United States Government Accountability Office

GAO Testimony before the Subcommittee on 

Airland, Committee on Armed Services, 

U.S. Senate

TACTICAL AIRCRAFT

Questions Concerning the 

F-22A’s Business Case 

Statement of David M. Walker, 

Comptroller General of the United States 

For Release on Delivery

Expected at 9:30 a.m. EST 

Tuesday, July 25, 2006

 

GAO-06-991T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

July 25, 2006

TACTICAL AIRCRAFT

Questions Concerning the F-22A's 

Highlights of GAO-06-991T, a testimony Business Case 

before the Subcommittee on Airland, 

Committee on Armed Services, U.S. 

Senate 

The F-22A—the Air Force’s next 

generation air superiority fighter

aircraft—incorporates a low 

observable (stealth) and highly 

maneuverable airframe, advanced

integrated avionics, and a new 

engine capable of sustained

supersonic flight without the use of

afterburners. The F-22A acquisition 

history is a case study in increased

cost and schedule inefficiency. 

Since the program’s inception in 

1986, the Air Force has added new 

requirements, more than doubled

the length of the acquisition 

schedule, cut purchase quantities

by more than 75 percent, and

increased total acquisition unit 

costs by more than 100 percent. 

The F-22A program’s significant 

cost and schedule growth is

illustrative of a number of systemic 

problems in the Department of 

Defense’s (DOD) major weapon

system acquisitions. Currently, 

DOD is proposing to buy the 

remaining 60 F-22As under a 3-year 

contract. At the request of this

subcommittee, GAO was asked for 

its views on DOD’s latest plan to

restructure the program and on the 

Air Force’s request for authority to 

enter into a multiyear contract to

implement this restructuring. 

Under DOD’s latest restructuring of the F-22A program, as reflected in the 

fiscal year 2007 President’s budget, the program will spread the production 

of the remaining 60 aircraft over 3 lots extending the period of production by 

2 years. The Air Force states that this is to avoid a gap in the production 

capabilities of the industrial base sector responsible for the latest generation 

of tactical fighter aircraft. Stretching out the production period will result in 

lower annual production rates and increased costs to the program of $1.7 

billion when compared to the costs the program would have incurred under 

the fiscal year 2006 President’s Budget proposal to buy the then-remaining 

quantity of 56 F-22As in two annual lots. The restructured F-22A program’s 

increased costs to complete the production will reduce the Department’s 

options in fulfilling other important national security priorities. 

Having made the decision to extend the program, the Air Force, in an 

attempt to reduce some of the costs of the restructured program, is 

proposing that Congress authorize its use of a multiyear contract to buy the 

remaining aircraft. The Air Force has concluded that it has met the six 

statutory criteria required for entering into a multiyear contract. GAO offers 

several points for congressional consideration. The Air Force estimates 

savings of approximately $225 million, 2.7 percent of remaining procurement 

cost for 56 aircraft—a significantly lower estimated savings percentage than 

past multiyear procurement program estimates, which averaged 13 percent.

The Air Force wants to buy 4 additional aircraft at a cost of $674 million to 

save an additional $10 million, but has not yet funded this plan. Finally, the 

statute requires that production rates and quantities remain substantially 

unchanged during the contract period as downward adjustments could 

impact contract prices and savings. F-22A quantities have fluctuated recently

and further downward adjustments after signing a multiyear contract could 

result in cancellation costs as high as $201 million currently not funded. 

Changes in F-22A Procurement Quantities and Effect on Unit Costs 

0

100

200

300

400

500

600

700

800

1986 1991 1993 1997 2004 2005

0

50

100

150

200

250

300

350

400

Aircraft quantity Total cost per aircraft (dollars in millions)

Source: U.S. Air Force (data); GAO (presentation).

Year

Total investment cost per aircraft

750

648

183

$149

$342

$118

$183

Quantity

Average procurement cost per aircraft

www.gao.gov/cgi-bin/getrpt?GAO-06-991T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Michael J. 

