Report to the Chairman, Subcommittee 

on National Security, Emerging 

Threats, and International Relations, 

Committee on Government Reform, 

House of Representatives 

United States General Accounting Office 

GAO 

July 2003 JOINT STRIKE 

FIGHTER 

ACQUISITION 

Cooperative Program 

Needs Greater 

Oversight to Ensure 

Goals Are Met 

GAO-03-775 
The JSF international program structure is based on a complex set of 

relationships involving both government and industry from the United States 

and eight partner countries. The program is expected to benefit the United 

States by reducing its share of program costs, giving it access to foreign 

industrial capabilities, and improving interoperability with allied militaries. 

Partner governments expect to benefit from defined influence over aircraft 

requirements, improved relationships with U.S. aerospace companies, and 

access to JSF program data. 

Yet international participation also presents a number of challenges. For 

example, while international partners can choose to share any future 

program cost increases, they are not required to do so under the terms of 

negotiated agreements. Therefore, the burden of any future increases may 

fall almost entirely on the United States. Technology transfer also presents 

challenges. The large number of export authorizations needed to share 

project information, solicit bids from partner suppliers, and execute 

contracts must be submitted and resolved in a timely manner to ensure that 

partner industry has the opportunity to compete for subcontracts and key 

contracts can be executed on schedule. Transfers of sensitive U.S. military 

technologies—which are needed to achieve aircraft commonality goals—will 

push the boundaries of U.S. disclosure policy. While actions have been taken 

in an attempt to address these challenges, additional actions are needed to 

control costs and manage technology transfer. 

Finally, if partners’ return-on-investment expectations are not met, support 

within their countries could deteriorate. To realize this return-on-investment, 

partners expect their industry to win JSF contracts through competition—a 

departure from other cooperative programs, which directly link contract 

awards to financial contributions. If the prime contractor’s efforts to meet 

these expectations come into conflict with program cost, schedule, and 

performance goals, the program office will have to make decisions that 

balance these potentially competing interests. 

Joint Strike Fighter 

The Joint Strike Fighter (JSF) is a 

cooperative program between the 

Department of Defense (DOD) and 

U.S. allies for developing and 

producing next generation fighter 

aircraft to replace aging 

inventories. As currently planned, 

the JSF program is DOD’s most 

expensive aircraft program to date, 

costing an estimated $200 billion to 

procure about 2,600 aircraft and 

related support equipment. Many in 

DOD consider JSF to be a model 

for future cooperative programs. 

To determine the implications of 

the JSF international program 

structure, GAO identified JSF 

program relationships and 

expected benefits and assessed 

how DOD is managing cost sharing, 

technology transfer, and partner 

expectations for industrial return. 

Information on prime contractor 

activities is critical to balancing 

program schedule goals with 

partner expectations. Therefore, 

GAO is recommending that the 

Secretary of Defense direct the JSF 

Program Office to ensure that 

international supplier planning 

fully anticipates and mitigates risks 

associated with technology transfer 

and that information concerning 

the selection and management of 

suppliers is available, closely 

monitored, and used to improve 

program outcomes. In its 

comments on a draft of this report, 

DOD concurred with the 

recommendations. 

www.gao.gov/cgi-bin/getrpt?GAO-03-775.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Katherine V. 

Schinasi at (202) 512-4841 or 

schinasik@gao.gov. 

Highlights of GAO-03-775, a report to 

the Chairman, Subcommittee on National 

Security, Emerging Threats, and 

International Relations, Committee on 

Government Reform, House of 

Representatives 

July 2003 

JOINT STRIKE FIGHTER ACQUISITION 

Cooperative Program Needs Greater 

Oversight to Ensure Goals Are Met 
Page i GAO-03-775 Joint Strike Fighter Acquisition 

Letter 1

Results in Brief 1

Background 4

International Participation Adds Complexity and Benefits to JSF 

Acquisition Program 6

International Participation Complicates JSF Program Efforts to 

Manage Costs 12

JSF Technology Transfer Presents Challenges for Program 

Execution, International Suppliers, and Disclosure Policy 16

Managing Industrial Participation Expectations 20

Conclusions 24

Recommendations for Executive Action 25

Agency Comments and Our Evaluation 25

Appendix I Scope and Methodology 28 

Appendix II JSF International Participant Contributions 

and Benefits 31 

Appendix III Comments from the Department of Defense 34 

Appendix IV Staff Acknowledgments 36 

Acknowledgments 36

Table 

Table 1: JSF Partner Financial Contributions and Estimated 

Aircraft Purchases 10

Figure 

Figure 1: JSF Program Relationships 7

Contents 
Page ii GAO-03-775 Joint Strike Fighter Acquisition 

Abbreviations 

AECA Arms Export Control Act 

ATPRG Arms Transfer Policy Review Group 

C4I command, control, communications, computers, and intelligence 

CTOL conventional take-off and landing 

DOD Department of Defense 

GPA global project authorization 

IPT integrated product team 

JSF Joint Strike Fighter 

MOU memorandum of understanding 

NATO North Atlantic Treaty Organization 

SDD system development and demonstration 

STOVL short take-off and vertical landing 

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Page 1 GAO-03-775 Joint Strike Fighter Acquisition 

July 21, 2003 

The Honorable Christopher Shays 

Chairman, Subcommittee on National Security, 

 Emerging Threats, and International Relations 

Committee on Government Reform 

House of Representatives 

Dear Mr. Chairman: 

The Joint Strike Fighter (JSF) program is viewed by many within the 

Department of Defense (DOD) to be a model acquisition program, as well 

as a new model for cooperative development and production between 

DOD and U.S. allies. As a centerpiece for DOD acquisition, the program is 

intended to produce a next generation multirole fighter to replace aging 

U.S. aircraft inventories. As currently planned, the program is DOD’s most 

expensive aircraft program, costing an estimated $200 billion to develop 

and procure about 2,600 aircraft and related support equipment. 

