U.S. GOVERNMENT PRINTING OFFICE

66–465 CC WASHINGTON : 2000

F–22 COST CONTROLS

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL SECURITY,

VETERANS AFFAIRS, AND INTERNATIONAL

RELATIONS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

DECEMBER 7, 1999

Serial No. 106–144

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

HELEN CHENOWETH-HAGE, Idaho

DAVID VITTER, Louisiana

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

JANICE D. SCHAKOWSKY, Illinois

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

DAVID A. KASS, Deputy Counsel and Parliamentarian

LISA SMITH ARAFUNE, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON NATIONAL SECURITY, VETERANS AFFAIRS, AND INTERNATIONAL

RELATIONS

CHRISTOPHER SHAYS, Connecticut, Chairman

MARK E. SOUDER, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

DAVID M. MCINTOSH, Indiana

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

HELEN CHENOWETH-HAGE, Idaho

ROD R. BLAGOJEVICH, Illinois

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

JOHN F. TIERNEY, Massachusetts

THOMAS H. ALLEN, Maine

EDOLPHUS TOWNS, New York

BERNARD SANDERS, Vermont

(Independent)

JANICE D. SCHAKOWSKY, Illinois

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

LAWRENCE J. HALLORAN, Staff Director and Counsel

THOMAS COSTA, Professional Staff Member

JASON CHUNG, Clerk

DAVID RAPALLO, Minority Counsel

(III)

C O N T E N T S

Page

Hearing held on December 7, 1999 ........................................................................ 1

Statement of:

Druyun, Darleen A., Principal Deputy Assistant Secretary of the Air

Force for Acquisition and Management ...................................................... 32

Schneiter, Dr. George, Director of Strategic and Tactical Systems, Department of Defense ............................................................................................ 22

Letters, statements, et cetera, submitted for the record by:

Barr, Hon. Bob, a Representative in Congress from the State of Georgia,

prepared statement of ................................................................................... 8

Druyun, Darleen A., Principal Deputy Assistant Secretary of the Air

Force for Acquisition and Management, prepared statement of ............... 38

Schneiter, Dr. George, Director of Strategic and Tactical Systems, Department of Defense, prepared statement of ..................................................... 25

Tierney, Hon. John, a Representative in Congress from the State of

Massachusetts, prepared statement of ........................................................ 4

(1)

F–22 COST CONTROLS

TUESDAY, DECEMBER 7, 1999

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON NATIONAL SECURITY, VETERANS

AFFAIRS, AND INTERNATIONAL RELATIONS,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:10 a.m., in room

2154, Rayburn House Office Building, Hon. Christopher Shays

(chairman of the subcommittee) presiding.

Present: Representatives Shays, Mica, and Tierney.

Also present: Representative Chambliss.

Staff present: Lawrence Halloran, staff director and counsel; J.

Vincent Chase, chief investigator; Thomas Costa, professional staff

member; Jason Chung, clerk; David Rapallo, minority counsel; and

Earley Green, minority staff assistant.

Mr. SHAYS. Good morning. I would like to call this hearing to

order.

Last February, in response to our request to describe high-risk

programs in the Department of Defense [DOD], the General Accounting Office [GAO], testified that unrealistic costs, schedule and

performance estimates continued to plague major weapons systems

acquisitions. GAO pointed specifically to cost overruns in the program to design and build the next-generation air superiority jet

fighter, the F–22.

In March, GAO told Congress it was unlikely the Air Force

would be able to keep the F–22 engineering and manufacturing development [EMD] program, within cost limits. They cited persistent

EMD spending growth not addressed by controlled strategies and

testing delays that could push costs higher still.

At that time, DOD assured the subcommittee that cost control

continues to be a primary emphasis in the F–22 program and congressional mandated spending caps would not be exceeded. The Department’s top acquisition reform official described, ‘‘comprehensive

measures to track and control F–22 program costs.’’ DOD promised

close monitoring of Air Force efforts to cut $660 million in projected

development expenses and $16 billion in estimated production

spending from the $60 billion program. Nevertheless, defense authorization and appropriations bills this year reflected growing congressional unease over the price and pace of the F–22 program. A

commitment to F–22 production was delayed and made contingent

on sufficient preproduction testing and completion of delayed avionics development.

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So today, on the 58th anniversary of the bombing of Pearl Harbor, we revisit the issues of F–22 cost control and development

delays, asking how spending control strategies are being implemented and how program managers are meeting leaner budgets

and tighter schedules. We do so in pursuit of our broad oversight

mission to monitor programs identified as vulnerable to waste and

mismanagement.

This hearing affords the subcommittee and DOD an opportunity

to assess the progress and the problems of a major acquisition effort hailed by some as a model of advanced technical development,

but scorned by others as vintage wasteful cold war procurement,

out of sync with post-cold war national security needs.

In order to focus on current F–22 cost controls, we invited only

Defense Department witnesses to testify today. At the subcommittee’s request, GAO will provide testimony in specific aspects of F– 22 production cost savings at a future hearing.

I want to acknowledge the work of our subcommittee colleague

from Massachusetts, Congressman John Tierney, who is to my

right, who has been dedicated and articulate in expressing his concerns over F–22 costs and who has been a full partner in our oversight of DOD acquisition reforms. The future of U.S. air power will

be shaped by our past.

I would like to say that before we start this hearing, I would like

a few moments of silence in remembrance for the 2,403 Americans

and their precious families who lost their lives 58 years ago today

at Pearl Harbor.

[Moment of silence.]

Mr. SHAYS. Mr. Tierney.

Mr. TIERNEY. Thank you, Mr. Chairman. Thank you for calling

this hearing and following up on this issue.

Let me also welcome our witnesses here this morning. I also

want to thank the General Accounting Office for providing an official statement for the record.

The Department of Defense currently is operating three aircraft

development programs that some have projected to cost more than

$350 billion. Many experts seem to agree that the Pentagon cannot

afford all three of these programs under any reasonable potential

scenario. As a result, experts from all sides have raised questions

with each of these programs, such as the necessity and relevance

of each program in today’s post-cold war environment, the ability

of each aircraft to operate between and among the various services,

the continued viability of strategic uses for these aircraft and, of

course, the cost of each program.

In addition to focusing on the continued increases in costs for development and production of the F–22, this hearing is also directed

toward analyzing the measures utilized by the Air Force and the

Department of Defense to predict and control these costs.

Although I understand the Air Force has achieved some of its

performance goals for the F–22, it appears from the written statement by the General Accounting Office that program costs are continuing to rise despite the implementation of cost control measures.

The broad question raised is whether the Air Force should be more

realistic in terms of anticipating delays in construction, in subcontractor performance, and in software development. Looking at

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the record of the past 10 years, it appears that the Air Force has

consistently underestimated the length of delays and increases in

costs.

At some point, repeated upward adjustments cease to be unexpected. At some point, they reveal a strategy that is overly optimistic.

As with any prioritization analysis, cost concerns with the F–22

program must inform the larger questions, such as the relevance

of the F–22 program in light of other ongoing aircraft development

programs. Essentially, as the costs for the F–22 program continue

to increase, the value of each aircraft decreases compared to other

alternatives. For these reasons, I look forward to hearing from both

of our witnesses about measures they are taking to predict more

accurately future cost increases, as well as measures being implemented to reduce current cost estimates.

Once again, I thank the witnesses for being here and thank the

chairman for conducting this hearing.

[The prepared statement of Hon. John Tierney follows:]

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Mr. SHAYS. Before swearing our witnesses, we just have a little

housekeeping.

I ask unanimous consent that all members of the subcommittee

be permitted to place any opening statement in the record and that

the record remain open for 3 days for that purpose. Without objection, so ordered.

I ask further unanimous consent that all witnesses be permitted

to include their written statement in the record; and without objection, so ordered. And I ask further unanimous consent that written

statements submitted by the General Accounting Office by Representative Bob Barr of Georgia and by Representative Saxby

Chambliss of Georgia be printed in the hearing record.

Without objection, so ordered.

[The prepared statement of Hon. Bob Barr and the information

referred to follow:]

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Mr. SHAYS. At this time I will call our witnesses. Dr. George

Schneiter, Director of Strategic and Tactical Systems, Department

of Defense; and then Darlene Druyun, Deputy Air Force Under Secretary, U.S. Air Force, Department of Defense.

If I could, I would invite both witnesses to stand up. As you

know, we swear all our witnesses and even Members of Congress

who testify before the committee. If you would raise your right

hands, please.

[Witnesses sworn.]

Mr. SHAYS. I would note for the record that both our witnesses

have responded in the affirmative.

Dr. Schneiter, I think you are going first.

Mr. SCHNEITER. Yes, sir.

Mr. SHAYS. My understanding is that you have a shorter testimony. I am going to put the clock on for 5 minutes, but you just

go on. I will just turn it over again.

I understand, Ms. Druyun, that your statement will be about 20

minutes, which we are happy to have you put on the record and

to listen to.

Mr. Chambliss, you are more than welcome to be up here if you

would like. We would be happy to have you.

We will allow you to speak for the 20 minutes. After the 20 minutes, we will give you a warning. We would just note for the record

that Mr. Chambliss is here and it is nice to have you here.

Thank you for coming. Dr. Schneiter, thank you for being here.

STATEMENT OF DR. GEORGE SCHNEITER, DIRECTOR OF STRATEGIC AND TACTICAL SYSTEMS, DEPARTMENT OF DEFENSE

Mr. SCHNEITER. Thank you, Mr. Chairman. I appreciate the opportunity to discuss today the Department of Defense’s efforts to

control the costs and adhere to the schedule of the F–22 aircraft

program. I would just comment on a few things from my written

statement, which will go into the record, as you said earlier.

The F–22 is a technically challenging program. The F–22 is intended to have unprecedented capabilities in the areas of low observability, the ability to fly supersonically without afterburner and

advanced avionics and sensors. It is intended to ensure that our air

forces remain dominant in the 21st century.

Such a program naturally gives us challenges regarding cost and

schedule performance. We have several oversight and budgeting

processes within the Department that we use to address such challenges, and I will summarize the principal ones of these. These

tools are intended to provide the Secretary of Defense and his staff

the information that he and they need to monitor, control, and reduce costs and to maintain program schedules.

The first process I would mention is where all programs begin,

with the requirements process. The senior military leadership on

the Joint Requirements Oversight Council address cost and schedule in establishing the military justification for an acquisition program. This Joint Requirements Oversight Council, which is chaired

by the vice chairman of the Joint Chiefs of Staff and includes military service vice chiefs, focuses on ensuring that the programs are

affordable and can be fielded in a timely manner. They now require

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that costs be a required parameter among the formal requirements

for weapons systems. That is the requirements process.

The second has to do with the acquisition process and, in particular, the Defense Acquisition Board. This is chaired by the Under

Secretary of Defense for Acquisition, Technology, and Logistics, my

boss, Dr. Gansler. It includes other senior officials in the Office of

the Secretary of Defense, and the vice chairman of the Defense Acquisition Board is the vice chairman of the Joint Chiefs of Staff,

who also chairs the Joint Requirements Oversight Council. So we

have his participation from a requirements point of view in this acquisition forum.

The Defense Acquisition Board [DAB], meets before major transition points, or milestones, as the program progresses through each

phase of development and production. Cost and schedule considerations are a major focus of a DAB review. Different offices within

the Department bring material to be considered at those meetings.

Foremost among these in the cost area is the Office of the Secretary of Defense’s Cost Analysis Improvement Group. They provide an independent cost estimate. By ‘‘independent,’’ we mean it

is independent of the military service, it is independent of the program office. This ensures that senior officials receive the most candid and complete information about the cost of weapons acquisition

programs.

We also conduct, as part of such milestone reviews, an affordability analysis which looks at the cost of the program in the context of the overall budget and, particularly, the mission area for

that program. So that is the DAB process, which is geared to milestones in a program.

A third process is a more routine process of review of programs.

This is the Defense Acquisition Executive Summary process. This,

on a quarterly basis, highlights to the Under Secretary the cost,

schedule, technical performance, management, and other key parameters of major defense acquisition programs. It includes examining what is called an ‘‘earned value management system,’’ which

is a way of tracking cost and schedule according to the plan to complete distinct packets of work. Mrs. Druyun will show you some examples of such tracking information.

The fourth Department review is our review of the adequacy of

the overall defense program in what we call the ‘‘Planning, Programming and Budgeting System.’’ This is the system whereby we

prepare the annual budget which we bring to the Congress each

year. This is not just for 1 year, but includes the Future Years’ Defense Program of 5 or 6 years.

Initial proposals for this budget come to us from the military departments. We then evaluate those in our summer program review

and, finally, the Defense Resources Board, which the Deputy Secretary of Defense chairs, considers alternative approaches that

might provide improved overall effectiveness within the available

funds. These reviews consider the balance among force structure

modernization, such as the F–22 readiness and sustainability, and

seek to accomplish the established policy goals within the available

funds. The Department’s tactical aircraft programs are often included in detail in these reviews. These are all parts of the Department’s internal process.