Sullivan at (202) 512-4841 or 

sullivanm@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the Department of Defense’s 

(DOD) proposal to buy sixty F-22As under a multiyear contract. As you 

know, GAO has recommended that the Air Force prepare a new business 

case for the F-22A program to justify the substantial changes planned in 

the mission roles and the quantities to be acquired—a recommendation 

that has yet to be implemented. Additionally, we share the Congress’s 

concerns over DOD’s wherewithal to acquire the F-22A and other key 

assets in light of current and expected resource constraints. Over the past

several years, it has become increasingly clear that DOD must reassess 

what is affordable and separate its many wants from its real needs. DOD 

must make tough acquisition choices in order for the country to begin to 

address the large and growing fiscal imbalance it faces. 

My statement today—which is based on our recent report on the F-22A 

program1

—will highlight our key concerns with moving forward with F22A procurement, as DOD proposes. Our work was performed in 

accordance with generally accepted government auditing standards. 

Our review indicates that DOD’s proposal to add 2 years to the production 

period of the remaining F-22A’s and to procure the planes under a 3-year 

multiyear contract will cost about $1.7 billion more than called for to 

procure the last two annual lots as compared to the amount previously 

provided in the fiscal year 2006 budget. The primary reasons cited for this 

change to the program are industrial base health and the need to preserve 

the F-22A production line until production of the Joint Strike Fighter (JSF) 

begins. The Air Force has reported to Congress that the F-22A program 

meets the criteria set forth in section 2306b of Title 10 of the U.S. Code for 

a multiyear contract. We have serious concerns regarding whether all of 

the criteria have been satisfied (i.e. substantial savings, sufficient funding, 

and stable quantities). 

Summary 

First, the timing of the proposal—near the end of the F-22A’s acquisition—

reduces the ability of the program to achieve substantial savings. Savings 

are currently estimated to be about $225 million or 2.7 percent of 

remaining procurement cost if 56 additional aircraft are purchased—a 

 1

 GAO, Tactical Aircraft: DOD Should Present a New F-22A Business Case before Making 

Further Investments, GAO-06-455R (Washington, D.C.: June 20, 2006). 

Page 1 GAO-06-991T 
savings that, in terms of percentage of costs, is far below historic 

estimates of savings for other multiyear contracts. Second, the Air Force is 

proposing to buy 4 additional aircraft—60 in total--at an added cost of $674 

million in order to save an additional $10 million under the multiyear 

contract; however, it has not funded the proposal. Finally, to satisfy other 

needs in DOD, F-22A quantities have been unstable over the last 2 years 

reducing quantities from 279 aircraft to 179 in the fiscal year 2006 budget 

and increasing quantities to 183 aircraft in the fiscal year 2007 budget. If 

quantities continue to fluctuate downward it could result in additional 

costs. For example, according to the Air Force cancellation costs alone 

could be as much as $201 million—a sum currently unfunded in the 

multiyear proposal. This financial risk, when compared to the savings 

projected from a multiyear contract, raises additional questions about the 

proposal and limits flexibility for future decision making. 

The F-22A program is illustrative of a number of systemic problems in 

DOD’s acquisition system. First, the F-22A was approved in an 

environment with no clear agreement on enterprise-wide priorities and 

without due consideration of current and likely future threats and 

resource constraints. Second, the requirements and key program 

specifications were not fixed when the program began and have changed

over its decades-long development. Third, key procurement decisions 

were made without adequate consideration of technology and other 

program risks, with costly consequences. And finally, in this program as in 

many others, DOD has paid out significant incentive and award fees to its 

contractors despite large cost overruns and schedule delays. 

Background 

The program has been a case study in cost increases and schedule 

inefficiency in major weapon system acquisitions. We have issued 

numerous reports over the years on the problems and issues associated 

with the F-22A development program. Beginning in 1986 the program was 

expected to complete development in 9 years for an estimated cost of 

$12.6 billion. After taking 19 years to complete development in December 

2005, development costs were reported at $26.3 billion—109 percent more 

than expected. The end result of these inefficiencies in the acquisition 

program has been a loss of buying power as the reduced quantity of 

aircraft will require a significantly higher unit cost than expected. Figure 1 

shows the changes in procurement quantities over time and allocates both 

development and procurement costs to those changing procurement 

quantities to show the trend of average total acquisition unit costs and 

procurement unit costs. 

Page 2 GAO-06-991T 
Figure 1: Changes to Quantities and Costs of F-22As as Program Has Evolved

0

100

200

300

400

500

600

700

800

1986 1991 1993 1997 2004 2005

0

50

100

150

200

250

300

350

400

Aircraft quantity Total cost per aircraft

(dollars in millions)

Source: U.S. Air Force (data); GAO (presentation).

