FIGHTER AIRCRAFT

Better Cost Estimates 

Needed for Extending 

the Service Life of 

Selected F-16s and 

F/A-18s

Report to Congressional Committees

November 2012

GAO-13-51

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-51, a report to 

congressional committees

November 2012

FIGHTER AIRCRAFT

Better Cost Estimates Needed for Extending the 

Service Life of Selected F-16s and F/A-18s

Why GAO Did This Study

Fighter aircraft are important to 

achieve and maintain air dominance 

during combat operations as well as to 

protect the homeland. DOD plans to 

replace many of its current fighter fleet 

with the F-35; however, the F-35 

program has experienced numerous 

delays and cost increases. To maintain 

fighter capabilities and capacity, the Air 

Force and Navy have decided to 

upgrade and extend the service life of 

selected F-16 and F/A-18 aircraft. In 

this context, two subcommittees of the 

House Armed Services Committee 

asked GAO to (1) describe the Air 

Force and Navy plans to upgrade and 

extend the service life of selected F-16 

and F/A-18 aircraft; and (2) assess the 

extent to which cost estimates for 

these upgrades and life extensions 

exhibit characteristics of a high-quality

cost estimate. GAO obtained 

documentation of the plans and 

estimates, compared the estimates to 

best practices outlined in the GAO 

Cost Estimating Guide, and assessed 

factors that could affect total costs. 

What GAO Recommends

GAO recommends that the Air Force 

and Navy follow all best practices to 

enhance the credibility of the cost 

estimates for the F-16 and F/A-18

upgrades and life extensions including

an assessment of the potential range 

of costs and seeking independent cost 

estimates. DOD agreed with all four 

recommendations.

What GAO Found

The Air Force plans to upgrade and extend the service life of 300 F-16 aircraft and 

the Navy 150 F/A-18 aircraft, at a combined cost estimated at almost $5 billion in 

fiscal year 2013 dollars. 

• The Air Force plans to extend the service life of selected F-16s by 2,000 flying 

hours each as well as install capability upgrades such as an improved radar. 

The Air Force estimates that it will complete this work by 2022 at a cost of 

$2.61 billion. About 28 percent of the projected costs are included in the Air 

Force’s spending plans through 2017, with the remainder expected to be 

incurred in 2018-2022. 

• The Navy plans to extend the service life of selected F/A-18s by 1,400 flying 

hours each and may install capability upgrades on some of the 150 aircraft—

such as adding the ability to integrate with newer aircraft. The Navy projects 

that it will complete the life extension by 2018 at a cost of $2.19 billion, with 

most of these costs included in its spending plans through 2017, but costs 

associated with any upgrades are not included in the Navy estimate or in its 

spending plans. 

Air Force and Navy officials told GAO that they could ultimately extend the service life 

of up to 650 F-16s and 280 F/A-18s if needed to attain desired inventory levels. 

The Air Force’s and Navy’s cost estimates to upgrade and extend the service life of 

selected fighter aircraft exhibit some characteristics of a high-quality cost estimate but 

do not reflect all potential costs. The estimates were: well-documented since they 

identified data sources and methodologies; accurate since they accounted for 

inflation and were checked for errors; and mostly comprehensive since they included 

the work planned and identified key assumptions. However, the estimates were not 

fully credible in part because they did not assess the extent to which the total costs 

could change if additional work is done or more aircraft are included in the programs. 

For example, Air Force leaders indicated in March 2012 that they intend to upgrade 

and extend the service life of 50 additional F-16s beyond the original 300, but the Air 

Force has not assessed how much the cost might increase if more aircraft are added 

to the program. In addition, the Navy plans to upgrade the capabilities of some 

aircraft at the same time as the service-life extension, but this cost is not included in 

the Navy estimates. Also, the Navy may extend the life of or replace other aircraft 

components that are becoming obsolete, but these costs—which could add an 

average cost of $5.64 million per aircraft—were also not included in the original $2.19 

billion estimate. Another factor affecting the credibility of the estimates is that they 

have not been compared to an independently developed estimate. GAO’s past work 

has shown that such an independent cost estimate is one of the best validation 

methods since an independent cost estimate tends to be higher and more accurate 

than a program office estimate. Air Force and Navy officials told GAO that they use 

Department of Defense and military department guidance that allows for some 

variation in how the estimates are developed depending on the dollar value and 

maturity of the program. However, these programs--which are critical to maintain 

fighter capability and capacity as current inventory ages--total almost $5 billion and 

the costs will increase if program quantities and scope increase. Without fully credible 

cost estimates, including an analysis of how much total costs may increase, decision 

makers will not have visibility into the range of potential costs, which could hinder 

their ability to formulate realistic budgets and make informed investment decisions.

View GAO-13-51. For more information, 

contact John H. Pendleton at 404-679-1816 or 

pendletonj@gao.gov. 
Page i GAO-13-51 Fighter Aircraft

Letter 1 

Background 4

Air Force and Navy Programs Would Extend the Service Life of 450 

Aircraft at a Cost of Nearly $5 billion 5

Air Force and Navy Cost Estimates Exhibit Many Characteristics of 

a High-Quality Cost Estimate but Do Not Reflect Some 

Significant Potential Costs 10

Conclusions 14

Recommendations for Executive Action 15

Agency Comments and Our Evaluation 16

Appendix I Scope and Methodology 18

Appendix II Air Force Cost Estimates for Upgrading and Extending the Service Life 

of Selected F-16 Aircraft in Then-Year Dollars 20

Appendix III Comments from the Department of Defense 21

Appendix IV GAO Contact and Staff Acknowledgments 24

Figures

Figure 1: Air Force F-16 and Estimated Costs to Upgrade and 

Extend the Service Life for 2,000 Hours (Fiscal Year 2013 

Dollars in Billions) 7

Figure 2: Navy F/A-18 A-D and Estimated Costs to Extend the 

Service Life for 1,400 hours (Fiscal Year 2013 Dollars in 

Billions) 9

Contents
Page ii GAO-13-51 Fighter Aircraft

Abbreviation

DOD Department of Defense

This is a work of the U.S. government and is not subject to copyright protection in the 