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We also report to Congress on program costs, and annually we

send over the Selected Acquisition Report, which provides cost,

schedule and other major information about our programs. Dr.

Gansler also holds program reviews more often than the processes

I just described for high-priority programs. The F–22 falls in this

category, and in fact he has a review of the F–22 scheduled for this

coming Thursday, 2 days from now.

When Dr. Gansler decided in December 1998, a year ago, to approve the go-ahead for two aircraft, he reiterated the importance

of maintaining continued emphasis on the F–22 program within

the congressional cost caps. He challenged the Air Force and its

contractors to continue efforts to reduce costs; and he directed the

Air Force to provide him with quarterly briefings on development

and production cost status. In this manner, he has been able to

track cost and schedule variances, the cost of each development aircraft being produced compared to the projected cost, and the status

of individual cost-reduction plans for both development and production.

To date, trends in cost and schedule have shown some improvement, but I think it is fair to say the jury is still out on the ability

of these cost-reduction plans to produce all the savings we need to

stay within the caps. Continuation of these quarterly reviews will

give us added confidence that the decisionmakers have the best information at each milestone decision on the ability of the Air Force

to execute the F–22 program as planned.

Mr. Chairman, those are the points I wanted to highlight. I will

be happy to respond to any questions you may have.

Mr. SHAYS. Thank you very much.

[The prepared statement of Mr. Schneiter follows:]

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Mr. SHAYS. Ms. Druyun. Am I pronouncing your name correctly?

Ms. DRUYUN. It is Druyun, yes.

Mr. SHAYS. You are going to be given 20 minutes. We will let you

know after that if we need to cut you shorter.

STATEMENT OF DARLEEN A. DRUYUN, PRINCIPAL DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE FOR ACQUISITION

AND MANAGEMENT

Ms. DRUYUN. Thank you, Mr. Chairman.

To try to explain the F–22 program and give you a better understanding of the management and cost oversight that we have in

this program, I have prepared a series of charts. I have laid out

in front of you an outline that I am going to basically follow and

I am going to basically skip that to really get into the meat of the

material.

The first issue I wanted to just very briefly cover is the issue of

why do we need the F–22. The F–22 provides air dominance over

the battlefield. It is optimized for the air-to-air environment.

Today, the F–22 is scheduled to replace the F–15 which is not able

to operate in an advanced surface-to-air missile environment. The

F–15 is at rough parity today with the Su–27 and the MiG fighter

aircrafts. The F–22 attributes of stealth, supercruise, maneuverability and integrated avionics are absolutely essential for enabling

dominance over the battlefield. More importantly, the F–22 complements the Joint Strike Fighter, which is optimized for ground

attack.

In looking at the next chart, in looking at the current EMD cost

estimate, I have broken this up into the airframe, the engine and

other government costs. The total cap that we have today on the

development program is $18.9 billion. What I would like to do is

to peel that back further so you can understand how we are carefully managing this program to stay within the development cost

cap established by the Congress back in 1998.

My next chart basically lays out a cost track history which I

think is important for this committee to understand. When the

original airframe development contract was awarded back in 1992,

the original value was approximately $10.3 billion. Today, our current estimate to complete this program is $14.3 billion. I think it

is important for this committee to understand what has caused the

cost growths within this program. As you can see, I have three columns where I basically have laid out the various growths that we

have experienced.

The first column is called rephase. This was driven by changes

made both within the defense budget as well as within the congressional budgets that in essence stretched the program out. A total

of $803 million was removed from the program which drove an

overall cost increase in the range of about, almost 15 percent. The

actual cost growth experienced by the contractor and which we are

projecting through the completion of development is in the range

of approximately 18.7 percent.

The last column entitled, ‘‘Other’’ is basically the work scope

changes that have been laid into this program since its inception.

Turning to the development engine contract, you will see that I

have laid it out in a similar fashion. Original contract value was

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approximately $1.5 billion. Today, our estimate to complete that

program is at roughly $2.4 billion. You can see that the rephases

caused by program funding instability through the congressional

and defense budget cycles caused a growth of approximately 23

percent, and the contractor experienced an actual growth in the

range of approximately 33 percent. I would tell you that half of this

cost growth experienced by the contractor was in the hot turbine

section redesign that we entered into back in 1994 because this

was a durability issue.

We basically viewed it as pay-me-now or pay-me-later. For longterm operation and support cost, it made much greater sense to go

back and to redesign that hot turbine section so that it would have

the durability for the life of the engine.

My next chart deals with F–22 EMD costs. Back in March 1999

in front of the SASC tactical air hearing, I basically reported that

our worst-case analysis in terms of cost growth above the congressionally imposed development ceiling was about $660 million. I also

reported at that time that we had laid in a number of initiatives

to vigorously manage this program and to offset those potential

cost growths.

Back in March 1999, I reported we had offsets, dollar for dollar,

for the potential cost growth. Today, I am able to report to this

committee that we have identified an additional $200 million for

now a total of $860 million worth of offsets to handle this worstcase shortfall that we predicted back in March 1999.

What I would like to highlight for you are the two areas that

have helped to basically build on our confidence and to build a larger offset, the first one, and it is in next chart, called ‘‘Development

Cost Reduction Status.’’ Back in March 1999, I reviewed with the

SASC tactical air hearing a process that we had laid in place in

July 1998 to rigorously control costs. Basically what we have laid

in place—as you can see, in 1999 I was predicting cost reduction

savings from a variety of projects such as revamping processes to

eliminate overhead, reusing EMD assets as opposed to having new

assets built, some new technical approaches such as GPS. We reported about $80 million in offsets. Today, that number, as you can

see, in September 1999 has grown to approximately $154 million.

I have approximately 70 projects that we carefully track, and the

offset column, which is about 79 percent today, we are very, very

confident of and it is actually built into our development estimate.

The next chart tracks some of the metrics that we use on a

monthly basis. I would tell you that within the Air Force, for example, I conduct what we call a MER, a monthly executive review, a

very detailed review with the contractor team and with our program office, and I basically drill down into multiple levels of

metrics to understand exactly where we are in terms of cost, in

terms of schedule and in terms of meeting the technical requirements in the program.

What this chart basically shows you is, through the completion

of development, we basically have laid out a curve where we are

actively managing to in terms of cost and schedule, and you would

see in tracking that all the way back to August 1998 to where I

am today in terms of my schedule variance, my schedule variance

continues to improve. That is very, very positive.

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We are seeing a cost variance running around $5.5, $6 million a

month. You would note that between September and October, I had

a bump-up in cost of about $11 million. The majority of that bumpup in cost was tied in with a union settlement at the Boeing Seattle facility with both their commercial and military work. Basically that represents a one-time charge in which they paid all of

their employees a bonus. That is why you basically see that bumpup in the cost arena.

This is something that we watch very, very closely. As I explained to you, sir, we drill down into it to really understand what

is driving these costs and what we need to do to make sure they

remain contained.

My next chart is called EMD equivalent headcount. I refer to this

basically as our ‘‘Slimfast’’ plan. As we complete each portion of the

development program, it is very important that we get rid of personnel associated with the program. They have to be off-loaded

from the program as their work is completed. We cannot afford to

carry them along.

What we have done in this program, this is an additional set of

metrics that we have laid in place, we basically have laid through

the entire program, where we need to ensure that we remain within the cost cap for development. As you can see, this is a good example, Lockheed Martin Fort Worth. Basically we are tracking

right along where we should be in terms of the equivalent

headcount to stay within the cost cap.

I think another good news story is that overtime used to run as

high as 11 percent. Today, that is running in the neighborhood of

5 to 6 percent. There have been very specific guidance and controls

laid in place to control overtime. You only use it when you absolutely need to use it to be able to meet key schedule commitments.

The next chart is entitled, ‘‘Production Cost Estimate.’’ Today,

our cost cap in our production program estimate is $39.8 billion.

What I have done is to break this up between Lockheed Martin and

Pratt & Whitney and to track it back to the original Joint Estimate

Team, that was put together in the 1996–1997 timeframe, to show

you the changes in profile and quantities of airplanes we are buying through the QDR. Then I am going to specifically address the

cost reduction initiatives that were laid in place and that we have

been very actively tracking along since completion of the JET.

If you would turn to the next chart, it is entitled, ‘‘Production

Cost Reduction Plan Savings.’’ When we concluded the JET in June

1997, we had identified approximately $9 billion, almost $10 billion

worth of production cost reduction initiatives that were being laid

in place. As you can see, since June 1997 to where we are today—

my data shows through July 1999—that number has climbed to

$16.9 billion.

Mr. Chairman, I would tell you that we have identified every

project, we are tracking every project, we are folding them into our

baseline as they become reality. And I think it is important to

point out, if you turn back to the production cost estimate on the

previous chart, I identified $15.1 billion worth of initiatives that we

needed to lay in place. As you can see, I am basically tracking to

$16.9 billion worth of initiatives.

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If I could give you an example of what some of these cost reduction initiatives are, as we go through looking at various aspects of

the program, contractors are able to, for example, in the area of

materiel efficiency, by rolling the materiel up into larger quantities

and using the leveraging power of the Lockheed Martin Corp., and

the Boeing Corp., they roll it into much larger buys, for example,

buys of materiel that would be needed to make, for example, commercial aircraft; and we are able to obviously garner much larger

savings when you can go out with a much larger buy of materiel.

That is just one of many, many examples.

In the engine itself, back in the June 1997 timeframe, we identi- fied approximately $3.2 billion worth of cost reduction initiatives

that Pratt was laying very aggressively into the program. Today,

that number is approximately $4.1 billion. Once again, I would remind you that the offsets needed to keep this program on the engine side on track was approximately $2.5 billion, so we have obviously a lot of initiatives built in there that will ensure that we

make that requirement.

I want to give you an example of one specific initiative. It is the

hollow fan blade. This is something that is built by Pratt & Whitney. This is a key technology that Pratt also needs to merge into

its commercial engine program as well. We laid out a plan about

3 years ago to turn the hollow fan blade into reality and actually

incorporate it into this program. It is tracking to plan. The cost of

a hollow fan blade has been reduced approximately threefold.

When I look at the average savings per aircraft engine when we

actually incorporate the hollow fan blade, it is approximately

$185,000 savings per engine.

The next chart really gives you the big picture of what we are

doing to manage the production costs. When we concluded the Joint

Estimate Team back in the 1997 timeframe, we felt it was very important that we lay in some target price commitment curves into

the development contract to really have the contractors focus in

and make the right investments up-front to ensure we could deliver

an airplane at $84.7 million flyaway unit cost. I would tell you for

the first contract that we have written, the PRTV contract that was

a firm fixed price contract, I track that very, very closely; and we

expect that the original estimate we had for this program in terms

of assembly hours, for example, that it is going to do better than

what we had projected.

We are also tracking the same data for the production representative test vehicle two efforts, which will be six aircraft that will be

put on contract later this month. We have tied this into a target

price commitment curve. Basically the contractors have made upfront investments, not government investments, but up-front investments from their own corporate funds to ensure that we can

stay within the target price of this program. If they are able to stay

within the target price curve that we have laid out here, they not

only recoup their investments, but they also make a return on their

investment. This is contractually laid out within the development

contract and will be carried out and executed as we move through

this program.

Next, I would like to talk about avionics software for a moment.

When I testified at the SASC tac air hearing on March 17, 1999,

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we had delivered at that time the two top blocks, Block 0 and Block

1.0 in terms of avionics software. Avionics software has always

been viewed as the high-risk portion of this program. I am very

pleased to report to this committee the tremendous progress that

we are making in this arena. As you can see, we have already delivered down through Block 2; and the block that is colored green

that says, ‘‘5 months early,’’ that was projected to be delivered on

January 15, 2000 in fact was delivered 1 month early. It was delivered last Friday. It is today in aircraft number 4004 on the development line. We consider this to be just an extremely good news

story.

If I were to show you some of the metrics, Mr. Chairman, I think

you would be amazed that we track for each one of these blocks.

My latest review of the metrics—and I look at them every single

month—shows that for Block 2/3S and for Block 3, as well as for

Block 3.1, we are on schedule and in fact are ahead of schedule,

which is why we are now able to accelerate the full sensor fusion

portion of the software 61⁄2 months early, and we are now projecting to deliver that to the aircraft October 30, 2000.

I asked the Software Engineering Institute of Carnegie-Mellon

University to go in and do an in-depth review of how well we are

doing in the whole software arena in the avionics. I would tell you

that the software institute gave us very high marks. In fact, they

call what we are doing within the F–22 program as best practices,

a pioneer within the Air Force, that we have outstanding tools, outstanding metrics, a very solid architecture.

The bottom line is that I believe that we will be able to meet the

schedule that we have clearly laid out here. It is a schedule that

has a very reasonable risk based on what we have seen to date.

