136 engine
programs. DOD cost officials also agree that there has been more
design, development, and production work done by both engine
contractors that could provide better quality and more precise data to
use to update a cost-benefit analysis. Specifically, DOD cost analysts
stated that several areas would need to be updated, including (1) F136
design progress; (2) procurement profiles, unit costs, and price
curves; and (3) operations and support cost estimates.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, DOD reiterated its position
that there is no compelling business case for the alternate engine. It
noted that the up-front costs are less affordable in the current
fiscal environment, the baseline F135 engine has performed well so
far, and the department has not received a formal contractor proposal
for a self-funded alternate engine. The department noted that the
federal government, including DOD, is entering a new era of resource
austerity. While that is clearly the case, we note that such austerity
is not limited to the near-term--it is a long-term problem.
Acquisition decisions should weigh both near-term and long-term costs
and benefits. If near term costs are always the primary factor in
decisions, it would be difficult to justify competitive strategies in
the future. DOD's complete comments are enclosed.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to appropriate congressional committees, the Secretary of Defense, the
Secretary of the Air Force, the Secretary of the Navy, and the
Director of the Office of Management and Budget. The report will also
be available at no charge on the GAO website at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4841 or sullivanm@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Staff members making key
contributions to this report were Bruce Fairbairn, Assistant Director;
Matthew Lea; and Travis Masters.
Sincerely yours,
Signed by:
Michael J. Sullivan, Director:
Acquisition and Sourcing Management:
Enclosure:
[End of section]
Enclosure: Comments from the Department of Defense:
Office Of The Secretary Of Defense:
Cost Assessment And Program Evaluation:
1800 Defense Pentagon:
Washington, D.C. 20301-1800:
August 30, 2011
Mr Michael J. Sullivan:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G. Street, N.W.
Washington, DC 20548:
Dear Mr. Sullivan:
This is the Department of Defense (DoD) response to the GAO Draft
Report, GAO-11-903R, Joint Strike Fighter: Implications of
Restructuring and Other Recent Developments on Key Aspects of DOD's
Prior Alternate Engine Analyses, dated August 15, 2011 (GAO Code
121003). Thank you for the opportunity to review this draft report. We
understand that your report contains no recommendations and,
therefore, comments are optional. We would like to take this
opportunity to provide clarifying comments on the report.
The basis for DoD opposition to the alternate engine program remains
unchanged: the costs to pursue a second engine are significant and
immediate, while the benefits are speculative and would not be
realized until many years later. During the past year, the fiscal
situation facing the Department has amplified our concerns with the
second engine program. The Federal Government, including DoD, is now
entering an era of resource austerity. We anticipate that many
difficult decisions will have to be made on major weapon systems,
including the Joint Strike Fighter (JSF) program at large. We simply
cannot afford to continue the second engine development activities
with the many higher military priorities and the stringent budgets we
face.
Your report identifies recent programmatic changes that could affect
our $2.9 billion estimate of upfront costs for an alternative engine.
The changes identified in the report could move this figure in either
direction”-either higher or lower-”but, ultimately, the changes
identified in the report would be inconsequential. Revisiting the
previous analyses will not change the fundamental conclusion that
upfront costs to prepare a second engine are significant, at a time
when the resources available to the Department are projected to
decline in real terms.
The Pratt & Whitney F135 JSF baseline engine has accumulated more than
18,000 test hours, including about 1,700 flight test hours on three F-
35 variants. Each variant of the propulsion system achieved initial
service release status within the past 18 months, a key milestone and
indication of the ability to meet performance and safety requirements.
Also, qualification issues that have risen during flight testing with
respect to baseline engine performance have been minimal, and have
been handled within the qualification schedule for the program.
Moreover, the JSF program is currently in the midst of qualification
activities for complex mission systems and software designed to
provide critical fifth generation capabilities. These are the
essential focus areas for the program, and continued development of a
second engine would divert resources and attention from these higher
program priorities.