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without further permission from GAO. However, because this work may contain 

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Page 1 GAO-13-51 Fighter Aircraft

United States Government Accountability Office

Washington, DC 20548

November 15, 2012

The Honorable J. Randy Forbes

Chairman

The Honorable Madeleine Z. Bordallo

Ranking Member

Subcommittee on Readiness

Committee on Armed Services

House of Representatives

The Honorable Roscoe G. Bartlett

Chairman

The Honorable Silvestre Reyes

Ranking Member

Subcommittee on Tactical Air and Land Forces

Committee on Armed Services

House of Representatives

Fighter aircraft are important to achieving and maintaining air dominance 

during combat operations as well as protecting the homeland. These 

aircraft operate during the first days of a conflict to penetrate enemy air 

space and defeat air defenses, which allows follow-on forces freedom to 

operate. Overall, the Air Force and Navy have about 3,500 fighter aircraft 

in inventory as of fiscal year 2012, including about 1,020 Air Force F-16s 

and about 624 Navy F/A-18 A-Ds.1

 

1

The Navy figure includes aircraft that are used by the United States Navy and Marine 

Corps. 

Many of the Department of Defense’s 

(DOD) current fighter aircraft are more than 20 years old on average, and 

although DOD plans to replace much of the existing inventory by 

procuring 2,443 new F-35s, the department has experienced numerous 

delays and cost increases in the F-35 program. Therefore, the Air Force 

and the Navy have considered several alternatives to maintain desired 

fighter inventory levels at an acceptable level of risk and to maintain 

fighter capabilities and capacity as a “bridge” until replacement F-35 

aircraft enter service in sufficient numbers. The Air Force has decided to

upgrade and extend the service life of selected F-16s and the Navy has 

 
 

Page 2 GAO-13-51 Fighter Aircraft

decided to extend the service life of selected F/A-18s.2 These programs 

are estimated to cost several billion dollars at a time when DOD is 

simultaneously facing the competing demands of developing and 

procuring F-35s at a cost approaching $400 billion, supporting ongoing 

operations, and implementing $487 billion of reductions over the next 10 

years, which the department has estimated that it needs to cut in order to 

comply with the Budget Control Act of 2011.3

We previously have reported that the F-35 program has experienced 

numerous delays in development and production, including program 

restructuring, which has added time for development.4 As a result, DOD 

has deferred procurement of 410 F-35s until after fiscal year 2017.5

To describe the Air Force’s and the Navy’s plans to upgrade and extend 

the service life of selected F-16s and F/A-18s, we reviewed the services’ 

documentation of the programs’ purpose and scope including the 

underlying analysis of alternative approaches. We also obtained cost 

estimates for these programs and obtained any updates to these 

estimates. Since the service cost estimates were developed in different 

Considering that further slips in the F-35 program may occur and could 

increase the scope and cost of the services’ plans for upgrading and 

extending the service life of current aircraft, you asked us to (1) describe 

the Air Force and Navy plans to upgrade and extend the service life of 

selected F-16 and F/A-18 aircraft, and (2) assess the extent to which cost 

estimates for these programs exhibit characteristics of a high-quality cost 

estimate. This report reviewed estimates of costs projected for fiscal 

years 2011 through 2022.

 

2

The Navy also decided to buy an additional 41 F/A-18 E/F aircraft. This report focuses 

on the services’ plans to upgrade and extend the service life of current aircraft and does 

not include an evaluation of buying new aircraft. 

3

Department of Defense, “Defense Budget Priorities and Choices” (January 2012). 

4

GAO, Joint Strike Fighter: DOD Actions Needed to Further Enhance Restructuring and 

Address Affordability Risks, GAO-12-437 (Washington, D.C.: June 14, 2012). 

5

GAO, Joint Strike Fighter: Restructuring Added Resources and Reduced Risk, but 

Concurrency Is Still a Major Concern, GAO-12-525T (Washington, D.C.: Mar. 20, 2012) 

and Joint Strike Fighter: DOD Actions Needed to Further Enhance Restructuring and 

Address Affordability Risks, GAO-12-437 (Washington, D.C.: June 14, 2012). The June 

2012 report states that DOD has purchased 63 F-35 (Joint Strike Fighter) aircraft as of 

January 2012, and, with the latest reduction, DOD now plans to buy a total of 365 aircraft 

through 2017, about one-fourth of the 1,591 aircraft expected in the 2002 plan. 
 

Page 3 GAO-13-51 Fighter Aircraft

base years, all of the cost estimates in this report have been converted to 

fiscal year 2013 dollars using the indexes published by the Office of the 

Under Secretary of Defense (Comptroller) so that the data can be 

presented in comparable terms.6 To assess the extent to which cost 

estimates exhibit characteristics of a high-quality cost estimate, we 

compared how the estimates were developed to the cost-estimating best 

practices outlined in the GAO Cost Estimating and Assessment Guide.

7

We analyzed the extent to which the Air Force and Navy cost estimates 

were comprehensive, well-documented, accurate, and credible—the four 

characteristics of a high-quality cost estimate—and assigned each 

characteristic a rating of not met, minimally met, partially met, 

substantially met, or met.8

We conducted this performance audit from May 2011 to November 2012 

in accordance with generally accepted government auditing standards.