By structuring the JSF program to allow for participation by allied 

governments during development and production, DOD expects to defray 

some development costs and realize other benefits. To ensure that the 

challenges of international participation do not negatively affect overall 

development and production of the aircraft, you asked us to review how 

DOD is managing the integration of partner countries and suppliers into 

the program. Specifically, we identified international relationships and the 

benefits they are expected to provide and assessed how DOD is managing 

cost sharing, technology transfer, and partner expectations for industrial 

participation. (See app. I for an explanation of our scope and 

methodology.) 

The JSF international program structure is based on a complex set of 

relationships involving both government and industry from the United 

States and eight other countries. Through negotiated agreements with 

partner countries, which define specific roles and responsibilities for 

participants, the United States expects to benefit from sharing program 

costs, gaining access to foreign industrial capabilities, and improving 

interoperability with allied militaries once the aircraft is fielded. Partner 

governments expect to benefit through defined influence over aircraft 

requirements and improved industrial relationships with U.S. aerospace 

United States General Accounting Office

Washington, DC 20548 

Results in Brief 
Page 2 GAO-03-775 Joint Strike Fighter Acquisition 

companies through access to JSF contractors and subcontracting 

competitions. Finally, a major benefit for partners is having their 

personnel physically located within the program office with access to 

program information and contractor data. 

While the United States expects to realize benefits from partnering with 

allies, international participation also presents challenges for JSF program 

management. First, while international partners can choose to share any 

future program cost increases, they are not required to do so under the 

terms of the negotiated agreements. Further, they have not been required 

to contribute any additional funding despite changes to the scope of 

the program. To address unexpected cost increases, DOD and the 

international partners can request additional program funding through 

their budget processes; however, this funding may not be provided. DOD 

can also adjust schedule, procurement quantities, or aircraft requirements 

to meet program cost concerns, although these actions could negatively 

affect partners’ procurement plans. Program management tools, 

provisions in agreements with partners, and contract incentives for 

Lockheed Martin Aeronautics Company (the JSF prime contractor) are 

being used to contain costs, but if costs still increase, the burden may fall 

almost entirely on the United States. 

Technology transfer issues also present challenges for the JSF program. 

Due to the degree of international participation at both a government and 

an industry level, a large number of export authorizations are necessary 

to share project information with governments, solicit bids from partner 

suppliers, and execute contracts. Export authorizations must be submitted 

and resolved in a timely fashion, or the execution of key contracts and the 

ability of partner suppliers to bid for subcontracts could be negatively 

affected. Increased pressure to approve export authorizations to support 

program goals and schedules, however, could result in unintended 

consequences, such as inadequate reviews of license content or broad 

interpretations of disclosure authority. In addition, the extent of 

technology transfers necessary to achieve program goals related to aircraft 

commonality will push the boundaries of U.S. disclosure policy for some 

of the most sensitive U.S. military technology. The JSF Program Office 

and/or Lockheed Martin have attempted to address these challenges by 

adding resources to help prepare license applications, exploring ways to 

streamline the export authorization process, and attempting to make 

decisions on technology transfer earlier in the program. However, 

Lockheed Martin has not completed a long-term plan that provides 

information on JSF subcontracting. Such a plan could be used to identify 

export authorizations needed for international suppliers; anticipate 
Page 3 GAO-03-775 Joint Strike Fighter Acquisition 

problems suppliers could face because of licensing or releasability 

concerns; and develop strategies to overcome those problems, such as 

finding other qualified suppliers to do the work. 

Finally, while the JSF Program Office is responsible for ensuring that 

program objectives are met for all participants, Lockheed Martin bears 

most of the responsibility for managing partner industrial expectations. 

Partners have identified industrial return as vital to their participation in 

the program. If return-on-investment expectations are not met, partners 

told us the program could lose political support domestically. To realize 

this return, partner industry must win JSF contracts through competition, 

which is a departure from other cooperative programs that have tied 

contract awards directly to partners’ financial contributions. The program 

office and the prime contractor have a great deal of responsibility for 

providing a level playing field for JSF competitions, including 

opportunities for partner industries to bid on subcontracts and visibility 

into the subcontracting process. If Lockheed Martin’s efforts to meet 

partner return-on-investment expectations come into conflict with 

program cost, schedule, and performance goals, the program office 

will ultimately have to make decisions to balance expectations and 

program execution. The award fee in Lockheed Martin’s system 

development and demonstration contract provides the program office 

with a mechanism to focus contractor efforts to achieve both U.S. and 

international program goals. 

Given these challenges, management attention on the program will need 

to be greater than that associated with traditional acquisition programs. 

Since DOD and the prime contractor must achieve program cost and 

schedule goals that are important to all participants, while managing 

potentially competing partner expectations for industrial and 

technological cooperation, DOD will need sufficient information about 

contractor activities to ensure that it can address these challenges. 

Accordingly, we are recommending that the Secretary of Defense direct 

the JSF Program Office to ensure that international supplier planning 

anticipates and mitigates risks associated with technology transfer and 

that information concerning the prime contractor’s selection and 

management of suppliers is available, closely monitored, and used so that 

award fee decisions address potential conflicts between international and 

program goals. In its comments on a draft of this report, DOD concurred 

with our recommendations. 
Page 4 GAO-03-775 Joint Strike Fighter Acquisition 

According to DOD policy, the core objectives of armaments cooperation 

are to increase military effectiveness through standardization and 

interoperability and to reduce weapons acquisition costs by avoiding 

duplication of development efforts with U.S. allies.1 According to DOD and 

the program office, through its cooperative agreements, the JSF program 

contributes to armaments cooperation policy in the following four areas: 

• Political/military–expanded foreign relations. 