The draft report mentions a "proposal" from General Electric (GE) to
self-fund the second engine development activities for some limited
period. Unfortunately, the details of this "proposal" are sketchy at
best. As you know, on April 25, 2011, the Department initiated the
contract termination process and all qualification activities for the
second engine have ceased. Also, the Department has not received any
formal proposal from the contractor to self-fund engine development
activities. We can reasonably project, however, that any self-funded
engine effort performed in isolation from the government is likely to
require extensive integration and validation efforts at a later point
in time. These activities would require both time and resources which
would ultimately be paid by the government. This scenario would also
result in additional cost and schedule implications for the JSF
aircraft development program.
In conclusion, we find that there is no compelling business case for
the second engine. The upfront costs are less affordable in the
current fiscal environment, the baseline F135 engine has performed
well so far, and we have no formal proposal for a self-funded second
engine
program. Also, the operational users have indicated that they have no
requirement for the second engine. Recent changes in the fiscal
environment make the upfront costs of a second engine program even
more unattractive Finally, I believe that revisiting, once again, each
of the analytic assumptions in the business case for the second engine
would prove unproductive, since it is not likely to lead to a change
in the Department's position on this program.
Signed by:
Christine H. Fox:
Director:
[End of section]
Related GAO Products:
Joint Strike Fighter: Restructuring Places Program on Firmer Footing,
but Progress Is Still Lagging. [hyperlink,
http://www.gao.gov/products/GAO-11-677T]. Washington, D.C.: May 19,
2011.
Joint Strike Fighter: Restructuring Places Program on Firmer Footing,
but Progress Still Lags. [hyperlink,
http://www.gao.gov/products/GAO-11-325]. Washington, D.C.: April 7,
2011.
Joint Strike Fighter: Restructuring Should Improve Outcomes, but
Progress Is Still Lagging Overall. [hyperlink,
http://www.gao.gov/products/GAO-11-450T]. Washington, D.C.: March 15,
2011.
Tactical Aircraft: Air Force Fighter Reports Generally Addressed
Congressional Mandates, but Reflected Dated Plans and Guidance, and
Limited Analyses. [hyperlink,
http://www.gao.gov/products/GAO-11-323R]. Washington, D.C.: February
24, 2011.
Defense Management: DOD Needs to Monitor and Assess Corrective Actions
Resulting from Its Corrosion Study of the F-35 Joint Strike Fighter.
[hyperlink, http://www.gao.gov/products/GAO-11-171R]. Washington,
D.C.: December 16, 2010.
Joint Strike Fighter: Assessment of DOD's Funding Projection for the
F136 Alternate Engine. [hyperlink,
http://www.gao.gov/products/GAO-10-1020R]. Washington, D.C.: September
15, 2010.
Tactical Aircraft: DOD's Ability to Meet Future Requirements Is
Uncertain, with Key Analyses Needed to Inform Upcoming Investment
Decisions. [hyperlink, http://www.gao.gov/products/GAO-10-789].
Washington, D.C.: July 29, 2010.
Defense Acquisitions: Assessments of Selected Weapon Programs.
[hyperlink, http://www.gao.gov/products/GAO-10-388SP]. Washington,
D.C.: March 30, 2010.
Joint Strike Fighter: Significant Challenges and Decisions Ahead.
[hyperlink, http://www.gao.gov/products/GAO-10-478T]. Washington,
D.C.: March 24, 2010.
Joint Strike Fighter: Additional Costs and Delays Risk Not Meeting
Warfighter Requirements on Time. [hyperlink,
http://www.gao.gov/products/GAO-10-382]. Washington, D.C.: March 19,
2010.
Joint Strike Fighter: Significant Challenges Remain as DOD
Restructures Program. [hyperlink,
http://www.gao.gov/products/GAO-10-520T]. Washington, D.C.: March 11,
2010.
Joint Strike Fighter: Strong Risk Management Essential as Program
Enters Most Challenging Phase. [hyperlink,
http://www.gao.gov/products/GAO-09-711T]. Washington, D.C.: May 20,
2009.
Defense Acquisitions: Assessments of Selected Weapon Programs.
[hyperlink, http://www.gao.gov/products/GAO-09-326SP]. Washington,
D.C.: March 30, 2009.
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.: March 12,
2009.