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

We also held detailed discussions with service 

officials and reviewed program documentation to identify key factors that 

could affect the potential total costs such as changes in aircraft quantities 

or additional work to maintain aircraft mission effectiveness that may not 

have been included in the estimates. We shared our cost guide, the 

criteria against which we evaluated the program’s cost estimates, and our 

preliminary findings with program officials. When warranted, we updated 

our analyses based on the agency response and additional 

documentation provided to us. Finally, we corroborated our analyses in 

interviews with service officials responsible for developing the cost 

estimates. See appendix I for a complete description of our scope and 

methodology.

 

6

App. II shows the Air Force cost estimates for upgrading and extending the service life of 

selected F-16 aircraft in then-year dollars. The Navy estimate was reported as a cost per 

aircraft in fiscal year 2011 dollars. Therefore, there is not comparable data for showing 

the Navy estimate in then-year dollars. 

7

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C: March 2009). 

8

Not met means the military service provided no evidence that satisfies any of the 

criterion; minimally met means the military service provided evidence that satisfies a small 

portion of the criterion; partially met means the military service provided evidence that 

satisfies about half of the criterion; substantially met means the military service provided 

evidence that satisfies a large portion of the criterion; and met means the military service 

provided complete evidence that satisfies the entire criterion. 
 

Page 4 GAO-13-51 Fighter Aircraft

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

The Air Force and the Navy plan to replace many of their current fighter 

aircraft with the Joint Strike Fighter, also called the F-35. DOD plans to 

buy a total of 2,443 F-35s—1,763 for the Air Force and 680 for the 

Department of the Navy—between 2008 and 2037. However, we have 

reported on F-35 issues since 2005 and found that the F-35 is still in 

development and the program has experienced significant delays and 

cost increases. For example, we reported that the F-35 program has 

experienced numerous delays in development and production, including 

program restructuring, which has increased time for development.

Further, we reported that the F-35 program costs have increased 42 

percent from the 2007 baseline and unit costs have doubled since the 

start of development in 2001.9 In addition, the DOD Fiscal Year 2011 

Annual Report on Operational Test and Evaluation stated that the F-35 is 

not on track to meet operational effectiveness or operational suitability 

requirements and that testing identified structural and maintenance 

issues.10

The upgrade and service-life extension programs will likely be costly and 

may be subject to further changes. Our prior work has found that a highquality cost estimate is critical to the success of any program because it 

can provide the basis for informed investment decision making, realistic 

budget formulation, and proactive course correction when warranted. The 

March 2009 GAO Cost Estimating and Assessment Guide is a 

compilation of best practices that federal cost-estimating organizations 

and industry use to develop and maintain reliable cost estimates 

Further, the DOD report also stated that aircraft produced in the 

first few production lots will need a significant number of modifications 

and upgrades in order to attain planned service life and capabilities. Due 

to delays in the F-35 program, the services have decided to extend the

service life of some existing aircraft in order to maintain desired inventory 

levels.

 

9

GAO, Joint Strike Fighter: DOD Actions Needed to Further Enhance Restructuring and 

Address Affordability Risks, GAO-12-437 (Washington, D.C.: June 14, 2012). 

10Department of Defense, Fiscal Year 2011 Annual Report, Director, Operational Test and 

Evaluation (December 2011). 

Background 
 

Page 5 GAO-13-51 Fighter Aircraft

throughout the life of a program. The GAO cost guide reported that a 

high-quality cost estimate has four characteristics including

• comprehensive when it accounts for all life-cycle costs, is sufficiently 

detailed to ensure that costs are neither omitted nor double-counted, 

and identifies ground rules and assumptions;

• well-documented when supporting documentation explains the 

process, sources, and methods used to create the estimate;

• accurate when it is based on the assessment of the costs most likely 

to be incurred and adjusted for inflation; and

• credible when the level of confidence has been identified through a 

risk and uncertainty analysis, and a sensitivity analysis has been 

conducted that identified the effects on the estimate of changing key 

assumptions. Also, a cost estimate is credible when it has been crosschecked with an independent estimate. The GAO cost guide 

describes eight types of independent cost estimate reviews which 

vary in the depth of analysis, ranging from a document review—

merely assessing the estimate’s documentation—to an independently 

developed cost estimate—conducted by an organization outside the 

acquisition or program office. The Air Force and Navy each have 

service cost-estimating agencies, which develop independent cost 

estimates for major acquisition programs and other programs when 

requested.

The Air Force currently plans to upgrade and extend the service life of 

300 F-16 aircraft at an estimated cost of $2.61 billion and the Navy plans 

to extend the service life of 150 F/A-18 aircraft at an estimated cost of 

$2.19 billion.11 Service officials have said that if the F-35 program 

experiences further delays, the services have the ability to expand the 

number of aircraft that are included in these programs.

 

11All the cost figures in the body of this report are in fiscal year 2013 dollars. 

Air Force and Navy 

Programs Would 

Extend the Service 

Life of 450 Aircraft at 

a Cost of Nearly $5 

billion
 

Page 6 GAO-13-51 Fighter Aircraft

In 2009, DOD and the Air Force were directed by statute and a committee 

report to provide reports on force-structure plans including alternatives 

such as buying aircraft and upgrading and extending the service life of 

selected aircraft.12 The Air Force reported on assessments of seven 

alternatives, which included buying between 150 and 300 new F-15Es, 

F/A-18 E/Fs, and F-16s, and upgrading and extending the service life of 

selected F-16s. The Air Force concluded that the cost for upgrading and 

extending the service life of current F-16s by 2,000 hours each would be 

10 to 15 percent of the cost of procuring new F-16s, F-15Es, or F/A-18s.