• Economic–decreased JSF program costs from partner contributions. 

• Technical–increased access to the best technologies of foreign 

partners. 

• Operational–improved mission capabilities through interoperability 

with allied systems. 

The Arms Export Control Act (AECA) provides DOD the authority to enter 

into cooperative programs with U.S. allies.2

 In March 1997, the Secretary of 

Defense directed that DOD engage allies in discussions as early as possible 

to determine the parameters of potential collaboration to meet coalition 

needs and ensure interoperability between allied systems. DOD guidance 

states that the department will give favorable consideration to transfers of 

defense articles, services, and technology consistent with national security 

interests to support these international programs.3

 Finally, the AECA 

further provides that when the United States enters into a cooperative 

agreement, there should be no requirement for industrial or commercial 

compensation that is not specifically stated in the agreement. The 

DOD Arms Transfer Policy Review Group (ATPRG) approved the 

JSF international plan and established guidelines for the JSF system 

development and demonstration negotiations based on the AECA 

requirement that participants contribute an equitable share of the 

costs and receive an equitable share of the results of a project. 

 1

 Office of the Deputy Under Secretary of Defense (International and Commercial 

Programs), International Armaments Cooperation Handbook (Washington, D.C.: 

June 1996). 

2

 Arms Export Control Act (22 U.S.C. sec. 2767). 

3

 Even before the 1997 guidance, the JSF program and predecessors such as the AV-8B 

tactical aircraft and Joint Advanced Strike Technology programs had heavy involvement 

from the government of the United Kingdom and its defense suppliers. 

Background 
Page 5 GAO-03-775 Joint Strike Fighter Acquisition 

In October 2001, DOD awarded Lockheed Martin Aeronautics Company a 

contract for the system development and demonstration phase. Pratt and 

Whitney and General Electric were awarded contracts to develop engines 

for the JSF aircraft. Currently, this phase will last about 10 years; cost 

about $33 billion; and involve large, fixed investments in human capital, 

facilities, and materials. The next significant program milestone will be the 

final critical design review, currently planned for July 2005. At that time, 

the final aircraft design should be mature and technical problems should 

be resolved so that the production of aircraft can begin with minimal 

changes expected.4

Unlike other cooperative programs, the JSF program will not guarantee 

foreign or domestic suppliers a predetermined level of work based on a 

country’s financial contribution to the program. Instead, foreign and 

domestic suppliers will generally compete for JSF work. DOD and the JSF 

Program Office use the term “best value” to describe this competitive 

approach.5

 By doing this, the program moved away from the industrial 

policies of other cooperative programs that have used work share 

arrangements for participation in the development of military items. An 

example of a work share arrangement would be guaranteeing that contract 

awards for suppliers in a participant country are tied directly to that 

country’s level of investment in the program. The recipient benefits not 

only from the value of the contracts placed in country but also the 

technology transferred as part of those contracts.6

 However, this approach 

does not always result in the most cost-effective program. 

 4

 The design should include precision schematics of the aircraft and components, based on 

the results of testing and a description of material and manufacturing processes to be used. 

5

 This is not necessarily the same as best value under the Federal Acquisition Regulation, 

which is an acquisition that provides the greatest overall benefit in response to the 

requirement and can be obtained by using one or a combination of multiple source 

selection approaches. 

6

 U.S. General Accounting Office, Defense Trade: U.S. Contractors Employ Diverse 

Activities to Meet Offset Obligations, GAO/NSIAD-99-35 (Washington, D.C.: Dec. 18, 1998). 
Page 6 GAO-03-775 Joint Strike Fighter Acquisition 

International participation in the JSF program adds complexity to an 

already challenging acquisition process. However, participation 

agreements negotiated between DOD and equivalent partner ministries 

or departments do provide potential benefits to all partners. The United 

States benefits from financial contributions, increased potential for 

international sales of JSF aircraft, and access to partner industry. Foreign 

partners benefit from participating in JSF Program Office activities, 

accessing JSF technical data, and receiving waivers of nonrecurring 

aircraft costs and levies from potential sales of JSF aircraft. JSF partners 

also enjoy greater access to program information than traditional 

cooperative programs because the JSF program allowed countries to 

participate at an earlier stage of the acquisition process. 

The JSF program is made up of a complex set of relationships involving 

both government and industry from the United States and eight other 

countries—the United Kingdom, Italy, the Netherlands, Turkey, Denmark, 

Norway, Canada, and Australia (see fig. 1). 

International 

Participation Adds 

Complexity and 

Benefits to JSF 

Acquisition Program 

JSF International 

Program Relationships 

Are Complex 
Page 7 GAO-03-775 Joint Strike Fighter Acquisition 

Figure 1: JSF Program Relationships 

a

Figure does not reflect relationships that the prime contractors may have with suppliers in 

nonpartner countries. 

The JSF program structure was established through a framework 

memorandum of understanding (MOU) and individual supplemental MOUs 

between each of the partner country’s defense department or ministry 

and DOD, negotiating on behalf of the U.S. government. These agreements 

identify the roles, responsibilities, and expected benefits for all 

participants and are negotiated for each acquisition phase (concept 
Page 8 GAO-03-775 Joint Strike Fighter Acquisition 

demonstration, system development and demonstration, and production). 