I would tell you, Mr. Chairman, that with the delivery of Block

1.2 and Block 2, that represents 50 percent of the software that

needs to be delivered and each of that has been delivered as we

have predicted, or actually a little bit ahead of schedule.

The next chart talks about Software Quality Metrics which is a

very important metric that I monitor on a monthly basis. This

chart shows you the software errors found per 1,000 lines of code.

It shows you what the industry standard is, and it is basically 5.5

errors per thousand lines of code. It shows you what we are actually tracking within Block 1 and Block 2. We are well below the

industry standard, which is good news. I would tell you for Block

2 and Block 3S, you would see similar types of data.

Now, I would like to turn to F–22 testing for a moment. I have

to take you back in history to the original development program at

its inception. This program was designed to change the paradigm

of how we do testing. This program has employed modelling and

simulation unlike any other fighter aircraft in the history of the

Defense Department. We have used a philosophy to test at the lowest subcomponent, benefit component, work it up to the subsystem

and then to the system level. As you can see, this chart lists the

amount of testing that we have accomplished to date. Over 45,000

hours of wind tunnel testing, over 60,000 hours of subsystems laboratory testing, over 10,000 hours of radar testing, and 14 live fire

tests on aircraft components.

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Today, our flight test hours in our two development aircraft are

around 480 hours. Actually that number changes every day; by December 2000, we predict that we will have over 1,000 flight test

hours underneath our belt.

I believe it is very important that I point out to you that we have

seen much efficiency in how we do our sorties. We had planned for

each of our sorties to take approximately 1.8 hours. We are actually able to achieve 2.4 hours, which represents a 25 percent increase in productivity. We have basically replanned parts of the

test program to make up for time that we had lost. The climatic

test chamber is a good example of where we were able to recapture

much of the test time that we had originally laid out in the program.

Turning to the next chart looking at Full Scale Static testing, the

primary purpose of Full Scale Static testing is to support the certification of the full F–22 operating envelope. This test is conducted

in two phases. We call it the limit phase and the postlimit phase.

We have completed the limit load testing as of September 1999

successfully, and this test demonstrated that there is no permanent

structural damage at the max loads level expected during the life

of this aircraft. We entered the postlimit loads testing on December

2nd. This test will basically demonstrate the strength up to 11⁄2

times the maximum load levels expected during the life of this aircraft. Today, I am at 1.2 times the max load level.

In talking to our structural engineers, we are following a very,

very deliberate program, validating our analysis tools as we move

to complete this test before the LRIP decision. I would also point

out that almost 29 percent of our test points have been completed

for the flying qualities on this aircraft.

A question we are often asked, my next chart, is, can we afford

all of this? What I have laid out for you is what I call our ‘‘sand

chart.’’ This is the average U.S. Air Force aircraft RDT&E and procurement investment over a 30-year history. As you can see, the

historic norm for this history runs about 16 percent of our Air

Force TOA. And if you see where we are with respect to our President’s budget, I am well below that historic norm. In fact, I am in

the range of 11 to 12 percent.

In conclusion, Mr. Chairman, I would like to reiterate to you that

F–22 development and production costs are very carefully managed, and I can continue to report today that they are within the

congressional cost caps. This is a very tough program to manage.

I think that I have the best team within the Air Force and within

the contractor community aggressively working this program. Our

avionics is very much on track, and all blocks are meeting or exceeding the JET delivery dates.

The F–22 has completed our planned flight test activities for this

phase of the program. We had laid out approximately 480 to 500

hours, and we will complete that by the end of this month. The F–

22 program, as you can see, is affordable if you look at the total

obligation authority and look at what the historic norms have been.

Thank you, Mr. Chairman. I look forward to responding to your

questions.

[The prepared statement of Ms. Druyun follows:]

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Mr. SHAYS. Thank you very much for your comprehensive testimony. I am going to start the questions by just making a quick

statement, but first I want to recognize that we have not only Mr.

Saxby Chambliss who is going to participate in the hearing—he

doesn’t serve on this committee, but he serves on the Armed Services Committee; we welcome him and are happy to have him here.

We also have John Mica who serves on the Government Reform

Committee, serves on this committee and also is the chairman of

the Government Reform Subcommittee on Criminal Justice, Drug

Policy, and Human Resources.

I would also point out that Mr. Chambliss is the leadership’s representative on the Budget Committee. I take a general assumption

that our job in Congress is to make sure that our military are

never involved in a fair fight—in other words, we always have superior equipment—that in every instance the training is better, so

that when we ask our men and women to risk their lives, they in

fact have all the advantages possible.

I have less concern about the concept of the F–22 than the general recognition that because we need it and the manufacturing— and the Air Force knows we need it—there isn’t the competition

that says, well, someone else is going to replace us. It’s really the

only show in town; at least that is the way it strikes me.

I would also say that I have always appreciated the Air Force’s

cooperation with this committee and DOD in general. We have a

good relationship. But this is a program, since there isn’t the competition, that Congress needs to do a better job of oversight and put

people’s feet to the fire.

I would ask you, Mr. Schneiter, first, that—you gave a whole

host—your presentation was solely based on the various groups

that were involved in helping to control costs. I was struck by the

fact that there were so many, and I began to wonder who ultimately holds the accountability and I began to wonder what kind

of coordination exists between—among these various groups.

Maybe you could respond to that.

Mr. SCHNEITER. Certainly.

The accountability for the acquisition programs rests with the

Under Secretary of Defense for Acquisition, Technology and Logistics, Dr. Gansler. He participates in all of those activities that I

mentioned with the exception of the Joint Requirements Oversight

Council, which is the purview of the military and the Joint Staff.

Many of the same participants are in all of those activities, but the

activities do different things. The Defense Acquisition Board process deals with milestones: Is a program ready to go into Engineering and Manufacturing Development, is it ready for production? So

typically the Defense Acquisition Board will meet every few years

or so on a program.

The process that I described after that involves many of the same

people, but it is a more routine process that occurs every 3 months.

Whether or not a program is about to come to a milestone, we examine how well it is doing.

Then the third thing I described in that nature is the annual

budget process. Again, Dr. Gansler very much participates in that

process. Ultimately the Secretary and the Deputy Secretary are the

decisionmakers with regard to that.

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Mr. SHAYS. Ms. Druyun, why were EMD aircraft flight dates delayed again due to wing manufacturing problems in June 1999, 3

months after DOD testified that the problems had been solved?

Ms. DRUYUN. If you were to look, sir, at the approved DAB

schedule that we had in terms of the performance of this program—and the baseline that we are following is the baseline that

was set out in December 1998—we have been meeting all of the revised wing delivery schedules. They have been delivered on time

since we were able to basically solve that problem. They are all

coming in on time with the exception of, I believe it is the last one.

This is an issue where Boeing overdrilled some holes, and so

there are going to have to be some repairs done to those holes that

they overdrilled.

But the fact remains, our data will show you, that we are tracking to the revised delivery schedule for both—for all of the wings.

Mr. SHAYS. So your point is that there is not a problem with

the——

Ms. DRUYUN. My point, sir, is there was a problem. This problem

was worked very aggressively and this problem has been solved.

We are tracking it on a monthly basis to ensure that those wings

are delivered to the schedule that we have in place today, and they

in fact are being delivered to that schedule in place today. That

was a problem that we had approximately 2 years ago. As I said,

a problem very aggressively worked.

Mr. SHAYS. Let me interrupt you a second. There are so many

revisions or there appear to be so many revisions, I am wondering

which revision am I at?

Ms. DRUYUN. It is the current baseline of the program.

Mr. SHAYS. Let me stop you for a second. In June, we were told

that the problems had been solved. Were the problems solved when

we were told they were solved or were there new problems that existed afterwards?

Ms. DRUYUN. The schedule that I am referring to is the approved

baseline schedule.

Mr. SHAYS. Dated when?

Ms. DRUYUN. This is 1998.

Mr. SHAYS. When?

Ms. DRUYUN. When in 1998? I would have to get that for the

record, sir.

I would say sometime in mid-1998, but I will officially supply

that for the record.

The problems that we had with the wing itself were solved. We

actually—we have had to do a titanium casting, for example.

Mr. SHAYS. Let me just be clear, though. Is the information that

I have that—in June we were told the problem was solved, and

then are you saying you kept on the schedule of the 1998 schedule,

or did we have a new schedule that occurred after that?

Ms. DRUYUN. Master Schedule 24 is what I have been basically

referring to. We laid in a plan for late wing delivery, as well as a

plan for boom repair, and we are basically tracking to that plan in

terms of wing deliveries.

I think there has been a lot of confusion in this subject, sir. We

had a problem with our ability to manufacture these wings. It was

a problem that was very aggressively worked. Once they were able

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to demonstrate that they had a fix laid in place, we have since

tracked them to ensure that those wings are being delivered on

time.

It is a very dynamic program. It is a living, breathing program.

As you encounter problems, you work them and then you lay in a

schedule to track them to it.

Mr. SHAYS. I don’t have any question that it is extraordinarily

dynamic. I want us to make sure that when we are hearing that

we are on schedule, we know which schedule we’re on and when

the schedule has been revised and how many times we have revised the schedule so that we have actually ended up meeting it.

Let me just ask another question as it relates to this. If you are

being forced to delay flight tests and aircraft production, why are

long-range goals also not being pushed back?

Ms. DRUYUN. I’m not sure I follow your question, sir.

Mr. SHAYS. Particularly as it relates to avionics. I mean, we have

a tremendous delay there. And so you have revised your schedule

in the short run, but we are being told we’re going to meet all the

scheduled production in the future. It would seem to me, if you revise in the beginning, everything has to be revised. You seem to be

pushing everything up, it seems to me, and into an unrealistic limited time.

Ms. DRUYUN. If you look at where we are in terms of the build

of the aircraft themselves, aircraft 4003, this has been a schedule

that I have been tracking since March 1999 very, very carefully.

Aircraft 4003 is scheduled to be delivered February 16, 2000; 4004

is scheduled to be delivered May 2000. Aircrafts 4005 and 4006

were scheduled to be delivered in late June 2000 and August 2000,

and there I am tracking, and this——

Mr. SHAYS. This is your revised schedule, not the master schedule?

Ms. DRUYUN. This is the master schedule. It has been in effect

since March 1999. That is the schedule that I am tracking to.

Mr. SHAYS. So it was revised when?

Ms. DRUYUN. Our schedule, sir, is adjusted on an annual basis

to accommodate where we are in the program. For example, as we

have received earlier delivery of some of the avionics——

Mr. SHAYS. My time is running out. We’re going to have plenty

of time to talk about this, but let me just ask you, the avionics is

behind schedule by how much?

Ms. DRUYUN. The avionics, to the schedule that we are tracking,

it is not behind schedule, it is actually meeting or ahead of schedule.

Mr. SHAYS. Based on which revision?

Ms. DRUYUN. That is an excellent question, sir. If I took you back

to the Joint Estimation Team back in the 1997 timeframe, when

I look at where I am with Block 2 and Block 3, I am going to deliver ahead of the 1997 schedule. In fact, that one chart that I

showed you in my presentation to you shows that we have been

able to draw in that schedule because we have such outstanding

tools and personnel working on the program that we are actually

able to finish the coding and the integration and the sensor fusion

sooner than we thought. That was really a good news story.

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I can understand your confusion, because I had had the same

confusion.

Mr. SHAYS. There is going to be a lot of confusion, but we have

lots of time to sort it out. There are going to be good stories here

and there are going to be bad stories. It is helpful for you not to

just want to make me hear the good stories, because eventually the

bad stories come out. It is better to have it all come out now, and

we know, this is the first of a few hearings that this committee will

have.

We just want the broad picture. But my sense is that we have

not gotten—we are behind in our testing and that is pushing—it

would strike me that it would push back other elements to your

whole program.

Let me call on Mr. Tierney, and I will come back.

Mr. TIERNEY. Thank you, Mr. Chairman.

Given the fact that Congress removed about $500 million from

the fiscal year 2000 budget request, which was originally about $3

billion, can you tell us whether or not the Air Force intends to

make up that shortfall in some way?

Ms. DRUYUN. What Congress did in the fiscal year 2000 budget

that was passed and signed into law was to require us to incrementally fund the PRTV 2 aircraft buy of six aircraft. In terms of incrementally funding it, we are laying into our budget today, and obviously our budget is not complete within the Department, but we

are laying in the funds for fiscal year 2001 and fiscal year 2002 to

finish incrementally funding those six aircraft.

Mr. TIERNEY. Do I interpret it correctly to say you’re increasing

your funding request over the next 2 years?

Ms. DRUYUN. Yes, and you should see that hopefully in the budget submission when it comes over the end of January, the first part

of February.

Mr. TIERNEY. There was some suggestion in yesterday’s edition

of the Defense News that the Air Force is leaning toward delaying

the purchase of C–130J transports to make up the shortfall.

Are you considering that option?

Ms. DRUYUN. Sir, that is an issue that is very much under review today within our budget. There have not been any final decisions made. I do not expect any final decisions on that will be made

until the budget is closed out.