Extending the life of existing aircraft would provide 6 to 8 years of 

additional service and, according to the Air Force, provide essentially the 

same capability over that period as buying new legacy aircraft. In 

reviewing these reports, GAO concluded in 2011 that the analyses done 

were limited in part by the absence of F-16 durability and viability data.13

 

12See National Defense Authorization Act for Fiscal Year 2010, Pub. L. No. 111-84, §§ 

131, 1075 (2009); H.R. Rep. No. 111-166, at 101 (2009). One provision in the National 

Defense Authorization Act for Fiscal Year 2010 required the Secretary of Defense to 

submit a report on 4.5 generation fighters, while another prohibited retirement of certain 

aircraft until the Secretary of the Air Force submitted a report regarding combat air forces 

restructuring. See Pub. L. No. 111-84, §§ 131, 1075. In response, the Air Force provided 

the following reports as well as a third, which we did not review as part of our current 

report: Department of the Air Force, Fighter Force Structure Shortfalls (April 2010), and 

Procurement of “4.5 Generation Fighter” Aircraft (April 2010). These reports are 

classified.

Figure 1 below shows the Air Force’s estimated costs for the current 

plans for capability upgrades and the service-life extension.

13GAO, Tactical Aircraft: Air Force Fighter Reports Generally Addressed Congressional 

Mandates, but Reflected Dated Plans and Guidance, and Limited Analyses, 

GAO-11-323R (Washington, D.C.: Feb. 24, 2011). 

Air Force Program Would 

Add 2,000 Hours to 300 F16s
 

Page 7 GAO-13-51 Fighter Aircraft

Figure 1: Air Force F-16 and Estimated Costs to Upgrade and Extend the Service Life for 2,000 Hours (Fiscal Year 2013 

Dollars in Billions)

a

$820 million service-life extension; $1.79 billion capability upgrade. 

The Air Force estimates to upgrade capabilities and extend the service 

life of selected F-16 aircraft included research, development, test and 

evaluation, and procurement costs. The capability upgrades, Air Force 

officials explained, are needed to maintain mission effectiveness and will 

include, for example, an improved radar and data-link enhancements.

The service-life extension will add 2,000 flight hours, or about 6 to 8 

years, depending on flying conditions, to each aircraft. Most of the $2.61 

billion to upgrade and extend the service life—$1.88 billion or 72 

percent—is planned to be incurred in fiscal years 2018 through 2022. The 

remaining $722 million is programmed in the fiscal year 2013-2017 Future 

Years Defense Program.14

Since the 2010 reports to Congress were completed, the Air Force has 

stated that without the service-life extension it would have to start 

gradually grounding some F-16s beginning in 2017. The Air Force is 

conducting tests to clarify the extent of the work required to extend the 

 

 

14The Future Years Defense Program provides information on DOD’s current and planned 

budget requests for a 5-year period. 
 

Page 8 GAO-13-51 Fighter Aircraft

service life, and plans to begin work in fiscal year 2016. Also, the Air 

Force plans a milestone program review for the service-life extension in 

the first quarter of fiscal year 2013 and a milestone program review for 

the capability-upgrade program in the fourth quarter of fiscal year 2013.

The Air Force plans to complete all the upgrade and service-life extension 

work by the early 2020s. Finally, Air Force officials said that they could 

expand these programs to include up to 650 aircraft if needed to attain 

desired inventory levels.

In response to a statutory requirement, in May 2011, the Navy submitted 

the results of a cost-benefit analysis comparing extending the service life 

of existing F/A-18 aircraft with procuring additional F/A-18 E/F aircraft.15

The Navy assessed six alternatives, which included various combinations 

of extending the service life of up to 280 F/A-18 A-D aircraft and procuring 

up to an additional 70 F/A-18 E/Fs. The Navy concluded that extending 

the service life of 150 F/A-18 A-D aircraft and buying 41 new F/A-18E/F 

aircraft would provide an acceptable inventory at a manageable level of 

risk.16

 

15Department of Navy, “Report to Congress on Service Life Extension of F/A-18 Aircraft” 

(May 13, 2011). This report was developed in response to a provision in the Ike Skelton 

National Defense Authorization Act for Fiscal Year 2011 that required the Secretary of the 

Navy to conduct the cost-benefit analysis and submit a report prior to entering into a 

program to extend the service life of F/A-18 aircraft beyond 8,600 hours. See Pub. L. No. 

111-383, § 114(a) (2011). The provision required the Navy to conduct the analysis in 

accordance with Office of Management and Budget Circular A-94. See § 114(a)(1). The 

report included comprehensive costs for each of the alternatives assessed. 

The Navy plans to complete the service-life extension work in fiscal 

year 2018. Figure 2 below shows the Navy’s estimated cost for the 

service-life extension of selected F/A-18 aircraft.

16The Navy report stated that the 41 additional aircraft were included in the fiscal year 

2012 President’s Budget request. 

Navy Program Would Add 

1,400 Hours to 150 F/A-18s
 

Page 9 GAO-13-51 Fighter Aircraft

Figure 2: Navy F/A-18 A-D and Estimated Costs to Extend the Service Life for 1,400 hours (Fiscal Year 2013 Dollars in 

Billions)

The Navy’s estimate includes procurement costs for materials and 

installation to extend the service life of 150 F/A-18s for an additional 

1,400 hours each or about 5 years depending on flying conditions.17

 

17According to Navy officials, a small amount of the funding is operations and support 

money which will directly support the service-life extension work and is not to support 

aircraft operations. In addition to the procurement costs, the Navy estimated that 

operating and support costs for the added 1,400 hours of service life would be $5.91 

billion which is not a part of the estimate for procurement and installation costs to extend 

the service life. 

Almost all the Navy’s estimated $2.19 billion is programmed in the fiscal 

year 2013-2017 Future Years Defense Program. Finally, the Navy’s 

analysis showed that the 150 aircraft selected for the service-life 

extension will individually be evaluated for capability upgrades—such as 

adding the ability to integrate with newer aircraft—as well as upgrades of 

other critical components reaching the end of their service life and 

becoming obsolete. After evaluating the aircraft, the Navy will decide 

whether to do this additional work. Finally, Navy officials said that they 

could expand their program if needed, to include up to 280 aircraft. Navy 

officials explained that they will review the service-life extension effort 

annually as part of an overall review of the F/A-18 program.
 