Only the concept demonstration phase and the system development and 

demonstration phase agreements have been negotiated to date, and 

participation in one phase does not guarantee participation in future 

phases. According to DOD officials, the department also contributes to the 

implementation of MOUs by acting as a “court of appeals” to address 

partner concerns, including industrial participation issues. Additional 

documents provide greater detail and clarity: 

• Financial management procedures document–describes the financial 

management procedures for the MOU supplements, as well as funding 

streams, auditing procedures, and other topics. 

• Program position description–describes the position title, duties, 

qualifications, and other information related to all foreign personnel 

located in the JSF Program Office. 

• Exchange of letters–series of formal, signed letters, which emphasize 

issues of importance to the United States and JSF partners but are not 

specifically mentioned or described in the MOU agreements. 

Representatives from partner ministries or departments of defense 

participate in senior-level management meetings, including chief executive 

officer meetings (chaired by the Under Secretary for Acquisition, 

Technology, and Logistics); system acquisition executive meetings; the 

senior warfighters group; and the configuration steering board with DOD, 

JSF Program Office, and contractor officials. These meetings offer 

opportunities for partner representatives to gain insight into and, in some 

cases, influence over the progress of the JSF program, in addition to that 

available from partner staff located in the program office, in areas such as 

program management, requirements, and aircraft configuration. Finally, 

the system development and demonstration framework MOU establishes 

the JSF executive committee, which includes one representative from 

the United States and each partner country. This committee provides 

executive level oversight for the program, such as reviewing progress 

toward program objectives, ensuring compliance with MOU financial 

provisions, and resolving program-related issues identified by the JSF 

international director. 

National deputies act as partner representatives in the JSF Program Office. 

They serve as the principal interface between the program office and the 

ministries or departments of defense to ensure proper execution of the 

system development and demonstration phase MOU and provide support 
Page 9 GAO-03-775 Joint Strike Fighter Acquisition 

and guidance on all country-specific program execution and integration 

issues. They provide program information to their ministries or 

departments of defense and, in some cases, act as an advocate for industry 

in their respective countries. National deputies and other partner staff also 

serve functional roles on integrated product teams—multidisciplinary 

teams that represent a variety of areas, including systems engineering; 

logistics; and command, control, communications, computers, and 

intelligence. 

At an industry level, the prime contractors interact with the JSF Program 

Office through activities in support of their system development and 

demonstration contracts and participation on both program office and 

contractor integrated product teams and work groups. In addition, the 

prime contractors interact with partner government ministries or 

departments (including defense, industry, and trade) and JSF partner 

personnel in the program office to discuss opportunities for industrial 

participation and the results of subcontracting competitions. For example, 

prior to the negotiation of the MOUs for the current phase, Lockheed 

Martin visited many of the partner countries to provide information on the 

aircraft and assess potential interest. In addition, for those countries 

expected to participate in the system development and demonstration 

phase, Lockheed conducted industry assessments and provided feedback 

on what areas suppliers might expect to compete for JSF contracts. 

The JSF program allows foreign countries to become program partners at 

one of three participation levels, based on financial contribution. As 

shown in table 1, the foreign partners have contributed over $4.5 billion, 

or about 14 percent, for the system development and demonstration phase 

and are expected to purchase about 722 aircraft beginning in the 2012-2015 

time frame. Israel and Singapore have recently indicated their intention 

to participate in the program as security cooperation participants, a 

nonpartner arrangement, which offers limited access to program 

information, without a program office presence. According to DOD, 

foreign military sales to these and other nonpartner countries could 

include an additional 1,500 to 3,000 aircraft. 

JSF Program Relationships 

Expected to Benefit Both 

DOD and Allies 
Page 10 GAO-03-775 Joint Strike Fighter Acquisition 

Table 1: JSF Partner Financial Contributions and Estimated Aircraft Purchases 

 System development and demonstration Production 

Partner country 

Partner 

level 

Financial 

contributions 

(in millions)a

Percentage of 

total costs 

Projected 

quantities 

Percentage of 

 total quantities 

United Kingdom Level I $2,056 6.2 150 4.7 

Italy Level II $1,028 3.1 131 4.1 

Netherlands Level II $800 2.4 85 2.7 

Turkey Level III $175 0.5 100 3.2 

Australia Level III $144 0.4 100 3.2 

Norway Level III $122 0.4 48 1.5 

Denmark Level III $110 0.3 48 1.5 

Canada Level III $100 0.3 60 1.9 

Total partner $4,535 13.7b 722 22.8 

United States $28,565 86.3 2,443 77.2 

Sources: DOD and JSF program documents and AECA project certifications to Congress. 

a

Chart values do not reflect any nonfinancial contributions from partners (see app. II). 

b

Percentages do not add due to rounding. 

Contributions can be financial or nonfinancial. For example, Turkey’s 

system development and demonstration contribution was all cash, 

whereas $15 million of Denmark’s $125 million contribution represented 

the use of an F-16 aircraft and related support equipment for future JSF 

flight tests and the use of other North Atlantic Treaty Organization 

(NATO) command and control assets for a JSF interoperability study. 

(See app. II for details on partner contributions and benefits.) 

For the agreements negotiated for the system development and 

demonstration phase, none of the partner country contribution levels met 

the financial targets established in the ATPRG guidelines. In the case of 

the United Kingdom, funding was not available to meet the expected 

10 percent contribution. The Under Secretary of Defense for Acquisition, 

Technology, and Logistics determined that the lower contribution amount 

was justified and, in fact, the United States was able to negotiate 

concessions concerning rights for the disposal of project equipment and 

third-party transfer and sales. Since the United Kingdom was the first 

partner to sign, and the only Level I partner, contribution targets for other 

partner negotiations were revised proportionately. 