Year

Total investment cost per aircraft (development and procurement cost)

Average procurement cost per aircraft

Quantity

750

648

183

$149

$342

$118

$183

While the F-22A program has completed development and testing of its 

initially planned air-to-air capability, the Air Force now sees a need to 

develop more robust air-to-ground attack and intelligence-gathering 

capabilities. Therefore, it has started a multibillion dollar development 

program for these additional capabilities. These capabilities were not 

previously considered a primary role for the F-22A as it was intended to be

primarily an air-to-air fighter to replace the F-15. From the outset the F22A was built to counter expected large numbers of new advanced Soviet 

fighter aircraft but this threat never materialized. The expanded air-toground attack capability is intended to allow the F-22A to engage a greater 

variety of ground targets, such as surface-to-air missile systems, that have 

posed a significant threat to U.S. aircraft in recent years. 

Amidst changes to expand F-22A missions and roles, the procurement 

quantities and acquisition strategy have also been in flux in recent years. 

In December 2004, the Office of the Secretary of Defense (OSD) reduced 

planned quantities to a total of 179 F-22A aircraft. At the same time, it 

decided to terminate the procurement program at the end of 2008 in order 

to free up about $10 billion for other priorities. Then, the fiscal year 2007 

budget extended the procurement program 2 years, to 2010. The 

DOD’s Latest 

Restructuring Is More 

Expensive and Slows 

F-22A Deliveries 

Page 3 GAO-06-991T 
department cited the health of the industrial base—the need for 

maintaining a fifth generation fighter2

 production line—as its rationale for 

this added expense and delay. DOD also proposed buying four additional 

aircraft and using a 3-year multiyear contract to procure the remaining 60

F-22As to mitigate some of the costs of extending procurement for at least 

2 years. 

To identify savings that might reduce the cost impact of the restructured 

acquisition strategy, the Air Force is proposing a multiyear contract to buy 

the remaining F-22A aircraft. The Air Force formulated an estimate for 

three annual contracts to compare to a single multiyear contract to buy 56 

aircraft. While this comparison can provide a basis for determining 

potential savings, the Air Force had not previously planned to buy the 

remaining aircraft over 3 years. Instead, the fiscal year 2006 President’s 

Budget included procurement costs to buy 56 F-22As in two annual lots—

29 F-22As in 2007 and 27 F-22As in 2008. Therefore, even utilizing the 

multiyear contract authority, the restructuring will add $1.7 billion in cost 

to the procurement program and slow deliveries of the final aircraft when 

compared to the plan previously provided for in DOD’s fiscal year 2006 

budget. The final 60 aircraft will each cost 10 percent more on average 

(unit procurement costs increase from $166 million per aircraft to $183 

million per aircraft) under the restructured plan, even taking into account

expected savings from the multiyear procurement. 

The Air Force submitted its justification to the Congress on May 16, 2006,

to buy the remaining 56 to 60 F-22A aircraft over a 3-year period with a 

multiyear contract. To enter into a multiyear contract for the F-22A, the 

Air Force must first obtain specific legislative authorization in both the 

annual DOD appropriations act and in an authorization act. If

authorization is obtained from Congress, the Air Force must also meet the 

statutory criteria listed in 10 U.S.C. § 2306b(a) for entering into a multiyear 

contract. The justification package the Air Force submitted to Congress in 

Concerns Whether 

DOD Satisfies All 

Multiyear 

Procurement Criteria 

 2

 F-22A and F-35 are considered fifth generation fighter aircraft as compared to the F-15, F16, F/A-18, and F-117. The primary characteristics are Very Low Observable (VLO) stealth 

and information fusion capabilities that make fifth generation aircraft more survivable and 

lethal. 

Page 4 GAO-06-991T 
support of its request for authority to enter into a multiyear contract for 

the F-22A concludes that the statutory criteria for multiyear procurement 

have been met and that such a multiyear contract would provide 

substantial cost savings or avoidance over three annual lot buys. In 

reviewing these criteria and the Air Force’s position, we have serious 

concerns regarding whether all of the criteria have been satisfied (i.e. 

substantial savings, sufficient funding and stable quantities). Table 1 lists 

the six criteria and our observations (we did not assess two of the 

criteria). 