Page 10 GAO-13-51 Fighter Aircraft

The Air Force’s and Navy’s cost estimates to upgrade and extend the 

service life of selected F-16 and F/A-18 aircraft exhibit many costestimating characteristics and best practices of a high-quality cost 

estimate, but do not reflect all the potential total costs that may occur. We 

assessed the Air Force estimate for capability upgrades and the Air Force 

estimate for the service-life extension of selected F-16 aircraft, which 

were prepared for the fiscal year 2013 budget request; and the Navy 

estimate for the service-life extension of selected F/A-18 aircraft. Overall, 

we found that the Air Force and Navy followed many of the best practices 

that support the four characteristics of a high-quality estimate. However, 

both the Air Force and Navy estimates were not fully credible due to two 

shortcomings—the estimates did not show the range of potential costs 

that are likely to be incurred and were not validated by comparison with 

an independently developed estimate. As a result, decision-makers do 

not have visibility of how much the total costs will be and how they may 

increase if program quantities increase or additional work is required on 

some aircraft, which could hinder their ability to assess budgets and 

affordability.

The Air Force’s $1.79 billion estimate for capability upgrades and the 

$820 million estimate for service-life extension were well-documented, 

accurate, and mostly comprehensive. However, the estimates were not 

fully credible because the Air Force’s analysis did not clearly show the 

potential range of total costs that would occur if more aircraft are included 

in the programs and the estimates were not compared to an 

independently developed estimate. In assessing the extent to which the 

Air Force’s cost estimates exhibited the four characteristics of a highquality estimate, we found the following:

• Comprehensive: The Air Force’s estimates were substantially 

comprehensive because they included all the work planned for 300 

aircraft, identified key cost-estimating ground rules and assumptions, 

and included development and procurement costs.

• Well-documented: Both estimates were well-documented because 

they identified the source of the data, included the work that is 

planned, documented the cost-estimating methodologies, showed 

how the calculations were made, and were reviewed by management.

• Accurate: Both estimates were accurate because they were adjusted 

for inflation, based on an assessment of most likely costs for 300 

aircraft, and used data from comparable programs where appropriate.

• Credible: For both estimates, the Air Force cross-checked major cost 

elements to determine whether results were similar and conducted a 

Air Force and Navy 

Cost Estimates 

Exhibit Many 

Characteristics of a 

High-Quality Cost 

Estimate but Do Not 

Reflect Some 

Significant Potential 

Costs 

Air Force Estimates 

Exhibit Some 

Characteristics of a HighQuality Estimate but Are 

Not Fully Credible
 

Page 11 GAO-13-51 Fighter Aircraft

risk and uncertainty analysis that included a list of the risks assessed.

For example, the analysis assessed the risk that more work may be 

required to extend the service life than currently planned. Also, the Air 

Force identified some cost drivers, which are the items that have the 

greatest effect on the estimated cost, such as labor rates. While the 

Air Force estimates exhibited many characteristics of a high-quality 

estimate, they had two shortcomings that lessened the estimates’ 

credibility. First, the analysis did not include an estimate of the total 

costs that may occur if more than 300 aircraft are included in the 

programs up to the potential maximum of 650 aircraft. Second, the 

estimates were not compared to an independently developed 

estimate.

Regarding the first shortcoming, best practices state that a credible cost 

estimate should include an assessment of how the cost estimate may 

change in response to changes in key program assumptions. This is 

known as a sensitivity analysis. Such an analysis helps decision makers 

identify areas that could significantly affect a program’s cost, such as 

changes in program quantities. According to Air Force officials, the 

service may choose to upgrade and extend the service life of additional 

aircraft if there are further delays in F-35 production. For example, in a 

written statement, Air Force leaders testified in March 2012 that the intent 

is to include 350 F-16 aircraft in the upgrade and life extension 

programs18—50 more aircraft than originally planned. Air Force officials 

explained that they did not assess the range of costs that may result from 

expanding the number of aircraft in the program up to the maximum of 

650 since the program is currently approved for only 300 aircraft.

However, without an assessment of how much the total cost may 

increase as the aircraft quantity increases, the estimate lacks 

transparency on the full range of possible costs, which could be 

significant. For example, we calculated that the cost to upgrade and 

extend the service life of all 650 aircraft could total $5.53 billion.19

 

18Prepared statement of Major General James M. Holmes, Assistant Deputy Chief of Staff 

for Operations, Plans and Requirements and Major General John D. Posner, Director of 

Global Power Programs, Office of the Assistant Secretary of the Air Force (Acquisition) 

before the Subcommittee on Tactical Air and Land Forces, House Armed Services 

Committee on March 20, 2012. 

19This number is a GAO calculation based on Air Force data using the per unit cost that 

the Air Force estimated for 300 aircraft. The per unit cost may change as quantities 

increase due, for example, to economies of scale. 
 

Page 12 GAO-13-51 Fighter Aircraft

The second major shortcoming is that the Air Force did not compare the 

estimates to independently developed cost estimates. Having an 

independent estimate is considered one of the best and most reliable 

estimate validation methods since an independent estimate is an 

objective assessment of whether the program office estimate is 

reasonable and can be achieved. Further, our past work has shown that 

an independent estimate tends to be higher and more accurate than a 

program office estimate.20 Air Force officials explained that it is likely the 

Air Force Cost Analysis Agency will be requested to develop a formal 

independent cost estimate for upcoming program reviews, but the 

decision to require an independent estimate has not yet been made.

Further, the program review for the capability-upgrade program will not be 

held for a year—it is currently scheduled for the fourth quarter of fiscal 

year 2013. Until the Air Force obtains an independent cost estimate, 

decision makers will not have the assurance that the programs’ estimated 

cost can be relied upon for making budgeting and trade-off decisions.