Lockheed Martin’s contracts with aerospace suppliers from partner 

countries are expected to improve the program because of those 
Page 11 GAO-03-775 Joint Strike Fighter Acquisition 

companies’ specific advanced design and manufacturing capabilities. 

For example, British industry has a significant presence in the program 

with BAE Systems as a teammate to Lockheed Martin and Rolls Royce as a 

major engine subcontractor. In addition, Fokker Aerostructures in the 

Netherlands is under contract to develop composite flight doors for the 

JSF airframe. 

In return for their contributions, partner countries have representatives 

in the program office with access to program data and technology; 

membership on the management decision-making bodies; aircraft delivery 

priority over future foreign military sales participants; guaranteed or 

potential waiver of nonrecurring aircraft costs;7

 potential levies on future 

foreign military sales aircraft sold;8

 and improved relationships for their 

industry with U.S. aerospace companies through JSF subcontracting 

opportunities. For example, the United Kingdom – which is committed to 

contribute just over $2 billion in the system development and 

demonstration phase – is a Level I full collaborative partner, with benefits 

such as 

• 10 staff positions within the JSF Program Office, including senior 

positions on integrated product teams; 

• participation in cost versus performance trade-off and requirement 

setting processes, resulting in British military needs being included in 

the JSF operational requirements document; and 

• involvement in final source selection process for the system 

development and demonstration contract award. 

Conversely, the five Level III partners, which are committed to contribute 

between $125 million and $175 million, each have one program office staff 

member and no direct vote with regard to requirement decisions. 

 7

 The President of the United States may reduce or waive cooperative project nonrecurring 

costs in accordance with the AECA (22 U.S.C. 2761 and 2767). For the JSF program, the 

Level I and II partners have been granted a full waiver of these costs; Level III participants 

will receive consideration for this waiver. 

8

 According to DOD, final disposition of levies and nonrecurring costs for partners will be 

decided in production phase MOU negotiations. 
Page 12 GAO-03-775 Joint Strike Fighter Acquisition 

All partners have benefited from increased access to program and 

contractor information by virtue of their early involvement in the 

program.9

 Specifically, this participation provided partners with 

information on the development of aircraft requirements and program 

costs and schedules, as well as on design, manufacturing, and logistics. 

According to some partner personnel, access to program information 

often did not meet their expectations early in the program, but it has 

improved. During the concept demonstration phase, data were available 

to partner staff based on country-specific projects. In addition, data were 

only formally provided through a rigorous, paper-driven document release 

process and required authority from JSF senior management. For the 

system development and demonstration phase, partner representatives 

located in the program office now have access to the database of 

unclassified program information, referred to as the JSF Virtual 

Environment, which contains the majority of program documents. Partner 

program office personnel, regardless of participation level, have equal 

access to most information. Some information in the database is available 

only to U.S. personnel or through integrated product team participation. 

Partner staff can request information from integrated product teams on 

which they have no membership, as long as the information is not 

restricted from being released to their countries. Lockheed Martin has a 

separate document database called the Joint Data Library that includes 

information on contractor activities, but partner access is limited by 

existing technical assistance agreements and National Disclosure Policy. 

Along with the traditional functions of balancing the requirements for JSF 

performance against its established cost and schedule targets, the program 

office is tasked with integrating partner government and industry 

participants into the program. While initial partner contributions are 

beneficial, and critical for political support for the program, there is no 

guarantee that additional funding will be available to support future cost 

increases should they arise. In addition, even when cost sharing may be 

justified, funding may not be available through respective partner 

budgetary processes. DOD’s typical response to increased program costs 

often results in requesting additional funding, delaying production 

schedules, and reducing procurement quantities or system capabilities, 

but such actions may negatively affect partner countries. DOD expects 

 9

 Most partners have been involved in the JSF program since the concept development 

phase, which began in 1996. 

International 

Participation 

Complicates JSF 

Program Efforts to 

Manage Costs 
Page 13 GAO-03-775 Joint Strike Fighter Acquisition 

that specific provisions in partner MOUs will maximize partner 

cost sharing when appropriate and that the use of competitive contracting 

will minimize cost increases to the program. 

Our past reviews have shown that weapons acquisition programs 

frequently encounter increased cost due to questionable requirements, 

unrealistic cost estimates, funding instability, and high-risk acquisition 

strategies. We reported in October 2001 that the JSF program entered the 

system development and demonstration phase with increased cost risk 

due to low maturity of critical technologies.10 Future cost increases, should 

they arise in the program, may fall almost entirely on the United States 

because there are no provisions in the negotiated agreements requiring 

partners to share these increases. Once established, the contributions for 

the partners cannot be revised or increased by the United States without 

the consent of the partner government as stated in these agreements. 

DOD and program office officials told us there could be instances where 

the partners would not be expected to share cost increases. For example, 

cost estimates for the system development and demonstration phase have 

increased on multiple occasions since the program started in 1996. During 

that time, the expected cost for this phase went from $21.2 billion to 

$33.1 billion as a result of scope changes and increased knowledge about 

cost. According to program officials and documents, partners have not 

been required to share any of these costs because the changes were DOD 

directed and unrelated to partner actions or requirements. 

The MOU framework does require partners to pay for all development 

costs related to meeting unique national requirements. For example, some 

partners expect to use weapons that may not be included in the current 

JSF operational requirements document and fully expect to bear the cost 

associated with integrating them into the aircraft’s design. In such a case, 

the United States and other partners are not required to share costs 

associated with meeting unique country requirements, unless they agree to 

make these requirements part of the baseline aircraft configuration and an 

adjustment is made to the baseline aircraft price. 