Defense Acquisitions: Better Weapon Program Outcomes Require
Discipline, Accountability, and Fundamental Changes in the Acquisition
Environment. [hyperlink, http://www.gao.gov/products/GAO-08-782T].
Washington, D.C.: June 3, 2008.
Defense Acquisitions: Assessments of Selected Weapon Programs.
[hyperlink, http://www.gao.gov/products/GAO-08-467SP]. Washington,
D.C.: March 31, 2008.
Joint Strike Fighter: Impact of Recent Decisions on Program Risks.
[hyperlink, http://www.gao.gov/products/GAO-08-569T]. Washington,
D.C.: March 11, 2008.
Joint Strike Fighter: Recent Decisions by DOD Add to Program Risks.
[hyperlink, http://www.gao.gov/products/GAO-08-388]. Washington, D.C.:
March 11, 2008.
Tactical Aircraft: DOD Needs a Joint and Integrated Investment
Strategy. [hyperlink, http://www.gao.gov/products/GAO-07-415].
Washington, D.C.: April 2, 2007.
Defense Acquisitions: Assessments of Selected Weapon Programs.
[hyperlink, http://www.gao.gov/products/GAO-07-406SP]. Washington,
D.C.: March 30, 2007.
Defense Acquisitions: Analysis of Costs for the Joint Strike Fighter
Engine Program. [hyperlink, http://www.gao.gov/products/GAO-07-656T].
Washington, D.C.: March 22, 2007.
Joint Strike Fighter: Progress Made and Challenges Remain. [hyperlink,
http://www.gao.gov/products/GAO-07-360]. Washington, D.C.: March 15,
2007.
Tactical Aircraft: DOD's Cancellation of the Joint Strike Fighter
Alternate Engine Program Was Not Based on a Comprehensive Analysis.
[hyperlink, http://www.gao.gov/products/GAO-06-717R]. Washington,
D.C.: May 22, 2006.
Defense Acquisitions: Major Weapon Systems Continue to Experience Cost
and Schedule Problems under DOD's Revised Policy. [hyperlink,
http://www.gao.gov/products/GAO-06-368]. Washington, D.C.: April 13,
2006.
Defense Acquisitions: Actions Needed to Get Better Results on Weapons
Systems Investments. [hyperlink,
http://www.gao.gov/products/GAO-06-585T]. Washington, D.C.: April 5,
2006.
Tactical Aircraft: Recapitalization Goals Are Not Supported by
Knowledge-Based F-22A and JSF Business Cases. [hyperlink,
http://www.gao.gov/products/GAO-06-487T]. Washington, D.C.: March 16,
2006.
Joint Strike Fighter: DOD Plans to Enter Production before Testing
Demonstrates Acceptable Performance. [hyperlink,
http://www.gao.gov/products/GAO-06-356]. Washington, D.C.: March 15,
2006.
Joint Strike Fighter: Management of the Technology Transfer Process.
[hyperlink, http://www.gao.gov/products/GAO-06-364]. Washington, D.C.:
March 14, 2006.
Tactical Aircraft: F/A-22 and JSF Acquisition Plans and Implications
for Tactical Aircraft Modernization. [hyperlink,
http://www.gao.gov/products/GAO-05-519T]. Washington, D.C.: April 6,
2005.
Tactical Aircraft: Opportunity to Reduce Risks in the Joint Strike
Fighter Program with Different Acquisition Strategy. [hyperlink,
http://www.gao.gov/products/GAO-05-271]. Washington, D.C.: March 15,
2005.
[End of section]
Footnotes:
[1] The JSF program began in 1996 with an acquisition strategy that
called for a competitive engine acquisition program. The program
planned to first develop and procure the F135 primary engine and, with
a few years lag time, develop the F136 alternate engine to compete for
future procurements and for life-cycle support activities.
[2] GAO, Joint Strike Fighter: Assessment of DOD's Funding Projection
for the F136 Alternate Engine, [hyperlink,
http://www.gao.gov/products/GAO-10-1020R] (Washington, D.C.: Sept. 15,
2010).
[3] Consistent with DOD's methodology, we applied a 15 percent spare
engine factor to the number of engines expected to be procured during
the period.
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