Furthermore, a program that has not been reconciled with an independent 

estimate has an increased risk of proceeding underfunded because an 

independent estimate provides an objective and unbiased assessment of

whether the program estimate can be achieved.

The Navy’s $2.19 billion cost estimate for the service-life extension of 

F/A-18s was comprehensive, well-documented, and accurate. However, 

the estimate was not fully credible because it did not include an 

assessment of the costs for additional work on the aircraft that may be 

done at the same time as the service-life extension and the estimate was 

not compared to an independently developed estimate. Since the Navy 

will assess on an aircraft-by-aircraft basis whether to do this additional 

work, the costs would be in addition to the $2.19 billion for the service-life 

extension and most of these costs are not included in the Navy’s 

spending plans through fiscal year 2017. In assessing the extent to which 

the Navy’s cost estimate exhibited the four characteristics of a highquality estimate, we found the following:

 

20In a previous review of DOD acquisition programs, we found that 19 of 20 independent 

estimates developed by the Office of the Secretary of Defense office of the Director of 

Cost Assessment and Program Evaluation were higher than the service estimate. See 

GAO, Defense Acquisitions: A Knowledge-Based Funding Approach Could Improve Major 

Weapon System Program Outcomes, GAO-08-619 (Washington, D.C.: July 2, 2008). 

Navy Estimate Exhibits 

Characteristics of a HighQuality Estimate but Does 

Not Capture Costs of 

Additional, Nonstructural 

Work
 

Page 13 GAO-13-51 Fighter Aircraft

• Comprehensive: The Navy’s estimate identified key cost-estimating 

ground rules and assumptions. Also, the Navy’s estimate included the 

costs to buy and install the materials needed to repair the airframe so 

that it can fly the additional 1,400 hours. Finally, the Navy’s analysis 

included assessing the costs for different quantities from 150 up to 

280 aircraft.

• Well-documented: The estimate was well-documented since it 

described the methodology used and the calculations performed to 

develop the estimate so that a cost analyst unfamiliar with the 

program could replicate it. Also, the Navy’s documentation included 

steps to ensure data reliability, and the estimate was reviewed by 

management.

• Accurate: The Navy’s estimate was accurate since it was adjusted for 

inflation, not overly conservative or optimistic, and incorporated data 

from comparable programs where appropriate.

• Credible: Finally, the Navy’s estimate was partially credible because 

the Navy followed some, but not all, of the best practices for this 

characteristic. For example, the Navy conducted a sensitivity analysis 

which identified cost drivers, such as materiel and labor costs. Also, 

the Navy conducted a risk and uncertainty analysis which accounted 

for some risks, such as the risk that the service-life extension may 

require more work than currently planned. However, the Navy did not 

assess the potential range of costs for all work that might be done and 

focused only on the costs associated with extending the life of the 

airframe, which officials described as consistent with Navy guidance.

Specifically, the Navy told us it will assess on an aircraft-by-aircraft basis 

whether the F/A-18s also need capability upgrades to maintain mission 

effectiveness, such as adding the ability to integrate with newer aircraft.21

 

21While the capability upgrades may enhance mission effectiveness, they are not 

essential for the aircraft to fly the additional 1,400 hours. 

According to the Navy, such capability upgrades could cost an average of 

about $1.76 million per aircraft, but uncertainty exists about how many 

aircraft the Navy will actually decide to upgrade and therefore the total 

cost associated with these upgrades is uncertain. In addition, the Navy 

has determined that some of the F/A-18 aircraft may also require life 

extension or replacement of nonstructural parts or systems that are 

becoming obsolete. The Navy estimated that this work could average 

$5.64 million per aircraft. Navy officials explained that they will decide on 

an aircraft-by-aircraft basis whether to do this work when the aircraft is 
 

Page 14 GAO-13-51 Fighter Aircraft

inspected just prior to beginning service-life extension. Navy officials told 

us that if an aircraft needs a lot of this type of work, the Navy may decide 

not to extend the service life of that particular aircraft, but rather substitute 

another one in its place. Given the uncertainties, the costs associated 

with this additional work are not included in the Navy’s $2.19 billion 

estimate nor are they included in the Navy’s spending plans through fiscal 

year 2017. The purpose of a sensitivity analysis is to identify the effects 

on the estimate of changing key factors and to show a resulting range of 

possible costs. Further analysis could show the likelihood of the Navy 

incurring some or all of the additional costs. Without an assessment of the 

effect on the total costs that would be incurred if some of the 150 aircraft 

need additional work at an additional cost, decision makers will not know 

the full range of potential costs.

Finally, the Navy did not compare the estimate to an independently 

developed cost estimate such as one that could have been requested 

from the Naval Center for Cost Analysis. Navy officials stated that the 

estimate was reviewed extensively within the Navy and that an 

independent estimate was not required because the service-life extension 

is a modification of an existing aircraft and is not a separate acquisition 

program. Even if not required, Navy officials said that they could have 

requested the Naval Center for Cost Analysis to develop an independent 

estimate for this program. In our prior work, we have found that an 

independent cost estimate is considered to be one of the most reliable 

validation methods. If the Navy’s estimate were validated by an 

independent cost estimate, decision-makers could place more credibility 

in the estimate.

The Air Force and the Navy decided to upgrade and extend the service 

life of selected F-16 and F/A-18 aircraft to provide a capability and 

capacity “bridge” until the F-35 is available in sufficient numbers. The cost 

to do so is already estimated to total almost $5 billion and likely will 

increase due to slippage in the F-35 program and increases in program 

scope. In many respects, the Air Force and Navy cost estimates we 

evaluated were developed in accordance with some best practices.

Specifically, we found the estimates to be well-documented and accurate 

and mostly comprehensive. However, the Air Force and Navy did not 

follow some important best practices and as a result did not clearly 

identify the potential total costs that may result as the programs evolve.