 10 U.S. General Accounting Office, Joint Strike Fighter Acquisition: Mature Critical 

Technologies Needed to Reduce Risks, GAO-02-39 (Washington, D.C.: Oct. 19, 2001). The 

JSF Program Office now tracks 23 program level risks—3 are low risks, 19 are moderate, 

and 1 is high. The high risk carried by the program is related to aircraft weight. 

JSF Partners May Not 

Provide Additional 

Funding for Program 

Cost Increases 
Page 14 GAO-03-775 Joint Strike Fighter Acquisition 

Historically, DOD has responded to cost increases by requesting more 

funding, extending program schedules, reducing overall program 

quantities and aircraft capability, or some combination of these. While 

such actions can negatively affect the U.S. military services, the impact 

may be more substantial for partners because they have less control over 

program decisions and less ability to adjust to these changes. In the case 

of the United Kingdom, the Ministry of Defence is developing a new 

aircraft carrier, expected for delivery in 2012, which is planned to carry 

JSF aircraft. According to United Kingdom officials, if the aircraft are not 

delivered as expected, the carrier might not be able to support mission 

scenarios. Further, most of the remaining partners also expect to receive 

their JSF aircraft beginning in about the 2012 to 2015 time frame. Potential 

program delays would affect the availability of the aircraft for partner 

governments. Finally, if the unit cost increases as a result of DOD’s 

actions, the sales price could be higher than expected, and all partners 

would be required to pay that additional amount. Current cost estimates 

for the program assume that the United States will purchase 2,443 and 

the United Kingdom 150 JSF aircraft.11 DOD and Lockheed Martin are 

working with partner countries to determine aircraft needs for all 

participants, and they will incorporate this information into formal 

production phase planning. 

To encourage partners to share costs where appropriate, the United States 

can consider past cost-sharing behavior when negotiating MOUs for future 

phases of the program. If a partner refuses to share legitimate costs during 

the system development and demonstration phase, the United States can 

use future phase negotiations to recoup all or part of those costs. In 

these instances, the United States could reduce levies from future sales, 

refuse to waive portions of the nonrecurring cost charges for Level III 

partners, or in a worst case, choose not to allow further participation in 

the program. 

Partner representatives indicated that they intend to cooperate with the 

JSF Program Office and Lockheed Martin in terms of sharing increased 

program costs when justified. However, the continued affordability of the 

development program and the final purchase price are important for 

 11 United Kingdom officials told us that for planning purpose it assumes a JSF buy of up 

to 150 aircraft. This assumption has not been formalized in a production MOU with the 

United States. 

Tools Available to 

Encourage Partner Sharing 

and Cost Control 
Page 15 GAO-03-775 Joint Strike Fighter Acquisition 

partners, and there is no guarantee that they would automatically 

contribute to cost overruns, especially if the increase is attributable to 

factors outside their control. Some partner representatives specifically 

expressed concern over the tendency of U.S. weapon system requirements 

to increase over time, which results in greater risk and higher costs. 

Several partner representatives also emphasized that it is important for the 

JSF Program Office to continue to use practices such as Cost as an 

Independent Variable12 and iterative requirements definition to address 

these concerns. While some partners could fund portions of cost overruns 

from military budgets if requested, others told us that even if they were 

willing to support such increases, these decisions would have to be made 

through their parliamentary process, which could affect their overall 

support for the program. 

DOD and the JSF Program Office expect that using a competitive 

contracting approach, without prescribed work share for partner 

countries, will also assist in controlling JSF costs. DOD officials stated, 

and our past work has shown, that cooperative programs, such as the 

Army’s Medium Extended Air Defense System, have experienced cost and 

schedule problems because such programs focused on meeting industrial 

work share requirements rather than pursuing a cost-effective acquisition 

strategy. Coproduction programs, such as the F-16 Multinational Fighter 

Program, that employ traditional work share approaches often experience 

cost premiums to the program in terms of increased manufacturing costs 

associated with use of foreign suppliers.13 In contrast, the JSF approach is 

expected to award contracts to the most competitive suppliers, and 

therefore Lockheed Martin does not believe there will be cost premiums. 

However, Lockheed Martin officials told us that due to limited aerospace 

capabilities in some of the partner countries, traditional industrial 

arrangements might be used in the JSF production phase. 

 12 A process by which performance requirements are considered in terms of the established 

cost targets so that trade-offs in performance capabilities can be made as necessary. 

13 U.S. General Accounting Office, F-16 Program: Reasonably Competitive Premiums 

for European Coproduction, GAO/NSIAD-90-181 (Washington, D.C.: May 14, 1990) and 

U.S. General Accounting Office, Defense Acquisition: Decision Nears on Medium 

Extended Air Defense System, GAO/NSIAD-98-145 (Washington, D.C.: June 9, 1998). 
Page 16 GAO-03-775 Joint Strike Fighter Acquisition 

The transfer of technology on the JSF program presents a number of 

challenges related to program execution, international suppliers, and 

disclosure policy. The volume of JSF export authorizations has taxed 

Lockheed Martin’s licensing resources, and any delays in the disposition 

of future export authorizations could affect the execution of key contracts 

and the ability of partner suppliers to bid for subcontracts. Further, the 

transfer of technologies necessary to achieve aircraft commonality goals 

is expected to far exceed past transfers of advanced military technology 

and will push the boundaries of U.S. disclosure policy.14 The JSF Program 

Office and the prime contractor have taken various steps to mitigate 

these challenges. 

The JSF Program Office and Lockheed Martin told us that there were 

over 400 export authorizations and amendments granted during the JSF 

concept demonstration phase, and they expect that the number of 

export authorizations required for the current phase could exceed 1,000. 