Mr. TIERNEY. What other program sources are you considering to

make up that shortfall?

Ms. DRUYUN. The C–130J was never—was not really laid in this

soon in our budget, so we’re not taking from the C–130J to pay for

the F–22.

Mr. TIERNEY. And nowhere do you project that you are going to

consider doing that at all?

Ms. DRUYUN. To use the C–130J which was not in the 2001

budget we sent over last year to pay for the F–22?

Mr. TIERNEY. To delay the purchase of the C–130Js.

Ms. DRUYUN. That is a subject that is very much under review

today.

Mr. TIERNEY. So you are considering delaying the C–130Js?

Ms. DRUYUN. If you had looked at the budget that we submitted

last year, I believe we really did not start buying those aircraft, I

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believe, until around the year 2003. But that is all under deliberation and will be vetted through the budget process and will conclude by the end of December.

Mr. TIERNEY. I think GAO estimated that if the C–130J purchases ceased, overhead costs for the F–22 that Lockheed Martin

also makes at their facility would increase as much as $150 to $160

million per year; is that correct?

Ms. DRUYUN. That’s an area that I have personally gone down

twice to review at the Marietta facility. As I recall, I did not see

any immediate impact to the 2000 budget. Potentially, we could see

some cost growth in that arena.

I would tell you that Lockheed is very aggressively managing

that and looking at some alternative plans to see how we could

manage the issue of any increase in overhead rates.

Mr. TIERNEY. But the fact of the matter still remains, that it may

increase their overhead rate and that may increase the cost $150

to $160 million?

Ms. DRUYUN. I don’t think my numbers were that high.

Mr. TIERNEY. How high were your numbers?

Ms. DRUYUN. I do not recall. I can supply that for the record if

you would like, but I believe my number was lower. The fact that

there was going to be a number of management actions laid in on

the part of Lockheed, it is hard to predict because of their aggressive management what that number would finally look like; we

could do some estimates, and that’s what we tried to do.

Mr. TIERNEY. We’re going to assume that their promises of aggressive management are going to save money and just factor in

that savings; is that the way this is going?

Ms. DRUYUN. I think that that is part of the equation that Lockheed is dealing with.

Mr. TIERNEY. Historically it seems that whenever we have cost

increases, they are significantly higher than what we are now estimating. Why don’t we use the historical models to determine the

future costs, what the increases are going to be?

Ms. DRUYUN. If you look at the various cost estimating methodologies that are available to us, they basically are based on history, kind of looking in your rear-view mirror, so to speak. If you

look at initiatives started by the Massachusetts Institute of Technology, such as lean aircraft initiatives, there are obviously some

new paradigms to be laid in there as to how you can—for example,

I will use the F–16 as a real live example.

We had a multiyear procurement that was 180 airplanes a year

delivery to the U.S. Air Force. We broke that multiyear procurement around the year 1990–1991, and our number of aircraft, as

I recall, dropped down around a quantity of 12 a year. If you had

used traditional estimating models, it would have told you that the

price of those airplanes would have gone up, when in fact that did

not occur.

When you look at CAD/CAM, computer-aided design, computeraided manufacturing, robotics, and really leaning out your production line, it will have a dramatic impact on the cost of whatever

it is that you are building. And we have been able to demonstrate

that in terms of when you look at travel time and an assembly line,

when you relay it out, you can reduce costs significantly. And your

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cost models today do not have that type of data in them. They are

continually being updated as we acquire that type of data.

Mr. TIERNEY. Well, historically in this program, we have underestimated what the costs are going to be. But now you’re telling me

that, looking forward, we are going to use these models and we are

going to have a more optimistic view?

Ms. DRUYUN. No. What I’m telling you is I have production cost

reduction initiatives laid in place.

If I can give you an example. The Weapon Bay Door project, this

is what we call a lean aircraft initiative—it’s one of our production

cost reduction initiatives—we’ve been able to actually realize operator-distance travel has been reduced by 76 percent, parts-distance

travel reduced by 52 percent, direct-touch labor reduced by 44 percent, and through-put time reduced by 58 percent.

When you take lean aircraft initiatives and go through your

whole production cycle, you really look at what am I doing today

and what do I need to do differently to reduce travel time, to reduce touch labor, and to significantly reduce through-put time. And

those are the types of activities that are ongoing today not only in

F–22, C–130J.

If you were to go out to the Marietta facility today, you would

see a new manufacturing line that has been laid out that has significant efficiencies laid into it and you can see the one area where

they haven’t finished laying it out, and it is the difference between

night and day.

Those are the types of lean aircraft initiatives that we’re laying

into all of our programs within the Defense Department, whether

it is F–22, JSF, and even our satellite programs.

Mr. TIERNEY. Let me broaden this out for a second.

The Congressional Research Service estimates that executing all

three of the current aircraft development programs could generate

a projected cost of $350 billion.

Are you telling us that you think the Pentagon can afford that

kind of spending?

Ms. DRUYUN. What I’m telling you, sir, is what I showed you in

my sand chart. We have carefully laid out a program of modernization that lives within the total obligation authority that we have

seen and that we are actually below that total obligation authority

within the aircraft arena.

When you look at it from historical terms—— Mr. TIERNEY. Well, let me just give you an example. Back in

March of this year, the Air Force General, Joseph Ralston, was

quoted as saying one of those three planes might have to be canceled or the number of each plane reduced by as much as half. Was

he wrong?

Ms. DRUYUN. I don’t think I really am prepared to answer a

question like that. I think that would be something that I would

be happy to go get you for the record. But, you know, it depends

on how he said that and the context in which he said it.

Mr. TIERNEY. Well, it is a pretty wide variance with what I think

I’m hearing from you today. You seem to be telling us that $350

billion for all three of these is no problem—it comes right within

your budget—and yet he is telling us that it would cause you serious reductions or cancellations.

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Ms. DRUYUN. Well, I’m specifically talking to the F–22 program,

as well as the Joint Strike Fighter program and our other aircraft

programs. And what I have shown you is what has historically

been there and what is laid out in the President’s budget today.

And it is very affordable, and it’s based on a certain TOA assumption, which is based on the President’s budget. That’s what I’m saying to you, sir.

Mr. TIERNEY. Are you familiar with General Ralston’s earlier

comment?

Ms. DRUYUN. No, I am not.

Mr. TIERNEY. I’ve been told by some that the Department of Defense is scheduled to meet this month to perform a comparative

analysis of the F–22 and some cheaper alternatives.

Are you familiar with that, and is that meeting still planned?

Ms. DRUYUN. There has been a study that has been undergoing

since I guess around, what, George, July 1999? I have not yet seen

the results of that study. And I will look forward to seeing it, I believe, next week when it is presented to Dr. Gansler.

Perhaps Dr. Schneiter could better address that.

Mr. SCHNEITER. The study is going on. It was asked for by Dr.

Gansler as part of, if you will, a what-if drill, which we do quite

often within the Department. We have great hope that the F–22

program will be carried out within the cost estimates and the cost

caps. One has to look at eventualities if that should not come

about.

What we have done is set forth on a study that looks at what

might be alternatives, should that happen; and we are looking at

other aircraft, such as modifications, improvements to the F–15.

We are looking at the Joint Strike Fighter. I’ve seen some preliminary results from this, and the results show to me pretty strongly

that the F–22 has a very important place in the future of our tactical aviation program.

Getting back to the point that Congressman Shays made early

on, in terms of that capability, the F–22 is the only show in town.

And that’s part of our intent to make sure that we don’t have a

fair fight in the future.

So we believe we are looking at such alternatives, but the analysis that I looked at thus far indicates that very strongly that we

do need the F–22.

Mr. TIERNEY. Would you excuse me 1 second.

Well, you’re talking about having a fair fight. I mean, I think it’s

fairly indisputable at this point in time that there is no fair fight

going on between what the United States has for systems and what

any projected enemy might have. I know that you said there is a

rough parity today with the SU–27 and the MiG–29.

If you upgraded the F–15, that would certainly put a stronger

balance between any rough parity, would it not?

Mr. SCHNEITER. There’s only so much you can do with the F–15.

The thing that the F–22 particularly brings is a very low radar

cross-section. That is a tremendous advantage in air-to-air combat

as well as in protecting you against surface-to-air threats. The F–

15 will never be able to be improved to anywhere near the capability of the F–22. And this is the sort of thing that we feel our forces

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need to have in order to be able to operate with a great advantage

on our part.

Mr. TIERNEY. The way things are moving along right now, are

you telling me that all of the testing will have been completed before the first production is done, the first models come online?

Ms. DRUYUN. No, sir. We have a test program that is laid out

through the completion of EMD. The final testing that is done in

this aircraft—right now we’re in what’s called development testing—the final testing will occur in mid-2002 or 2003 and it’s called

operational test and evaluation conducted by the AFO TEC organization within the Air Force.

What I can say to you is, if you look at the schedule that we had

back in 1997 and you look at our current schedule today, yes, we

have replanned our test program. It has been reviewed with all of

our testers. They’re the ones that have actually helped us put it together. We have been able to rephase and do some things smartly

with respect to our test program.

For example, I mentioned the climatic labs. We had scheduled at

the airplane, one of our test airplanes would have gone in there on

two different occasions; and we were able to streamline that and

get all the testing done, you know, with one visit to the climatic

lab instead of two visits.

That alone, for example, helped us to recapture 6 months of some

lost test time.

Mr. TIERNEY. Are you telling me that all the developmental testing will be done before the first models are produced?

Ms. DRUYUN. No, all of the developmental testing will not be accomplished before the first models are produced.

Mr. TIERNEY. So we’re ahead of ourselves on that, we’re going to

be building things before the developmental testing is done.

Has experience in the past not shown us that sometimes that is

a little over-optimistic and we end up with systems that don’t meet

the requirements that we had hoped for?

Ms. DRUYUN. If you were to look at other programs, like the F–

18 for example, the F–15, the F–16, you would find when you enter

into low-rate initial production you have not completed all developmental tests.

What you would find, though, is that you have completed a sufficient amount of tests that you have confidence that the airplanes

are going to be produced will, in fact, meet the war fighters’ needs.

Mr. TIERNEY. So your testimony is we have never run into difficulty before in completing the production before we have done the

development?

Ms. DRUYUN. No. I would never say we have never run into difficulty in any of our programs. I believe it was either the F–15 or

F–16 that had some problems. F–18 had some problems. But the

problems that we have seen to date, with the testing that we have

done on the F–22, including our flight testing, are well within the

spectrum of what we expected.

The airplane is performing exceedingly well and to date meeting

all of its requirements.

Mr. TIERNEY. Thank you.

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Mr. SHAYS. Thank you. At this time, we would ask for Mr. Mica.

What we’re doing is we’re doing 10-minute segments. We don’t

seem to get a red on the time, but we’ll roll it over twice.

Mr. MICA. Thank you, Mr. Chairman. I appreciate your conducting this hearing on a very important subject tied into really our national security since we’re trying to develop an aircraft that will

give us air superiority.

And I might say at the outset that I am committed to this program. I mean, just the one page that’s presented to us that says

that the F–15, which I believe is almost 25 years old, is unable to

operate in an advanced surface-to-air missile environment is certainly sufficient for us to be expending these taxpayer resources to

develop superior capability.

I think we found in the past there aren’t too many of our friends

willing to help us. As the last superpower in the world, we’re left

to bear not only some of the costs but also provide the technology

and equipment to get the job done when we have people coming

after us or threatens world stability or regional stability in the

world.

The major question before us is trying to contain the costs and

the development of this program.

Dr. Schneiter, first of all, there have been cost overruns and I’ve

been told that it’s about a 5 percent cost overrun. Is that a fair estimate of the total amount, or is it a larger figure we’re looking at

now, just in a ball park range?

Mr. SCHNEITER. I suspect that, if you look at cost estimates at

the time we started development, you would find a somewhat larger percentage overrun than that at this point. As Ms. Druyun’s

chart showed, however, you have to watch out how you define

‘‘overrun.’’ In some cases this is caused by bad estimating on our

part. We just don’t know well enough what to do; we run into difficulties we didn’t anticipate. A large part on the development cost

increase on the F–22 was inefficiencies caused by having to replan

the program.

Mr. MICA. Well, this program, as I understand, started out

around 1991; is that correct?

Ms. DRUYUN. Yes, that is.

Mr. MICA. And if we’re going to look at what has caused us to

have cost overruns, there are going to be some various areas that

have been responsible for driving the cost up. One of the things

that concerns me is the way that Congress has sort of jerked this

program around and Congress has changed both the requirements

several times. Is that not correct?

Mr. SCHNEITER. I think the changes have been less in requirements than in funding.

Mr. MICA. We started out with what? Wasn’t it an initial procurement of 700 or something? And where are we now, 300?

Mr. SCHNEITER. Oh, as far as the numbers to be procured, that

has decreased; and we are 339 at this point. That will affect your

average unit cost quite a bit, but should not have an effect on the

development cost.

