GAO 2008: F-35 Program Status Report
America’s Congressional Government Accountability Office (GAO) has been conducting annual reviews of the F-35 A/B/C Joint Strike Fighter program for several years, analyzing everything from program approach to the wisdom of the program’s dual-source structure for the fighters’ engines. The GAO has a long-standing disagreement with the program over timing, and especially the decision to begin low-rate initial production before testing is complete in 2013. It has also backed the dual-source engine program as more expensive in the short run, but likely to save money in the long run; that backing has helped secure the votes in Congress to reinstate the dual-source approach for 2 years running.
In a sense, therefore, the most recent March 11/08 report and testimony could be seen as the running continuation of earlier disagreements. The report also contains summaries of program progress to date, however, and the warnings contained in its high level assessments are likely to have ripple effects in the USA and abroad…
“Midway through development, the program is over cost and behind schedule. Difficulties in stabilizing aircraft designs and the inefficient manufacturing of test aircraft have forced the program to spend management reserves much faster than anticipated. To replenish this reserve, DOD officials decided not to request additional funding and time for development at this time, but opted instead to reduce test resources. GAO believes this plan will hamper development testing while still not addressing the root causes of related cost increases. While DOD reports that total acquisition costs have increased by $55 billion since a major restructuring in 2004, GAO and others in DOD believe that the cost estimates are not reliable and that total costs will be much higher than currently advertised. Another restructuring appears likely – GAO expects DOD will need more money and time to complete development and operational testing, which will delay the full-rate production decision and the fielding of capabilities to the warfighter.
This year, DOD is again proposing cancellation of the JSF alternate engine program. The current estimated remaining life cycle cost for the JSF engine program under a sole-source scenario is $54.9 billion. To ensure competition by continuing the JSF alternate engine program, an additional investment of about $3.5 billion to $4.5 billion may be required. However, potential advantages from a competitive strategy could result in savings equal to or exceeding that amount across the life cycle of the engine. GAO’s updated cost analysis suggests that a savings of 9 to 11 percent – about 2 percent less than what GAO estimated last year – would recoup that investment. Also, as we noted last year, prior experience indicates that it is reasonable to assume that competition on the JSF engine program could yield savings of at least that much. Further, non financial benefits in terms of better engine performance and reliability, more responsive contractors, and improved industrial base stability are more likely outcomes under a competitive environment than under a sole-source strategy. While cancellation of the program provides needed funding in the near term, recent test failures for the primary JSF engine underscore the importance and long-term implications of DOD decision making with regard to the ultimate engine acquisition approach.”
“Since last year’s report, the JSF program office estimates that total acquisition costs increased by more than $23 billion, primarily because of higher estimated procurement costs. The JSF development cost estimate stayed about the same. Development costs were held constant by reducing requirements, eliminating the alternate engine program, and spending management reserve faster than budgeted. Facing a probable contract cost overrun, DOD implemented a Mid-Course Risk Reduction Plan to replenish management reserves from about $400 million to about $1 billion by reducing test resources. Progress has been reported in several important areas, including partner agreements, first flights of a JSF prototype and test bed, and a more realistic procurement schedule. The midcourse plan carries the risk of design and performance problems not being discovered until late in the operational testing and production phases, when it is significantly more costly to address such problems. The plan also fails to address the production and schedule concerns that depleted management reserves. Cost and schedule pressures are mounting. Two-thirds of budgeted funding for JSF development has been spent, but only about one-half of the work has been completed…”
“…Three independent defense offices separately concluded that program cost estimates are understated by as much as $38 billion and that the development schedule is likely to slip from 12 to 27 months. Discrepancies in cost estimates add to program risks and hinder congressional oversight. Even so, DOD does not plan for another fully documented, independent total program life-cycle cost estimate until 2013… JSF’s goal – to develop and field an affordable, highly common family of strike aircraft – is threatened by rising unit procurement prices and lower commonality than expected. The program also makes unprecedented funding demands – an average of $11 billion annually for two decades – and must compete with other defense and non-defense priorities for the shrinking federal discretionary dollar. Further, expected cost per flight hour now exceeds that of the F-16 legacy fighter, one of the aircraft it is intended to replace. With almost 90 percent (in terms of dollars) of the acquisition program still ahead, it is important to address these challenges, effectively manage future risks, and move forward with a successful program that meets our and our allies’ needs.”