Lockheed Martin licensing officials have indicated that this volume has 

strained its JSF program resources. Export authorizations for critical 

suppliers need to be planned for, prepared, and resolved in a timely 

fashion, to help avoid schedule delays in the program. Without proper 

planning, there could be pressure to expedite reviews and approvals of 

export authorizations to support program goals and schedules. This could 

lead to unintended consequences, such as inadequate reviews of license 

content or broad interpretations of disclosure authority. Lockheed 

Martin’s ability to forecast its export authorization workload extends out 

only 3 months because most licensing resources are already devoted to 

keeping up with time critical authorizations. Further, JSF Program Office 

officials told us that Lockheed Martin has not yet fulfilled a requirement to 

complete a long-term plan that could anticipate the export authorizations 

and technology release reviews that will be necessary to execute the 

program using international suppliers to design and manufacture key parts 

of the aircraft. This plan could also be used to identify problems suppliers 

face in executing contracts as a result of licensing or releasability 

concerns and develop strategies to overcome those problems, such as 

finding other qualified suppliers to do the work. 

 14 National Disclosure Policy establishes procedures and criteria for releasing classified 

or controlled unclassified military information to other countries. In addition, there are 

special release processes for technology, such as stealth. U.S. policy on the release of 

stealth-related data and technology is contained in DOD Instruction S5230.28. 

JSF Technology 

Transfer Presents 

Challenges for 

Program Execution, 

International 

Suppliers, and 

Disclosure Policy 

Timing and Volume of 

Export Authorizations 

Could Affect Program 

Execution and 

International Suppliers 
Page 17 GAO-03-775 Joint Strike Fighter Acquisition 

Timely export authorizations are also necessary to avoid excluding partner 

industries from competitions. While Lockheed Martin has stated that no 

foreign supplier has been excluded from any of its competitions or denied 

a contract because of fear of export authorization processing times or the 

conditions that might be placed on an authorization, the company is 

concerned this could happen. Further, one partner told us that export 

license delays have had a negative effect on the participation of its 

companies because some U.S. companies have been reluctant to 

undertake the bureaucratic burden to allow the participation of a foreign 

company and some partner companies have been unable to bid due to the 

time constraints involved in securing an export license. 

DOD, the JSF Program Office, and Lockheed Martin have taken several 

actions to mitigate the challenges presented by export authorization 

delays: 

• The JSF Program Office and Lockheed Martin have established a 

process to coordinate export authorization applications before they are 

submitted to the Department of State for review. This process is 

intended to reduce review times by ensuring that the export request 

clearly describes the data or technology that would be transferred and 

by addressing potentially contentious issues related to sensitive 

transfers. In addition, Lockheed Martin has added resources to its 

licensing organization to respond to the volume and schedule demands 

of JSF export authorizations. 

• Lockheed Martin received a global project authorization (GPA)—an 

“umbrella” export authorization that allows Lockheed Martin and 

other U.S. suppliers on the program to enter into agreements with 

over 200 partner suppliers to transfer certain unclassified technical 

data—from the Department of State.15 The GPA is expected to lessen 

the administrative burden and improve the consistency of and 

processing times for routine export authorizations. The Departments 

of State and Defense and Lockheed Martin agreed to the scope of the 

information that could be exported using this authorization and the 

conditions for those exports up front. The Department of State expects 

to process GPA implementing agreements in 5 days, provided there 

is no need to refer them to other agencies or offices for review. 

 15 The JSF global project authorization does not cover the transfer of any classified 

information or certain unclassified, export-controlled information in sensitive technology 

areas such as stealth, radar, and propulsion. 
Page 18 GAO-03-775 Joint Strike Fighter Acquisition 

Approved in October 2002, implementation of the GPA was delayed 

until March 2003 because of supplier concerns related to liability and 

compliance requirements. In March 2003, the first implementing 

agreement between Lockheed Martin and a company in a partner 

country was reviewed and approved in 4 business days. 

• Prior to the GPA, Lockheed Martin and 13 other U.S. suppliers were 

granted an exemption by the U.S. Air Force from the export 

authorization requirements that govern the release of unclassified 

technical data to suppliers from NATO and certain other countries, 

including Australia, for bid and proposal purposes. This exemption 

expires in March 2004. Lockheed Martin also uses a country-specific 

exemption to transfer technical data to Canada.16

• Finally, as a NATO Defense Capabilities Initiative program, partner 

countries and companies participating in the program, including 

Australia, can take advantage of expedited review processes for certain 

types of export licenses. Under these expedited procedures, the 

Department of State promises to complete its reviews of license 

applications in 10 days, and if it requests comments on a license from 

DOD or other government agencies, those reviews should be 

completed in 10 days as well. 

The United States has committed to design, develop, and qualify aircraft 

for partners that fulfill the JSF operational requirements document and 

are as common to the U.S. JSF configuration as possible within National 

Disclosure Policy.17 In some cases, according to DOD, the program has 

requested exceptions from National Disclosure Policy to achieve 

interoperability and aircraft commonality goals and to avoid additional 

development costs. Some DOD officials confirmed that technology 

transfer decisions have been influenced by JSF program goals, rather than 

adjusting program goals to meet current disclosure policy. 

DOD, JSF Program Office, and Lockheed Martin officials agreed that 

technology transfer issues should be resolved as early as possible in order 

 16 U.S. General Accounting Office, Defense Trade: Lessons to Be Learned from the Country 

Export Exemption, GAO-02-63 (Washington, D.C.: Mar. 29, 2002). 

17 Releasability reviews, such as the low observable/counter low observable review process 

for stealth technology, are necessary to transfer certain sensitive technologies and related 

design and manufacturing data to foreign countries and suppliers. 