Mr. MICA. With the question of congressional changes in funding

and commitment to the program, it’s also been estimated to me

that about 40 percent, 41 percent of some of the increase in costs

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could be attributed again to the congressional instability in supporting the program or changes.

Is that a fair estimate?

Mr. SCHNEITER. I would have to give you an answer for the

record to be precise on that. My guess would be that the part that

was caused by congressional changes would be a little bit less than

that.

There were also some changes, frankly funding instabilities, that

the Department caused itself.

Mr. MICA. Well, if we look at again congressional responsibility

for some of the cost overruns, management responsibility, and I

won’t ask you that because you’re really, I guess, in charge of the

management or administration, another important factor would be

contractor cost overruns.

As a percentage or as a factor in the total cost overruns, where

does the contractor fit into this?

Mr. SCHNEITER. I think roughly about 50/50. Is that right?

Ms. DRUYUN. Yeah, I think it’s close to that. If I could try to answer your question, Congressman Mica.

Mr. MICA. And I want to divide that up, because I think the contractor would have certain responsibility in funding overruns and

that we could probably document. Of course, some of that may be

based on changes in technical requirements and that would be the

other part of the question. And I know it’s hard to get a handle on

all of these exact figures. But since 1991, we’ve had great advances

in technology. And I have also known that all of the Federal agencies are prone to change the procurement requirements, at least

from the technical standpoint, as projects of this nature go along.

So maybe you could give us a little bit of information about cost

overruns attributed to these two factors.

Ms. DRUYUN. Yes, I’d like to do that. If I could have my EMD

airframe contract cost track back up on the monitor.

What I explained earlier—and I think that perhaps you arrived

a little bit late at the time—is when you look at the original contract value back in the 1991, early 1992 timeframe when we

awarded the development contract, it was $10.3 billion. Today my

estimate of completion of the airframe—this is the Lockheed contract—is basically $14.3 billion.

What you would see is a difference in $4 billion from my original

value to where I am today. And when I break that down, I broke

it down into what I term three possibilities. One was called rephasing the program, and these were a combination of congressional

cuts; and they added out to $559 billion in defense cuts, which

added out to $244 million, for a grand total of $803 million.

What you would find is that when you have to rephase a program, you have to stretch it, you have a standing army you have

to keep in place, the programming becomes more expensive. So 15

percent of that cost growth that we see is because of the instability

in funding, whether it was by the Defense Department or the Congress.

Mr. MICA. Did you say 15 percent?

Ms. DRUYUN. Fifteen percent for Lockheed. And Lockheed’s actual cost growth is in the neighborhood of 18.7 percent.

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I would like to put that in its proper context. If I had written

the fixed-price incentive ceiling-type contract instead of a cost-type

contract and I had set my ceiling at 140 percent or even 135 percent, I would still be under that ceiling today.

When you consider the technology that we have developed in this

program, a very, very complex program, cost growth in an area of

18 and 19 percent is actually a good record.

I could point out other programs to you where we have seen

much more significant cost growth. If you look at the engine contract, it was a smaller contract. Its original value was about $1.5

billion. Today my estimate to complete that program is about $2.4

billion. Once again, 23 percent of that cost growth that we saw was

because of program-funding instability. Thirty-two percent of that

was contractor cost growth.

And part of that was a collected decision made on the Department’s part and I believe a correct decision. We, basically, back in

1994, as a result of testing on the hot section of the turbine, saw

potential durability issues. And it’s very important you build an engine that’s durable and that will have low life-cycle costs. And so

we decided to go ahead and redesign that portion of the engine to

ensure we have long-term durability and that drove about half of

that cost.

And the other bucket that you see over there, basically, refers to

requirement changes. I think that is something I track on an annual basis to understand what has exactly happened within this

program.

Mr. MICA. Before the Defense Appropriations Act delayed the decision on low-rate production, that decision was to have been made

this month, I understand. In your estimation, would this program

have been ready to enter production this month, as was originally

scheduled?

Ms. DRUYUN. And my answer, sir, is yes, it absolutely was ready

to enter into low-rate initial production of six airplanes.

We have demonstrated supercruise. We have conducted weapons

bay open testing. By the end of December, I will have 500 flight

hours of testing. You saw my previous chart, which laid out the

thousands of hours of sub-system and component and sub-component testing that has taken place to date.

We’ve been able to demonstrate high angle of attack, post-stall

flight with thrust vectoring. We’ve demonstrated flight at 50,000

feet. And we’ve greatly expanded the flying envelope of the F–22.

The fact remains, all of the criteria established in 1998 by Dr.

Gansler we satisfied.

Mr. MICA. Well, I guess finally, do you believe that this program

can be executed within the congressionally mandated cost caps?

Ms. DRUYUN. Yes. That’s something that I track very carefully on

a monthly basis that I drill down and understand. And our estimate today is, when you look at the EMD development cost cap,

yes, we have cost pressures; but we have also laid in initiatives to

ensure that we stay within that cost cap. The service cost estimate

basically agrees that I can deliver within that cost cap. And for

production, I believe that if our target price commitment curves

and all of the other production cost production initiatives we have

laid in place, we are aggressively managing them; and we believe

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we can bring this program in under the congressionally imposed

cap.

And this is something we watch every single month and we report all the way through the senior Air Force management as well

as to OSD and will continue to very carefully watch this and understand what is happening within the program.

Mr. MICA. Thank you.

Thank you, Mr. Chairman.

Mr. SHAYS. Thank you.

We’re going to go through another round of Members. But Mr.

Chambliss will ask questions, has 10 minutes; and then we’ll do

another round.

Mr. CHAMBLISS. Thank you, Mr. Chairman.

I want to tell you that I appreciate the opportunity that you have

given me to be here today and to participate in this hearing on an

issue that I am very sensitive to and, frankly, very supportive of.

And your reputation of fairness and objectivity is well known to

me, so I particularly appreciate your approach to this issue.

I would also say that, while I do represent the State of Georgia

and the F–22 is to be manufactured in Georgia, that it is not manufactured in my district; nor is there any subcontractor manufacturing for the F–22 in my district. So my interest is not parochial.

It is simply one of the fact that, as a member of the Committee on

Armed Services, I have come to know and understand that, if we

are to maintain air dominance, that the F–22 is a critical weapon

system and that it is simply vital to the future of national security

of the United States.

I’d also just like to point out that Ms. Druyun and I are very well

acquainted because she testifies before my committee on a fairly

regular basis, and she has had jurisdiction over the last 5 years

that I’ve been a Member of Congress on any number of issues that

I’m very interested in and sensitive to. And she’ll be the first one

to tell you that we’ve not always agreed on issues. But, as she

knows, I have great respect for her abilities, particularly in the

area of acquisitions. She has done amazing things in the area of

acquisition and is well regarded and well respected in the Department of Defense and certainly before our committee.

Ms. Druyun, I just wanted to confirm a couple of things in the

record. You alluded to this in your written statement and oral

statement earlier. With respect to the need of the F–22—I don’t

want you to go into great detail about it, but there are some general statements that I think or general facts that are well known

that I think should be brought out today. And you referred to the

fact that we have been able to maintain air superiority or air dominance in our last several conflicts and if we’re going to continue to

do that, that the F–22 is essential.

You also stated that the F–15, which has been the vehicle by

which we have maintained that air superiority, is now compared to

with the SU–27, which is a Russian-made tactical air fighter. Is it

not a fair statement that, while we’re on parity today, that the

Russians also have ready for production the SU–37, which is going

to be far superior to the current F–15 and would even be superior

to the F–15 with the modifications that have been alluded to as an

upgrade to the F–15?

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Ms. DRUYUN. Yes, I believe that’s correct, sir.

Mr. CHAMBLISS. And is it not also generally known that, while

the cold war may be over, that the economy of Russia is certainly

not a booming economy but one of their biggest sources of income

is the sale of military hardware?

Ms. DRUYUN. Yes, that’s also correct. I was just there during the

month of November.

Mr. CHAMBLISS. And there are other nations out there who manufacture aircraft that also have on the drawing board aircraft that

are superior to the current F–15 and superior to the proposed upgraded F–15?

Ms. DRUYUN. That’s also correct.

Mr. CHAMBLISS. Now, we have online—and Mr. Tierney alluded

to this and it is an excellent area of discussion, and that is the area

regarding the collision course we’ve been headed down from a tactical air, tac-air perspective.

We have the F–18–E and F, which is the most modern aircraft

that’s in the inventory of the Navy. We have the F–22 online. We

also have the Joint Strike Fighter, which is still in R&D but is projected to come on board subsequent to the F–22.

The JSF is going to have certain assets that are also on the F–

22. And is it a fair statement to say that the projected cost of the

Joint Strike Fighter depends on our production of the F–22?

Ms. DRUYUN. Yes, that’s absolutely correct. When you look at

avionics, the F–22 will have the most sophisticated avionics system

ever in any fighter aircraft. When you look at the F–119 engine,

the F–119 core is being used by the Joint Strike Fighter.

Those are just two areas where these programs are dependent

upon each other, yes.

Mr. CHAMBLISS. And at the same time, isn’t it correct that the

F–22 is going to be the first-day, first-strike, first-kill aircraft, as

opposed to the JSF, not having the supercruise, not having all the

sophisticated integrated avionics, so that the Joint Strike Fighter

is not going to have the capabilities of penetrating behind the

enemy lines to fire that first shot before the enemy ever knows

they are there, which is an asset that the F–22 possesses?

Ms. DRUYUN. And clearly, the F–22 is there for air dominance,

yes.

Mr. CHAMBLISS. Now also, Mr. Tierney’s question related to the

expense of all of these tactical aircraft, which is an issue that we

have discussed within the Armed Services Committee a number of

times, and it’s a very legitimate question. But I want to just make

very clear today that what you’re here talking about is the F–22,

which is not going into the inventory of the Navy, it’s not going

into the inventory of the Marine Corps, which the F–18 is in inventory of both those services, the Joint Strike Fighter will be going

into the inventory of all three branches. And what you’re talking

about today and what your charts reflect is the purchase of the F–

22 by the Air Force and we’re not discussing the other services

today?

Ms. DRUYUN. My charts reflect the purchase of the F–22 aircraft.

But my charts also show those conventional takeoff and landing,

we call them CTL, variant of Joint Strike Fighter. That is also

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built into our Presidential POM and it very much fits within the

historical levels that we have seen over the past 30-year period.

Mr. CHAMBLISS. You also alluded to the per-copy cost of the F– 22. And I want to make sure that everybody understands that,

when this airplane was originally decided upon several years ago,

that the schedule was to purchase some 750-plus aircraft.

Ms. DRUYUN. 750.

Mr. CHAMBLISS. That it was subsequently reduced to about 550

aircraft and then ultimately reduced down to about 339 aircraft, I

believe is the now-scheduled purchase.

Ms. DRUYUN. Yes.

Mr. CHAMBLISS. All of those decreases contributed to an increase

per-copy cost. Is that a fair statement?

Ms. DRUYUN. Yes, that is correct.

As a matter of fact, what I would add to that is I’ve done some

unit fly away cost comparisons using base year 1999 dollars; and

today, with the maximum production rate of 36 aircraft a year, we

are projecting 84.7 million per aircraft. If I were to put that back

up to its original number of 750, with a maximum rate of 48 aircraft a year, it would lower its cost from 84.7 million to 63.4 million.

The point is, you know, all of these aircrafts are very sensitive

to their costs as to the quantity and the rate buy you do per year.

Mr. CHAMBLISS. And another method that we commonly use to

lower that cost per copy is a multiyear buy. Is that a fair statement?

Ms. DRUYUN. Yes, that is correct.

Mr. CHAMBLISS. And do we have some experience to show that

the multiyear buy does, in fact, lower that per-copy cost?

Ms. DRUYUN. Yes. I think the best example I can give the committee today is the C–17 program. The C–17 program entered into

a multiyear procurement with the express approval of Congress,

and we were able to take out approximately 51⁄2 percent of the recurring cost of that airplane.

I think it’s a very good example of what you can do when you

have stability, funding stability in a program. And part of the F– 22 program, when we reach 1 of 4, is by then we will have completed all operational testing and development testing, is to be able

to enter into a multiyear procurement; and our estimate is that

we’ll be able to achieve at least a 51⁄2 percent savings.

Mr. CHAMBLISS. And is it a fair statement that the F–22 program, from a cost perspective, is now at a very high profile in the

Department of the Air Force?

Ms. DRUYUN. Absolutely. But I will tell you that it has been a

very high profile for a fair number of years. I have conducted

monthly execution reviews on this program before it ever came

under a cost cap.

What I have found in my own experience in managing complex

programs in terms of my oversight responsibilities is I meet every

single month with the contractor and my program management

team and I drill down into, you know, where are we in performing

this contract, what is driving the costs, what is driving the schedule and are we meeting the technical requirements. And I find that

when you do this month after month after month, you really get

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a team working and focusing together and understanding what it

is that they need to do to be able to bring a program, in this case

the F–22, within the cost cap.