Table 1: Observations of F-22A Multiyear Contract Criteria 

Multiyear criteria GAO observations

Contract will result in substantial savings Substantial savings are not defined in the statute, but the 2005 F-22A Independent 

Cost Estimate states that between 1982 and 1989 estimates for multiyear savings for 

proposed weapon systems averaged 13 percent. The Air Force justification package 

shows only 2.7 percent cost avoidance ($225 million) for 56 aircraft. 

Reasonable expectation agency head will 

request funding at required level to avoid 

contract cancellation 

The Air Force has indicated that its multiyear budget is currently under funded by $674

million and is seeking authorization to use incremental funding rather than fully funding 

each aircraft lot. 

Minimum need expected to remain 

substantially unchanged during contract 

period in terms of production rates and total 

quantities 

F-22A quantities have changed in the last 2 fiscal years to accommodate the need to 

fund other annual priorities. Given the potential for other priorities in the future—military 

presence overseas, global war on terrorism, and response to natural disasters—there is

a risk that F-22A quantities would need to be adjusted again. Quantity reductions could 

result in cancellation costs of as much as $201 million, an amount that is currently 

unfunded. 

There is stable design, and technical risks

are not excessive

The baseline F-22A aircraft design is stable (the proposed multiyear contract is for the 

baseline aircraft). While not the subject of the proposed multiyear contract because it is

a separate effort, the design for adding new ground attack and ISR capabilities has not 

been demonstrated through development or operational testing and cannot be

considered “stable” at this time. 

Estimates of contract cost and cost 

avoidance are realistic 

Not assessed. 

Use of the multiyear contract will promote 

national security of the United States

Not assessed. 

Source: GAO Analysis and 10 U.S.C. 2306b.

Substantial Savings 

Criterion 

To identify potential savings, the Air Force formulated an estimate for 

three annual contracts to compare to a single multiyear contract with buys 

of 56 and 60 aircraft. Section 2306b of Title 10 of the U.S. Code does not 

define what constitutes substantial savings, but the 2005 F-22A 

Independent Cost Estimate3

 indicates that from 1982 to 1989, DOD 

 3

F/A-22 Independent Cost Estimate, Institute for Defense Analyses, August 2005. 

Page 5 GAO-06-991T 
proposed at least 60 multiyear procurement programs for congressional 

approval, with estimated savings averaging 13 percent. The Air Force 

estimates F-22A multiyear procurement savings to be 2.7 percent if 56

aircraft are procured, approximately $225 million. The justification 

package also shows that an additional $10 million could be saved by

buying 60 aircraft as stated in the fiscal year 2007 President’s Budget, but it 

would require an additional $674 million not included in the fiscal year 

2007 future year defense plan. 

The proposed multiyear contract for 60 F-22As submitted with the fiscal 

year 2007 budget is under funded by about $674 million—funds the Air 

Force believes it will need in fiscal years 2008 through 2010 to complete 

these buys. Additionally, the Air Force has proposed using incremental 

funding to pay for the multiyear contract. Instead of fully funding the buy 

for each fiscal year, this proposal plans four funding increments—

economic order quantity, advanced buy, subsystem, and final assembly. 

Incremental funding for multiyear procurement is neither permitted by the 

annual DOD appropriations act4

 nor the multiyear authorizing statute, 

which requires that funds only be obligated under a multiyear contract “for

procurement of a complete and usable end item.”5

 The Air Force is seeking

an exception to these requirements in its request to Congress for statutory 

authorization for the multiyear contract. The congressional defense 

committees are aware of the concerns with incremental funding, and those 

committees that have completed a defense bill have provided full funding

for the initial year of the proposed multiyear contract. However, the 

congressional authorization and appropriations processes are ongoing. 

Funds Have Not Been 

Budgeted 

Multiyear Contract 

Quantities Could Be 

Changed in the Future 

OSD has restructured the F-22A acquisition program twice in the last 2 

years in order to allocate funds to other priorities. In December 2004, OSD 

reduced the program from 279 to 179 F-22As to save $10.5 billion. Then in 

December 2005, OSD changed the F-22A program again, adding $1 billion 

to extend the production line for 2 years to ensure a fifth generation 

fighter aircraft production line would remain in operation in case the JSF

experiences delays or problems. So far we have not seen detailed rationale

 4

 Section 8008 of the fiscal years 2005 and 2006 Department of Defense Appropriations Acts 

(Public Laws 108-287 and 109-148, respectively) require full funding of units to be procured. 