For example, without an analysis that includes the potential for increases 

in the number of aircraft in the program or that clearly identifies the cost 

for additional work that may be required on some of the aircraft, decision 

Conclusions 
 

Page 15 GAO-13-51 Fighter Aircraft

makers are not aware of how much total costs could increase if these 

events occur. Further, unless the services reconcile the program cost 

estimate with an independent cost estimate, there is an increased risk 

that the actual costs will exceed the estimate. According to the GAO Cost 

Estimating and Assessment Guide, independent estimates are usually 

higher and more accurate than program estimates and therefore if a 

program estimate is close to an independently developed estimate, one 

can be more confident that the estimate is credible. The guide further 

explains that there are various types of independent cost estimate 

reviews that can be performed, including seeking an independent 

estimate. Since these are multibillion-dollar investments that are critical to 

maintaining fighter capacity, an independent review of service estimates 

or an independently-developed estimate—which could be performed by 

the respective service cost-estimating agencies—would provide 

assurance about the likely full costs. Without fully credible cost estimates, 

service and congressional decision-makers will not have reasonable 

confidence of knowing the potential range of costs to upgrade and extend 

the service life of selected F-16 and F/A-18 aircraft as they make 

resource and trade-off decisions, develop and review budget requests, 

and assess the programs’ affordability.

To improve future updates of Air Force and Navy cost estimates for 

upgrading and extending the service life of selected F-16s and F/A-18s 

and to improve the ability of decision-makers to assess the potential total 

costs, we recommend that the Secretary of Defense take the following 

four actions:

Direct the Secretary of the Air Force to update its cost estimates, and in 

doing so:

• include in its sensitivity analysis an assessment of the range of 

possible costs if the capability-upgrade and service-life extension 

programs are expanded to more than 300 aircraft including up to the 

maximum of 650 aircraft, and

• obtain an independent review of the updated cost estimates.

Direct the Secretary of the Navy to update its cost estimates and in doing 

so:

• include in its sensitivity analysis an assessment of the range of 

possible costs for extending the service life of other nonstructural 

Recommendations for 

Executive Action
 

Page 16 GAO-13-51 Fighter Aircraft

components that are becoming obsolete and capability upgrades that 

may be required for some of the 150 aircraft, and

• obtain an independent review of the updated cost estimates.

We provided a draft of this report to DOD for comment. In written 

comments on the draft of this report, DOD agreed with all four 

recommendations. DOD’s comments are reprinted in their entirety in 

appendix III. DOD also provided technical comments, which we 

incorporated into the report as appropriate. 

Regarding the first recommendation for improving future updates of the 

Air Force cost estimates, DOD concurred, stating that the Air Force had 

updated planned force structure requirements to upgrade and extend the 

service life of 50 aircraft in addition to the original 300 aircraft and 

therefore estimated costs for 350 aircraft. Also, the department stated 

that while these programs could be expanded beyond 350 aircraft, further 

cost excursions are premature until F-35 production has matured. The 

department stated that it would update its cost estimates with another 

sensitivity analysis containing an assessment of the range of possible 

costs if force structure requirements change further. While we 

acknowledge that estimating costs for 350 aircraft is a step in the right 

direction, an assessment of how much the total cost may increase up to 

the maximum of 650 aircraft is needed to provide transparency on the full 

range of costs, which could be significant—potentially totaling up to $5.53 

billion. DOD also noted that further cost excursions are premature until F16 structural testing is complete. However, Air Force officials explained 

during our review that data from testing are available throughout the 

testing period and that they could use this information to update cost 

estimates before testing is completed in 2016. Until the Air Force 

completes analyses to show the potential range of costs, decision makers 

will continue to lack crucial data on how much total costs could increase 

as they make resource and trade-off decisions. 

Regarding the second recommendation for improving future updates of 

the Air Force cost estimates by obtaining an independent review of the 

updated cost estimates, DOD agreed, stating that the Air Force Cost 

Analysis Agency had reviewed the estimates for the Air Force’s fiscal 

year 2014 budget development process and that, if further cost 

assessments are warranted, the Air Force would submit the estimates for 

an independent review. An independent review of cost estimates is 

important because a program that has not been reconciled with an 

independent estimate has an increased risk of proceeding underfunded 

since an independent estimate provides an objective and unbiased 

Agency Comments 

and Our Evaluation
 

Page 17 GAO-13-51 Fighter Aircraft

assessment of whether the program estimate can be achieved. As the 

Air Force updates its cost estimates for these $2.61 billion programs, upto-date, independently validated cost estimates would provide decisionmakers assurance that the programs’ estimated cost can be relied upon 

as they assess program affordability. 

Regarding the two recommendations for improving future updates of the 

Navy cost estimates, DOD concurred but did not explain when or what 

specific actions it intends to take to implement these recommendations. 

We are encouraged that the department agrees these are important, valid 

steps to take and further believe that it is important for the Navy to 

implement these recommendations in a timely manner to facilitate review 

and implementation of these programs since the programs are estimated 

to cost $2.19 billion and could increase an average of $5.64 million per 

aircraft. 

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of Defense, the Secretary of the Air Force, and 

the Secretary of the Navy. The report also is available at no charge on the 

GAO website at http://www.gao.gov.

If you or your staff have any questions concerning this report, please 

contact me at (404) 679-1816 or pendletonj@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. Staff members making key contributions to 

this report are listed in appendix IV.