Mr. CHAMBLISS. Did you go through a similar procedure with the

C–17 program?

Ms. DRUYUN. Yes, I did. And I think the C–17 is a great example

of a program that turned around because of that and took tremendous focus and efforts not only on the Air Force’s part but also on

OSD’s part. And you are seeing the same type of teamwork today

on the F–22.

Mr. CHAMBLISS. And are you comfortable again that you’re going

to be able to meet these caps that have been imposed by Congress

on the F–22 program?

Ms. DRUYUN. In all the data that I have seen to date, yes, I am.

And I have said that, I think, very clearly in my statement, as well.

And this will be a program that we will continue to monitor on a

monthly basis, lay in the right metrics, and ensure that we have

the right mechanics in place to be able to turn this into reality.

And it’s hard work. This is not easy.

Mr. CHAMBLISS. Mr. Chairman, that’s all I have. And again, I

thank you for allowing me to participate.

Mr. SHAYS. I’m having trouble knowing what the benchmark is.

And because I have trouble knowing what the benchmark is, it’s

harder for me to have a sense of quite where we are. And I think

partly legitimately the benchmark has changed. And I realize there

are benchmarks within the overall benchmark. So I’m just going to

make a reference first to the GAO report that was dated March

1998, and I’m on page 8 of that.

Do you have that report? It’s entitled, ‘‘F–22 Aircraft, Progress

in Achieving Engineering and Manufacturing Development Costs.’’

Ms. DRUYUN. We’re looking to see if we’ve got it with us.

Mr. SHAYS. Take your time. Time is something we have today.

Do you have that report?

Ms. DRUYUN. Yes, we have found it.

Mr. SHAYS. Thank you.

I’m looking at the chart, table 2. Do you have that?

Ms. DRUYUN. Yes, I do.

Mr. SHAYS. In 1997, we passed the 1998 Defense Authorization

Act; and it was basically the schedule that came under that; and

that was a recognition that we were going to be $1.5 billion over

costs, and for a variety of reasons, production levels changing and

so on. And this chart points out that we were actually from that

schedule of 1997 in the Defense Authorization Act we were actually

16.9 months behind on testing vehicles. And it’s entitled, ‘‘Expected

First Flight as of January 1998.’’ and I think we refer to that as

the Master Schedule 24; is that correct?

Ms. DRUYUN. No. That was a previous master schedule.

Mr. SHAYS. No. I’m talking the middle column. That’s when you

testified, you testified before the Senate committee and we were

looking at 667 overruns then.

Ms. DRUYUN. Right.

Mr. SHAYS. So $1.5 billion overrun. And I’m going to accept there

are going to be some overruns. So just because I say the word

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‘‘overrun,’’ I’m not losing sleep about it right yet; but I just want

the full picture.

So from the first schedule, it’s $1.5 billion. And then the second

schedule we’re looking at $666 million. And that really to me becomes the target that we’re having to deal with, and it’s 16.9

months. And then we’re looking now at the current schedule done

in June 1999 and that 16.9 months has become 28.89 months. Is

that correct?

So we’ve gone from the first one we call the Joint Estimating

Team schedule that was basically done in the defense authorization

and the Joint Estimating Team anticipated a $1.5 billion overrun.

Is that correct?

Ms. DRUYUN. That’s what the GAO report is laying out, yes.

Mr. SHAYS. Well, but you don’t disagree with that part of it?

Ms. DRUYUN. Well, he arrives at his 29.9 months—I believe

that’s the number—based on the 1997 schedule.

Mr. SHAYS. Which is the Joint Estimating Team schedule.

Ms. DRUYUN. Yes. That was the best schedule that—I led the

Joint Estimating Team that we put together.

Mr. SHAYS. I understand. Everyone has an estimate, and every

year we have new estimates; but we’ve got to have some benchmark. And that was the benchmark. We were looking at $1.5 billion of overruns.

Ms. DRUYUN. That’s correct.

Mr. SHAYS. And then 6 months later to a year later, we then

said, well, basically in March 1999 we were looking at an additional $667 million, maybe all justified.

Ms. DRUYUN. And that $667 million number was identified by

the Air Force and provided to GAO along with the cost-reduction

initiatives and the offsets that we set in place back in June 1998.

I gave them that data in March 1999.

Mr. SHAYS. I just want to know what the benchmark is. I just

don’t want us to lower the bar or raise the bar. I want us to know

what the benchmark is.

So we went from the Joint Estimating Team in 1997 of $1.5 billion, and then we went to what I’m told is referred to as the Master

Schedule 24.

You’re nodding your head. The reporter can’t write that.

Ms. DRUYUN. Yes. We’re using now, I believe, Master Schedule

24.

Mr. SHAYS. OK. And so when GAO did its report in March 1998,

they were looking at and you and the Air Force and DOD were

looking at 16.9 months at that particular time, is that correct, of

delays?

Ms. DRUYUN. If you used the Joint Estimating schedules.

Mr. SHAYS. That’s what I’m doing.

Ms. DRUYUN. Yes.

Mr. SHAYS. And if we use the master plan, then what, we have

no overrun at that point then. I mean, what’s the point you’re trying to make to me? I’m trying to understand.

Ms. DRUYUN. The point I’m making to you, sir, is that we went

through a DAB review in 1998. We set a new baseline.

Mr. SHAYS. Can you explain that?

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Ms. DRUYUN. We went through a Defense Acquisition Board review with Dr. Gansler, the Under Secretary of Defense for Acquisition. At that point in time he approved a new baseline, the revised

schedule that we laid in place. And that’s where some of this confusion takes place.

Mr. SHAYS. I’m not really confused. I’m just trying to understand

it. The difference is that I just want to understand what the benchmark is, and I want to understand and then how we evaluate what

you’re doing to that benchmark.

Ms. DRUYUN. Yes.

Mr. SHAYS. And what you want me to know is that the Joint Estimating Team’s benchmark, the $1.5, we’re beyond that point now,

so you want me to just discard it and you want me to go to the

Master Schedule 24 and use that as the benchmark.

Ms. DRUYUN. Well, I would never want anyone to disregard reality. We had a $1.5 billion cost overrun that we put together

under the Joint Estimating Team. We also, as part of the Joint Estimating Team, sent out some revised schedules. And if you were

to read further on, you would find, I think, a little more confusion

in the avionics arena.

Mr. SHAYS. Why do you keep referring to it as confusion? We’re

trying to sort out facts. You keep saying ‘‘confusion.’’ Ms. DRUYUN. Well, I think the GAO testimony, I read it I believe

last night, indicates that we’re not meeting the JET schedule that

we had laid out in terms of our software avionics program; and my

point to you that I tried to make earlier is that we are meeting that

schedule. In some cases we are exceeding it. We’re doing better by

as much as 61⁄2 months.

Mr. SHAYS. You want to talk about a particular element of avionics. Why do you want to jump into that point? Why are you

jumping into that point now? I just want to establish some basic

points.

Ms. DRUYUN. The point I want to make, sir, when you go back

and look at what was baseline in 1997 and what was the new baseline established in 1998, the facts and the data obviously change,

for very solid reasons. We have gone back. Yes, his number of 29.9

months is correct if I look at the 1997 baseline he was operating

off of.

This is a very dynamic program. We have gone back and rebuilt

our test schedule with the test community. We have found efficiencies in that test schedule. I gave you an example of the climatic

lab. If you looked in the 1997 schedule, you would have found I

took two different aircraft into the climatic lab at Eglin Air Force

Base.

Mr. SHAYS. Wait a minute. You’re telling me something you want

me to know, which I haven’t asked; and I want to understand why

you want me to know this right now. What is your bottom line

point?

Ms. DRUYUN. My bottom line point is I think we, frankly, when

you talk about the 29.9 fewer flight test months that we are missing what has happened since the GAO made their comment with

respect to June 1997.

Mr. SHAYS. Would you hear me for a second? Debate this issue

after I established that’s the issue and then tell me that. But I’ll

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be confused if I allow you to just keep doing that because I’m just

trying to establish some basic points and then tell me those points

are irrelevant. But I want to understand if they exist as a point

to be discussed. And so I want to just first establish is that in the

Defense Authorization Act of 1998, passed admittedly in 1997, we

had the Joint Estimating Team say we are going to be $1.5 billion

over. And now we’re saying, OK, now we don’t want it to be worse.

And there may have been reasons why it’s worse, and it may have

been no fault of the Air Force. It may have been all of Congress’s

fault. I just want to understand that.

When you came before the Senate in 1998, we had a revised estimate; and we were looking at changes in dates, maybe all caused

by Congress; and those changes in date I just want to understand

are referred to as the Master Schedule 24. Yes?

Ms. DRUYUN. I believe Master Schedule 24 is what we’re operating off of today, yes.

Mr. SHAYS. OK. By comparing that Master Schedule to the Joint

Estimating Team, we found that we were 16.9 months behind in

the opportunity to test a plane before we go into mass production.

In other words, this is not an irrelevant bit of information. It may

have been justified, but it’s not irrelevant. Is that true? I mean,

every month that we can test this plane before we go into production is an important month to have.

Ms. DRUYUN. That is correct, sir.

Mr. SHAYS. Now, what I’m looking at now—and tell me if I’m incorrect in that—is that we are from the baseline and we’ll subtract

it, too, from the baseline of joint estimation of 1997, we are 28.89

months, or basically 29 months behind. If you want me to use the

Master Schedule 24, I would basically just take the 16.9 from the

28.9, say, and then I’d have had my number that we’re basically,

what, about 12 months behind that schedule? Is that accurate?

Ms. DRUYUN. It turns out to be about 9 months.

Mr. SHAYS. Well, we have one thing that we’re going to have to

look at. Because if I look at the JET estimates, the Joint Estimating Team estimates, to what you’re providing us now, we come up

with 28.89 months. And if you don’t want me to use that baseline,

I’ll subtract the 16.9 from that and, I guess, basically a number.

But whatever you say, your estimate is 9, we’ll clarify that, 12, that

bottom line we are going to use as the benchmark the master plan,

we’re going to use the Master Schedule 24 as the baseline; is that

correct?

Ms. DRUYUN. Yes, that is correct.

Mr. SHAYS. Thank you.

Would you look at under the F–22 Production Cost Plan, this one

here. They are not numbered. I wrote its the 11th on my page.

Ms. DRUYUN. Yes, I have two charts, one for Lockheed and one

for Pratt & Whitney.

Mr. SHAYS. I have the F–22. It’s the chart you showed.

Ms. DRUYUN. One is entitled, ‘‘F–22 Production Costs Reduction

Plan Savings.’’ Mr. SHAYS. Yes. Let’s put that one up.

Ms. DRUYUN. And that refers to Lockheed Martin’s program for

the airframe.

Mr. SHAYS. Oh, it is the airframe.

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Ms. DRUYUN. Yes.

Mr. SHAYS. Now, let me just, since you introduced that, just ask

you. There’s the engine. You have Pratt & Whitney. The other participants in the construction of this aircraft, the major participants,

would be who?

Ms. DRUYUN. We have two development contracts, one for the

airframe. Lockheed Martin is the prime contractor. Boeing is a

major subcontractor that builds part of the airplane. And then we

have an engine contract with Pratt & Whitney. Those are the two

major development contractors.

Mr. SHAYS. Who’s doing the avionics? Or is it many doing the

avionics?

Ms. DRUYUN. Avionics is under the Lockheed Martin contract.

Boeing has lead for much of the avionics under that contract.

Mr. SHAYS. Would you just explain to me, of the airframe and the

engine, who’s at this point able to stay within production costs and

meet the timeframes? Can you compare the two?

Ms. DRUYUN. If I look at the production-cost reduction initiatives

that have been laid in place by Lockheed, in July 1999 this chart

shows you that I was looking at savings in the range of approximately $16.9 billion. When you go back to the previous chart, the

point that I had was that I needed at least $15.1 billion in costreduction initiatives to stay within the cap portion of the production program. And for Pratt, I need $2.5 billion. And to date they

have $4.1 billion worth of production initiatives laid in place.

We’re very actively tracking these. You have to put the two of

them together to arrive at the total production cap.

Mr. SHAYS. I was asking another question. It might have been

hard to follow my train of thought. I was getting distracted. But

since you have brought it up, I’m just curious to know has Pratt

& Whitney, for the most part, kept on schedule? Has it kept on

schedule? Is the engine the biggest challenge, the least challenge

in your whole effort?

Ms. DRUYUN. The engine, if I took you back in history, was a

challenge back in 1994 and 1995. Since that time, if I were to show

you the earned value charts that I look at on a monthly basis, their

schedule looks good and their costs are holding within the spectrum that we had laid out.

Mr. SHAYS. Is the avionics the area where we have the greatest

delay?