5

 10 U.S.C. § 2306b (i)(4)(A). This restriction was added by section 820 of the Bob Stump 

National Defense Authorization Act for Fiscal Year 2003 (Public Law 107-314). 

Page 6 GAO-06-991T 
concerning the impact to the health of the industrial base. OSD also added 

4 aircraft at this time for a total of 183 F-22As. We have also not seen the

threat based justification for buying these additional aircraft at an 

estimated cost of $674 million. Given the potential for priorities to change 

again in the future to fund the military presence in Iraq and Afghanistan, 

fight terrorism around the globe, fund the response to natural disasters, or 

for other reasons, there is risk that F-22A quantities under the proposed 

multiyear contract would need to be adjusted again. According to the Air

Force’s multiyear proposal, if a reduction in quantity were to happen, it 

could result in cancellation costs of as much as $201 million in fiscal year 

2007, the first year of the multiyear contract. The current Air Force 

acquisition strategy does not fund these potential cancellation costs. 

Therefore, the Air Force would have to find funds from other sources to 

pay these costs in the event quantities are reduced. This is therefore a risk 

that must be weighed in approving a multiyear contract for the F-22A, 

particularly at this late stage of its procurement program as it could limit 

the flexibility of decision makers in the future. 

Other circumstances argue against using a multiyear contract. Multiyear

contracts are typically used earlier in an acquisition program when greater 

efficiencies in buying materials and subsystems can be achieved and 

thereby provide more substantial savings at both the prime contractor and 

subcontractor levels. In the case of the F-22A, the multiyear proposal 

comes at the end of production. At the same time, the F-22A program 

plans to reduce the annual buying rate, providing less opportunity to incur 

savings. Previously, the Air Force had planned to purchase 29 and 27 

aircraft in fiscal years 2007 and 2008, respectively. The multiyear plan calls

for 20 aircraft a year in 2008, 2009, and 2010—7 to 9 aircraft fewer in each 

of the 2 years under the previous plan. Additionally, it appears the primary 

purpose for proposing a multiyear contract was to mitigate the additional 

cost of extending procurement for an additional 2 years; even with the 

proposed multiyear contract, procurement costs will be $1.7 billion higher 

than costs proposed under the previous program structure. 

Other Factors 

Influence the 

Practicality of Using 

Multiyear Contracts at 

This Stage in the F22A Program 

The length of the proposed multiyear contract and the lower quantity of 

aircraft planned for multiyear are concerns identified in the May 2006 Air 

Force business case analysis for F-22A multiyear procurement. For 

example, the business case analysis states that the average number of air 

Page 7 GAO-06-991T 
vehicles procured under a multiyear contract was 3086

—more than five 

times the number of aircraft the F-22A program is proposing to buy under

its 3-year contract. The analysis also acknowledges that there is limited 

opportunity to obtain additional savings from the previously planned 

initiatives to improve the F-22A production efficiency as these savings 

were obtained earlier in the acquisition cycle. 

In conclusion, the Air Force’s decision to extend production for 2 years for 

industrial base purposes has increased the length and cost of the F-22A 

program. We are not sure what the Air Force’s rationale was for extending 

production and how it specifically relates to maintaining the industrial 

base so as to warrant an increased cost of at least $1.7 billion. At the same 

time, our nation’s large and growing long-term fiscal imbalance requires 

the federal government—especially DOD—to begin making hard choices 

between its many wants and real needs. In this context, we continue to 

believe that the Congress needs to reevaluate a range of existing federal

programs and polices, including the F-22A program, based on credible 

current and future threats, current and expected future national budget

levels and priorities, and the warfighter’s many true needs. As it stands, 

the restructured F-22A program’s increased cost to complete the 

procurement program—$1.7 billion—will eventually serve to reduce the 

Department’s options in fulfilling other important national security 

priorities. This at a time when the difference between DOD’s program 

wants and its expected resource levels is growing. 

 6

 The Institute for Defense Analysis analyzed the multiyear procurement programs for the 

F/18, C-17, C-130J/KC-130, and F-16. Institute for Defense Analysis, F-22A Multiyear

Procurement Business Case Analysis (May 2006). 

Page 8 GAO-06-991T (120581) 
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