John H. Pendleton

Director

Defense Capabilities and Management
Appendix I: Scope and Methodology

Page 18 GAO-13-51 Fighter Aircraft

To describe the Air Force’s and the Navy’s plans to upgrade and extend 

the service life of selected F-16s and F/A-18s, we reviewed the services’ 

documentation of the programs’ purpose and scope including the 

underlying analysis of alternative approaches. To identify the Air Force’s 

and the Navy’s estimated costs to upgrade and extend the service life of 

F-16s and F/A-18s, we obtained the services’ cost estimates for these 

programs and obtained any updates to these estimates. The Air Force 

updated its initial estimate to support development of the fiscal year 2013 

budget. The Navy’s cost estimate was reported to Congress in May 2011.

All of the cost estimates from these sources were converted to fiscal year 

2013 dollars using the indexes published by the Office of the Secretary of 

Defense (Comptroller) in the National Defense Budget Estimates for 

Fiscal Year 2013, commonly referred to as the “Green Book”.1

To assess the extent to which the cost estimates exhibited characteristics 

of a high-quality cost estimate, we compared how the estimates were 

developed to the cost estimating best practices outlined in the GAO Cost 

Estimating and Assessment Guide.

2 The guide is a compilation of best 

practices that federal cost-estimating organizations and industry use to 

develop and maintain reliable cost estimates that management can use 

for making informed decisions. The guide describes 19 best practices for 

developing a comprehensive, well-documented, accurate, and credible 

cost estimate—the four characteristics of a high-quality cost estimate. We 

analyzed the extent to which the Air Force and Navy cost estimates met 

each of these four characteristics and assigned each a rating of not met, 

minimally met, partially met, substantially met, or met.3

 

1

Constant dollars measure the value of purchased goods and services at price levels that 

are the same as those in the base or reference year. Constant dollars do not contain any 

adjustments for inflationary changes that have occurred or are forecast to occur outside 

the base year. Therefore, the changes in these dollar amounts will not be due to inflation. 

The overall rating 

2

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C: March 2009). We 

performed this comparison for the Air Force estimate for capability upgrades, the Air Force 

estimate for service-life extension, and the Navy estimate for service-life extension. We 

did not perform this comparison for the Navy estimates of average cost per aircraft for 

obsolescence work or capability upgrades. 

3

Not met means the military service provided no evidence that satisfies any of the 

criterion; minimally met means the military service provided evidence that satisfies a small 

portion of the criterion; partially met means the military service provided evidence that 

satisfies about half of the criterion; substantially met means the military service provided 

evidence that satisfies a large portion of the criterion; and met means the military service 

provided complete evidence that satisfies the entire criterion. 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 19 GAO-13-51 Fighter Aircraft

for each characteristic was based on the average rating of the best 

practices for each characteristic. We also held detailed discussions with 

service officials and reviewed program documentation to identify key 

factors that could affect the potential total costs such as changes in 

aircraft quantities or additional work to maintain aircraft mission 

effectiveness that may not have been included in the estimates. We 

shared with program officials our cost guide, the criteria against which we 

evaluated the program’s estimated cost, as well as our preliminary 

findings. When warranted, we updated our analyses on the basis of the 

agency response and additional documentation that was provided to us.

Finally, we corroborated our analyses in interviews with service officials 

responsible for developing the cost estimates.

We conducted our work at the Office of the Under Secretary of Defense 

for Acquisition, Technology and Logistics; Office of the Chief of Staff of 

the Air Force, Directorate of Force Application; Ogden Air Logistics 

Center at Hill Air Force Base; F-16 System Program Office at WrightPatterson Air Force Base; Air Combat Command; Air Force Cost Analysis 

Agency; Air Force Fleet Viability Board; Office of the Deputy Assistant 

Secretary of the Navy for Air Programs; Headquarters United States 

Marine Corps; Naval Air Systems Command; and the Naval Center for 

Cost Analysis.

We conducted this performance audit from May 2011 to November 2012 

in accordance with generally accepted government auditing standards.

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings, and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Air Force Cost Estimates for 

Upgrading and Extending the Service Life of 

Selected F-16 Aircraft in Then-Year Dollars

Page 20 GAO-13-51 Fighter Aircraft

Dollars in millions

Fiscal year

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total

Service-life 

Extension

$18.80 $0.80 $ 8.86 $12.10 $14.78 $50.59 $110.88 $167.80 $220.50 $188.10 $104.30 $0.00 $897.51

Capability 

upgrades

0.00 12.00 69.70 129.50 98.20 26.50 201.85 355.90 379.70 381.30 269.00 41.20 $1,964.85

Total $18.80 $12.80 $78.56 $141.60 $112.98 $77.09 $312.73 $523.70 $600.20 $569.40 $373.30 $41.20 $2,862.36

Source: Air Force data.

Notes: The numbers in this table are in then-year dollars. The numbers in the report text are in fiscal 

year 2013 dollars.

The Navy estimate was reported as a cost per aircraft in fiscal year 2011 dollars. Therefore, there is 

not comparable data for showing the Navy estimate in then-year dollars.

Appendix II: Air Force Cost Estimates for 

Upgrading and Extending the Service Life of 

Selected F-16 Aircraft in Then-Year Dollars
Appendix III: Comments from the Department 

of Defense

Page 21 GAO-13-51 Fighter Aircraft

Appendix III: Comments from the 

Department of Defense
Appendix III: Comments from the Department 

of Defense

Page 22 GAO-13-51 Fighter Aircraft
Appendix III: Comments from the Department 

of Defense

Page 23 GAO-13-51 Fighter Aircraft
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 24 GAO-13-51 Fighter Aircraft

John H. Pendleton, (404) 679-1816 or pendletonj@gao.gov

In addition to the contact named above, the following staff members 

made key contributions to this report: Patricia W. Lentini, Assistant 

Director; Brenda M. Waterfield; Benjamin D. Thompson; Joseph M. 

Capuano; Ophelia Robinson; Karen A. Richey; Jennifer K. Echard; 

Charles W. Perdue; Michael D. Silver; Michael Shaughnessey; and 

Richard S. Powelson. 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Acknowledgments 

(351600)
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