Ms. DRUYUN. If you look—and I will go back to the JET schedule

that was laid out in June 1997—no. We are actually doing better

than what we thought we would do under the original JET schedule and avionics. We had problems back in 1997, for example, with

the wings, for example. These were large titanium castings that attach the wings to the aircraft body. We, in fact, had casting problems. We have those problems behind us. We went out and qualified a second source. We now have two sources who are successfully

building those large titanium castings.

And I think that’s where perhaps we tend to get a little bit confused. Back in 1997 we did have problems with the wings. We laid

a new schedule in place once we were confident, and we had proven

that we had qualified a second source who, in fact, could help

produce these castings.

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Mr. SHAYS. The whole purpose of this hearing is to not get confused. So you can keep saying, ‘‘confused, confused, confused,’’ but

we hope to sort it out.

On this chart that we had on 11, which is the ‘‘F–22 Production

Cost Reduction Plan Savings,’’ just describe to me what the $16.9

billion means; and then I want to ask you two questions.

Ms. DRUYUN. OK. The $16.9 billion basically lays out the costreduction initiatives that we have laid in place since the JET concluded its activities in June 1997. They are broken up. If I can

walk you through some of these areas, Production Cost Reduction

Initiatives. That’s kind of the blue-green. It’s basically producibility

improvement projection. We have Diminished Manufacturing

Sources. You have an area that is called ‘‘Lean.’’ This is where you

apply lean principles to the factory. We have Material Efficiencies.

This is where I described, instead of just buying material for the

F–22, you roll it into all the material that Boeing, for example, or

Lockheed would require across the board in their aircraft factories,

and you’re able to leverage much greater pricing with your suppliers, get much better pricing.

We have something called PBC, Performance Based Contracting.

This is where you take your single performance spec and all the

acquisition reform concepts that we have laid into place. Product

Support. This is where you would rely on contractor logistics support as well as comprehensive training and a much stronger warranty program before we actually begin establishing our depots.

We are looking at a multiyear procurement, which would start

at high-rate production, and we’re looking at using ways basically

about a 5 percent savings a year. That’s what that represents.

And then rate savings due to Joint Strike Fighter. Regardless of

who wins the Joint Strike Fighter competition, there will be rate

savings, and that is basically what we have laid in there.

Mr. SHAYS. Is that primarily the engine?

Ms. DRUYUN. Yes, that’s also true for the engine as well, for both

airframe and engine.

Mr. SHAYS. Then the last is the multiyear?

Ms. DRUYUN. The last is the multiyear.

Mr. SHAYS. Which is?

Ms. DRUYUN. This would be once we have satisfied all the requirements in development, successfully completed it, we would be

able to write a multiple year contract like we have for the C–17,

to get stability—funding and stability in the production line, and

you are able to reduce the average recurring price by approximately 5 percent. That’s what that represents.

Mr. SHAYS. Both the multiyear and the Joint Strike Fighter rates

are gigantic assumptions, correct? You don’t know what the

multiyear contracts will be?

Ms. DRUYUN. If you were to use historical models, sir, 5 percent

is right in line with those historical models. That would be dependent upon the Congress approving a multiyear procurement. That

authority does not rest with us.

Mr. SHAYS. I understand that. And I understand you have to

make assumptions, believe me.

Ms. DRUYUN. Yes.

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Mr. SHAYS. And I understand that when Congress votes out

weapons systems that are greater than our 5-year budget allows,

Congress decides—and Defense goes along with it—decides to push

it to the 6th and 7th year, and we increase costs tremendously. But

frankly that happens because both Congress and Defense want

these weapons systems, and they don’t want to see a 5-year budget

because we would be over our weapons systems. So it’s kind of an

agreement that occurs between Congress, the administration and

the Defense Department.

Would you turn please back to the chart that was on the board,

Avionics Software Delivery Dates. I’m interested to know why you

didn’t put the JET schedule in there. You put everybody else’s

schedule in. Was there just an oversight?

Ms. DRUYUN. I tried to simplify the chart. I find you can only put

so much stuff on a chart. But if I could take you back to the JET

schedule, for Block 2.0, we had projected the—the JET laid out

July 2000. The JET for Block 3.0 laid out April 2001. And for Block

3.1, the JET laid out September 2001.

Mr. SHAYS. If I am looking at the third Block, Block 1.1, based

on the JET schedule, would be 4 months behind?

Ms. DRUYUN. No. No, sir. It has already been delivered.

Mr. SHAYS. January 1999?

Ms. DRUYUN. Its need date, according to the JET, was June 11,

1999, and it was delivered May 28, 1999.

Mr. SHAYS. So you’re saying it’s 1 month ahead?

Ms. DRUYUN. Yes.

Mr. SHAYS. On Block 2/3, the seventh Block—sixth Block down,

what was the schedule on that? Didn’t the JET say January 2000,

it anticipates it?

Ms. DRUYUN. Are you referring to the Block that says ‘‘Sensor

Physics?’’

Mr. SHAYS. Yes.

Ms. DRUYUN. This was a change to the JET. This was an additional Block of software that we added in to put it into the avionics

integration lab and into the flying test bed. This was a risk reduction Block that we laid in.

Mr. SHAYS. Let me put it in my words. Are you saying the JET

doesn’t even have this estimate?

Ms. DRUYUN. The JET, that’s correct, did not have something for

a Block 2/3S.

Mr. SHAYS. The last two blocks, do they reflect the delays that

already occurred?

Ms. DRUYUN. The last two blocks, I assume you’re referring to

Block 3.0 and 3.1?

Mr. SHAYS. Yes.

Ms. DRUYUN. Taking you back to the JET estimate, to the JET

schedule, we are ahead of the JET schedule for Block 3.0. The JET

schedule was April 17, 2001. We believe we will deliver that by October 30, 2000. And the metrics I am tracking show that we are

very much on track for that to occur.

The Block 3.1, the JET said September 2001, and we believe that

we will be able to deliver it in June 2001 which is on or ahead of

schedule.

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Mr. SHAYS. They both would be. Let me just ask you one last

chart and I thank my colleague for his patience. If you would look

at chart, Air Vehicle October 1999 Final CPR.

Ms. DRUYUN. Is this the GAO report, sir?

Mr. SHAYS. I’m looking at your report. I’m looking at page 8— not page 8, I just numbered it. It’s just helpful to have page numbers.

You have got it on the board there.

Ms. DRUYUN. OK.

Mr. SHAYS. The December number for commitment, which is the

projection, is $225. Your number in October is $222. These are in

dollars, $222 million. The cost variation now is $238 million. What

do you think it is going to be in December? The bottom line, the number will go up from $238, we are al- ready going to be above it, from $225 to $238. The question I have

is, is it going to be much higher than $238?

Ms. DRUYUN. I laid out projections through really the end of the

program. I don’t remember what my December projection was, but

I expect I will be slightly above it. Some months I am above it,

other months I come within it.

Mr. SHAYS. Above $238?

Ms. DRUYUN. I would have to get you the exact number, but I think it was around $245 million.

Mr. SHAYS. About $20 million over, give or take?

Ms. DRUYUN. Yes.

Mr. SHAYS. Is that significant?

Ms. DRUYUN. No, I don’t think it’s significant. Part of the bump- up that you saw from $227 in September, the real cost variance,

to October, to $238, that’s $11 million, the bulk of that is a onetime charge because of a bonus that Boeing paid to all of its employees when they wrote a new union agreement. So that’s a onetime charge. That’s why you see this bump-up that occurs like that.

But we have typically—what we have typically experienced is in the neighborhood of a $6 million a month variance from the previous month.

Mr. SHAYS. You just triggered a question. I make an assumption

that estimates are allowed to vary by the cost of living. So as the

cost of living goes up, we can change estimates.

How does it work—what is the incentive to Boeing to control

costs if they can basically pass on the costs to you and me and everyone else?

Ms. DRUYUN. That’s a very good question. If I could try to explain how we do inflation estimates on this program—actually we

do it in all defense programs—we have our own inflation rate that

we use in building our budget. It is passed down to us, I believe,

from the Office of Management and Budget. The inflation rate that

we have basically built into this budget is less than—I believe it’s

less than 1 percent. So when we put together the estimate, we had

to use Department of Defense inflation rates.

If you look at, and this is an interesting anomaly, when you look

at the DRI, this is the data resource organization that captures all

the labor statistics, for this type of work typically the inflation rate

that you see with your workers, they get an average of 3 to 4 percent increase per year. The way we have to price it out, I basically

98

have to price it out at less than 1 percent a year. And we track

very carefully the recent agreements that Boeing has struck up,

that Lockheed has struck up, that all of their major subs have entered into, and they are very much in line with the Data Resources

Institute percentage.

This is a challenge to us on this program, and that’s why these

cost reduction initiatives are so important, because these cost reduction initiatives have to offset the difference between the standard inflation rate versus the inflation rate that we use.

Mr. SHAYS. Just let me ask that question, part of the question

again. You answered part of it.

If Boeing ends up passing on, agreeing with its employees to give

them a bonus or salary increases, we’re pretty much locked into

Boeing right now. So do we just absorb that cost?

Ms. DRUYUN. In a cost-type contract, you do. EMD, our development contract, is a cost-type contract.

Now, when I look at my PRTV contract No. 1 and my PRTV contract No. 2, those are firm, fixed price contracts. I do not absorb

those costs; that contractor absorbs those costs.

Mr. SHAYS. Thank you very much.

Thank you, my friend. You have the floor as long as you may

want.

Mr. TIERNEY. I will not want it that long.

Can you just repeat for me again what the cost per F–22 is anticipated to be at this time?

Ms. DRUYUN. Our estimate today of the average unit flyaway cost is $84.7 million apiece.

Mr. TIERNEY. As of this time, what are the number of F–22s that

the Air Force has committed to procure?

Ms. DRUYUN. Our development program, we are receiving nine

air vehicles and two ground test vehicles, the first production readiness test vehicle contract, two vehicles, and the second production

readiness test vehicle contract, six vehicles. So it is 8 and 9; it’s a

total of 17 vehicles.

Mr. TIERNEY. Nine plus two plus two plus six, right?

Ms. DRUYUN. Right. I really don’t count the ground test vehicles

as air vehicles.

Mr. TIERNEY. So you have 17 vehicles that are committed for

right now.

What is the Air Force commitment to procure long lead materials, for how many more F–22s?

Ms. DRUYUN. We have a DAB review, a DAE review scheduled,

as Dr. Schneiter mentioned, this Thursday, the day after tomorrow,

and we will review the status of the program; and we have been

authorized by the Congress to obligate $277 million of procurement

funding for long lead of 10 aircraft for next year.

Mr. TIERNEY. So the answer is 10?

Ms. DRUYUN. Yes, 10 aircraft, $277 million long lead.

Mr. TIERNEY. So we planned originally for, what, 4,337 hours of

flight tests overall for this project?

Ms. DRUYUN. I don’t recall, sir. I would have to get that for the

record.

Mr. TIERNEY. Does that sound about right to you?

Ms. DRUYUN. Yes, that’s about right.

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Mr. TIERNEY. What percentage of that planned flight testing will

we have completed when all this production has taken place for

these 17 plus 10?

Ms. DRUYUN. By the end of this month, I expect we will have 500

flight hours, flight test hours. By the end of December 2000, it will

be over 1,000 flight test hours.

Mr. TIERNEY. Given the complexity of this system, are you comfortable that that is a sufficient testing prior to production?

Ms. DRUYUN. Yes, I am, particularly given the test philosophy we

laid into this program at its inception. Testing at the lowest component and working your way up to the system level, extensive modelling and simulation, and if you were to compare this airplane

today with respect to an F–15 and F–16 or an F–18, we actually

today have more flight test hours than they did when they entered

into low rate initial production.

Mr. TIERNEY. Earlier you and Mr. Chambliss were having a nice

little discussion back and forth, you mentioned the dependency of

the Joint Strike Fighter and the F–22, and you mentioned it again

on your Production Cost Reduction Plan Savings chart under the

orange where you had JSF rates, you said to be a greater savings

in both the airframe and the engine. Would you explain that a little more for me?

Ms. DRUYUN. The decision was made when we began the Joint

Strike Fighter program to use the same core engine that we’re

using on the F–22. As you know, the engine is still in development

for F–22. But that core engine is what is being used by two competing contractors with Pratt for their designs on Joint Strike Fighter.

The avionics system that we have laid in place, as I said, is the

most complex avionics system in any fighter aircraft manufactured

to date. When it is all said and done, my avionics system will have

about 2 million, 2.2 million lines of code. The Joint Strike Fighter

is looking at obviously an even more complex avionics system, and

theirs could be perhaps double that amount. It depends on the individual contractor’s design. But being able to do things like full sensor fusion, would be the first time ever we will have demonstrated

this on the F–22, and it will be a key part of what they will be

doing in Joint Strike Fighter.

Mr. TIERNEY. This would be true whether you are moving directly to the JSF and just doing all of this research and development for that alone and not producing the F–22, right?

Ms. DRUYUN. I guess my point is, the work we’re doing today on

development, proving out that you can do this complex sensor fusion and that you can take the core engine that we have developed

in F–22 is a great risk mitigator for the Joint Strike Fighter program.

Mr. TIERNEY. All the risk goes into the F–22, but if you went

straight into the JSF, it would go into the JSF, right?

Ms. DRUYUN. No, I think very clearly the two programs complement each other in terms of the warfighters’ needs.

Mr. TIERNEY. That may be the case, but in terms of production

and the cost, if you were going to go directly to the JSF, you would

just do all of the research and development for the avionics and for

the engine and whatever directly for that jet?

Ms. DRUYUN. That’s correct.

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Mr. TIERNEY. The savings come only because you decide to double up, you’re going to use the same for the F–22, the same for the

JSF, have larger numbers and spread the cost over that. But if you

didn’t have the production of the F–22, then obviously you would

save all of that and you would be moving right to the JSF.

Ms. DRUYUN. I think you would have a more complex development program with the Joint Strike Fighter.

Mr. TIERNEY. Somewhat, sure.

Ms. DRUYUN. Yes.

Mr. TIERNEY. But other than that, basically I am on point?

Ms. DRUYUN. Yes, it just adds to the complexity and to the risk.

Mr. TIERNEY. Dr. Schneiter, we talked a little bit earlier about

the F–15 Eagle and upgrading it and not upgrading it. What upgrades on the F–15 Eagle could reasonably be contemplated?

Mr. SCHNEITER. If you were going to upgrade it, probably one of

the first things you would do is give it an improved radar. You

would also do some things to upgrade other aspects of the avionics.

You might do some things, if you could, to reduce its observability.

Mr. TIERNEY. If you did all of those improvements, all those upgrades on that, how would it compare to what your projections are

for the F–22 in terms of maneuverability?

Mr. SCHNEITER. I don’t think it would be much different in terms

of maneuverability. The thing you would not have, though, in the

case of the improved F–15 is anywhere near as small a radar crosssection. You would also not have the ability to fly supersonically

without using afterburner. And the big advantage of that is, if you

have to use afterburner to go supersonically, your fuel flow is extremely high, and so you can only do that for a very short amount

of time.

What the F–22 allows you to do is to use supersonic flight for a

longer period of time, because it uses far less fuel than you would

need with afterburner.

Mr. TIERNEY. Is it projected that the JSF will have those capabilities?

Mr. SCHNEITER. The JSF will have a low radar cross-section. It

will have, we expect, an excellent avionics suite. We do not expect

that it will have the so-called supercruise capability, and that is

one of the reasons that it does not do nearly as well in an air-toair role.

Mr. TIERNEY. And in the view of the Department of Defense, is

it not possible to give it that supercruise capability?

Mr. SCHNEITER. I don’t think it would be possible to do it and

still keep within the cost targets which we have for the Joint Strike

Fighter. We expect to build a very large number of Joint Strike

Fighters. We need them to replace aging aircraft in the Air Force,

in the Navy, and in the Marine Corps. Since we will be building

very large numbers, it’s very important that we keep the cost

down, and so we give it only the requirements that it needs to do

its principally air-to-surface role. That does not include supersonic

flight without afterburner.

Mr. TIERNEY. If you had a savings in the F–22, production of the

F–22, would it not make it more reasonable to then adjust the cost

of the JSF to maybe include some things that may be a little more

costly?

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Mr. SCHNEITER. I think the savings we’re talking about in the F–

22, that Ms. Druyun was referring to, were savings that we need

to accomplish in order to buy the aircraft——

Mr. TIERNEY. The savings I’m talking about, just hypothetically,

if we skipped over the F–22 and went to the JSF, you would have

substantial savings from the F–22 and then might it not be reasonable to do some other things with the JSF?

Mr. SCHNEITER. You would have some amount of money left. The

development program, though, on the F–22 is getting close to complete.

Mr. TIERNEY. When you say ‘‘some money left,’’ you would have

a lot of money left, right?

Mr. SCHNEITER. You would have a lot of money left, but if you

then take that money and divide it by 3,000 aircraft, you would

find you wouldn’t want the cost of the aircraft to go up very much.

So I think you would be very disinclined to give a lot of that additional capability to the Joint Strike Fighter.

Mr. TIERNEY. What countries do you think right now are going

to have anything even close to, comparable with the F–15, as you

have talked about it might be modified or upgraded?

Mr. SCHNEITER. I think the Russian aircraft that were referred

to earlier certainly fall in that category.

Mr. TIERNEY. Does it exist or the ones that are on the board?

Mr. SCHNEITER. I believe they exist. The SU–27 does exist.

Mr. TIERNEY. They are under parity with an existing F–15, but

not with an upgraded F–15, right?

Mr. SCHNEITER. I think parity is a rough term here. The thing

we’re talking about in the F–22 is something that is a large step

difference.

Mr. TIERNEY. I’m talking about an upgraded F–15.

Mr. SCHNEITER. You would still expect to have rough parity

among the F–15 class of fighter and the fighters that you would expect to have from other countries.

Mr. TIERNEY. Maybe I’m not being clear, maybe I’m not hearing

you correctly.

You have the so-called ‘‘rough parity’’ according to the report we

were given this morning, rough parity between the Su and the MiG

and the F–15 as it exists now?

Mr. SCHNEITER. Yes.

Mr. TIERNEY. If you were to upgrade the F–15 Eagle to some of

the points you made just a few moments ago, then do you see anything that exists now that even is close or at rough parity with it?

Mr. SCHNEITER. I would expect if we would improve our aircraft,

others would improve their aircraft as well. I think, in any event,

we would not have the degree of superiority that we need to have

in order to have air dominance, even with the improved F–15.

Mr. TIERNEY. Do you feel we had air dominance in the last conflict that we had?

Mr. SCHNEITER. I think we did, yes.

Mr. TIERNEY. I don’t have any further questions.

Thank you, Chris.

Mr. SHAYS. I don’t have many more but I have a few.

The F–22, the EMD cost, it is No. 6, page No. 6 of mine.

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Would you identify the Government Management Reserve number? That seems to be a new number for us. We’re not used to that

number. You have the chart. Take your time. It is what you were

going through, I believe, and what you showed us. We wanted you

to go through all your charts without our interrupting you, but we

wanted you to make reference to them now.

We appreciate sincerely the information you are providing. It

helps us ask our questions. What is the Government Management

Reserve? It is $1.3 billion or $130 million? That’s a new number

for us, or we are just being exposed to that.

Ms. DRUYUN. When I testified at the SASC TACAIR hearing on March 17th, I showed the figure $666 million. What you see here

in March 1999.

Mr. SHAYS. That is the overall chart?

Ms. DRUYUN. Yes.

Mr. SHAYS. And that number is based since the Joint Estimating

Team, that $667?

Ms. DRUYUN. That’s correct. The $130 million management reserve I alluded to at my hearing back in March.

What we have done because the Congress has capped this program and development in particular, normally I have to tax all of

my programs for small business innovative research taxes. They

are across-the-board taxes that you have to do; whenever we cap

a program in development, we exempt it from having to pay those

costs. That has generated another $130 million worth of management reserve for a program manager to use as we complete the development program.

Mr. SHAYS. When you say ‘‘alluded to,’’ that’s a dangerous word.

What does that mean?

Ms. DRUYUN. I did not come out and state what the exact number was, because at the time there were a number of contractors,

both of my contractors, Lockheed and Pratt, were sitting in the audience, and I did not feel it was appropriate at that time to openly

speak to it. I made reference to the fact that we had additional

Government Management Reserve, and that’s what I am showing,

sir.

Mr. SHAYS. That’s not a savings. That’s just basically a way to

meet the cost. It’s an added fund that you can draw on?

Ms. DRUYUN. Right. Because the Congress capped this program.

Whenever you cap a program, it does not make good management

sense to us to tap into that to pay some of the taxes that are required on an annual basis. I’m doing the same thing right now in

the Joint Strike Fighter program as well.

Mr. SHAYS. Would you just—I am just trying to think of the impact. I just want to make sure I understand it. The bottom line is,

it’s a reserve that you can tap into, so you’re not making a savings—and I’m not saying you should, I’m just trying to understand

it—you are not making a savings in the program, an offset in the

program, you’re drawing on reserve to help meet your numbers?

Ms. DRUYUN. That’s correct, to offset the worst-case cost growth

that I identified back in March 1999.

Mr. SHAYS. Thank you. When I look at external stores deferral,

deferral means you didn’t save, but you postponed. That is still in

that chart there?

103

Ms. DRUYUN. Yes, that’s correct.

Mr. SHAYS. It is $140 million?

Ms. DRUYUN. Yes.

Mr. SHAYS. So the answer to the question is yes to my question.

So it is $140 million that we are going to incur, but we are going

to incur later, outside the caps?

Ms. DRUYUN. That’s correct. That was a decision that we made

with Air Combat Command.

Mr. SHAYS. But we’re going to have to come up with that money

some way, sometime.

Ms. DRUYUN. It’s laid into the program. We always do what we

call follow-on test and evaluation. And these airplanes will continually go through additional testing as long as we have them in inventory.

What we agreed we would do——

Mr. SHAYS. This primarily was weapons systems? Does this include the deferral of the weapons?

Ms. DRUYUN. No, it does not include the deferral of weapons. It

only includes—excludes—let me tell you what we are doing as part

of the development program so you can understand it.

We’re going to certify the full compliance of weapons systems—

AMRAAMs, M9X, our gun, the thousand-pound JDAM, which is all

internal carriage which you need so you can have stealth performance. You hang that stealth on the outside of the airplane, you

don’t have stealth performance. This represents the go-to-war scenario configuration that our warfighters will take with the F–22.

So as part of the development program, we’re going to certify the

full stealth combat configuration and the basic ferry configuration.

What we’re going to postpone and do as part of follow-on test and

evaluation, because we would never take this airplane to war that

way is the external carriage of AMRAAMs or JDAMs, basically the

external carriage of additional munitions or missiles that you

would carry.

Mr. SHAYS. That won’t be stealth?

Ms. DRUYUN. That’s correct. As long as you hang that on the bottom of the airplane, it is no longer stealth.

Mr. SHAYS. Let me be clear. So what comprises the external

stores deferral?

Ms. DRUYUN. The cost to go through the full op test certification

is $140 million and that is what we have deferred to follow-on test

and evaluation.

Mr. SHAYS. But it wasn’t included in the original EMD estimates,

originally?

Ms. DRUYUN. I believe it was.

Mr. SHAYS. OK. Are there any other deferrals that show up in

any of these other numbers or are deferrals only in this number of

$140?

Ms. DRUYUN. To the best of my recollection, it is only in this

number.

Mr. SHAYS. Let me just conclude with an observation, and I’m

happy to have you make a response to it.

You use a per plane cost, per copy cost of $84 million. If we used

all the research and development, we would come up with $184

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million. Make your argument as to why we should look at $84 million and not $184 million.

Ms. DRUYUN. We have always reported the average unit flyaway

cost with respect to all of our aircraft. I would tell you every single

year when we brief the House Appropriations Committee and have

hearings, I basically show three sets of numbers.

Would you pull out my backup chart.

Mr. SHAYS. Do I have that chart?

Ms. DRUYUN. I believe you do.

Mr. SHAYS. It was part of this one?

Ms. DRUYUN. It should have been. Did we include backups?

Mr. SHAYS. I can’t read it there, so if someone could give us a

chart.

Do you have any other backup charts you want to show us? They

may be the most interesting.

Ms. DRUYUN. No. I had a couple of other backup charts, but I

don’t think you would find them to be as interesting.

What we basically do on an annual basis is report the flyaway

cost, the unit procurement cost and the program acquisition unit

cost. We show that in fiscal year 1999 dollars as well as then-year

dollars. We give that every single year to the appropriations and

authorization committees.

Mr. SHAYS. So the program acquisition unit cost would be your

entire cost of everything divided by the number of planes?

Ms. DRUYUN. Yes, and it includes your RDT&E, your military

construction, anything that was ever spent with respect to the F– 22 program.

But a true measure of a program is really its flyaway cost. This

is the actual recurring cost and nonrecurring startup charges to actually build an airplane.

Mr. SHAYS. Thank you.

I thank you. I would invite each of you to respond to any question we didn’t ask that you wanted to answer or any other comment you want to make.

Mr. SCHNEITER. I have nothing more.

Ms. DRUYUN. I have nothing more. Thank you, sir.

Mr. SHAYS. Thank you both very much. I really appreciate both

of you being here and your testimony.

I would also like to thank our court reporters; we had Ryan Jackson and Bill Odom. On loan to us, Major Mike Mueller, who was

assisting us in the charts, and I thank you for doing that. I thank

you for having the charts; it was very helpful. Don Springman, who

is the senior evaluator, GAO, he was helpful too, and I thank him.

All of you have a beautiful day, a Merry Christmas, a Happy

New Year, a Happy Hanukkah, and a lovely day today. Thank you.

[Whereupon, at 12:45 p.m., the subcommittee was adjourned.]

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