Degree of Technology 

Transfer Will Stretch 

Current Disclosure 

Boundaries 
Page 19 GAO-03-775 Joint Strike Fighter Acquisition 

to meet program schedules without placing undue pressure on the release 

process. However, there have been some initial problems executing this 

strategy. An official at the Defense Technology Security Administration, 

one of the offices responsible for technical assessments of disclosure and 

export authorization requests, stated that even though the JSF program 

has a plan to manage releasability issues and the National Disclosure 

Policy process, the office does not always receive information related to 

these issues in a timely manner. In addition, one partner has expressed 

concern about the pace of information sharing and decision making 

related to the JSF support concept. According to several partners, access 

to technical data is needed so that they can plan for and develop a 

sovereign support infrastructure as expressed in their formal exchange 

of letters with the United States. The program office anticipates that 

in-country support of JSF aircraft will be an issue for all partners and 

will involve both technology transfer and industrial considerations. 

The JSF support concept is currently being developed, with input from 

the U.S. military services and international partners. 

DOD, the JSF Program Office, and Lockheed Martin have taken a number 

of actions designed to mitigate the challenges presented by the transfer of 

technologies on the program. 

• In February 2002, the program office modified Lockheed Martin’s 

system development and demonstration contract to include a study on 

the expected commonality between U.S. and partner JSF aircraft. The 

objective of this study is to develop a partner JSF aircraft specification 

that is as common to the U.S. specification as possible under National 

Disclosure Policy. This effort allows the program to pursue early 

releasability decisions, which mitigates the risk of putting undue 

schedule pressure on the process. Lockheed Martin did not deliver the 

partner specification to the program office as planned in March 2003, 

and it now expects to deliver the specification in August 2003. 

• To identify and resolve expected technical, security, and policy issues 

for the overseas sale and cooperative development of JSF aircraft, the 

program chartered an international development work group. The core 

of this group consists of program office and contractor personnel, as 

well as individuals from the Air Force’s Office of International Affairs 

and Special Programs, Marine Corps Requirements, and Navy 

International Programs. The group was chartered to review how past 

export decisions apply to the JSF program; identify contentious items 

in advance; and provide workable resolutions that minimize the impact 

to the program cost, schedule, or performance. 
Page 20 GAO-03-775 Joint Strike Fighter Acquisition 

• In February 2003, the JSF Program Office received direction from the 

Low Observables/Counter Low Observables Executive Committee to 

appoint a JSF export compliance officer. The purpose of this position is 

to ensure that releasability decisions and export licensing provisos or 

conditions are fully implemented and adhered to by the program and 

applied to JSF configurations as required. 

• As required by DOD acquisition regulations, the JSF program has 

identified critical program information, and Lockheed Martin is 

developing a plan to prevent unauthorized disclosure or inadvertent 

transfer of leading-edge technologies and sensitive data or systems. To 

reduce cost and integrate appropriate measures into the JSF design, 

this effort is being undertaken as a systems engineering activity. During 

this phase of the program, technology protection measures have to be 

demonstrated, operationally tested, and made ready for production. 

DOD officials have stated that the program’s progress on this plan has 

been slow. Given that releasability decisions should consider the 

measures mentioned above, timely completion of this plan is important 

for long-term program planning. 

• Finally, the JSF Program Office established an exchange of letters 

work group with participation from selected program office and 

Lockheed Martin integrated product teams, and partner representatives 

when appropriate. The current focus of this group is to address partner 

goals related to in-country support of the aircraft. In addition, the JSF 

autonomic logistics integrated product team is conducting trade 

studies to further define a global support solution for worldwide 

support to start to address these issues. According to program officials, 

this strategy will identify the best approach for maintaining JSF 

aircraft, and may include logistics centers in partner countries. Followon trade studies would determine the cost of developing additional 

maintenance locations. The implementation of the global support 

solution and the options identified in follow-on trade studies will have 

to be in full compliance with the National Disclosure Policy, or the 

program will need to request exceptions. 

In the JSF program, the prime contractor is responsible for managing 

industrial participation. Lockheed Martin provides partners with 

return-on-investment expectations, opportunities for qualified bidders to 

compete for JSF contracts, and visibility into the subcontracting process 

for the program. Partners have identified industrial return as one of the 

primary reasons for their participation in the program. If partners do not 

realize their expectations, they can choose to leave the program and/or not 

Managing Industrial 

Participation 

Expectations 
Page 21 GAO-03-775 Joint Strike Fighter Acquisition 

purchase the aircraft—both negative consequences for DOD. But, 

if Lockheed Martin’s efforts to meet partner return-on-investment 

expectations come into conflict with program cost, schedule, and 

performance goals, this could have a negative effect as well. Therefore, 

the JSF Program Office will ultimately have to make decisions to balance 

partner expectations and program execution. 

Partner representatives generally agreed with the JSF competitive 

approach to contracting, but cautioned that while it is too early to assess 

results, their industries’ ability to win JSF contracts and participate in 

design and development is vital to their continued involvement in the 

program. In addition, some partners stated that retaining political support 

for the program in their countries will depend, in large part, on winning 

contracts whose total value approaches or exceeds their financial 

contributions for the JSF system development and demonstration phase. 

In addition to the amount of work placed in a partner country, partners 

have expectations about the timing of contracts and/or which companies 

in their countries win contracts. If return-on-investment and other 

expectations are not met, partners could decide to leave the program and 

not purchase the aircraft.18 If a partner decided to leave the program, DOD 

would be deprived of anticipated development funding and an opportunity 

to improve interoperability among U.S. allies, while Lockheed Martin 

could be faced with lower than projected international sales. 

Other cooperative programs provide for industrial participation 

commensurate with the financial contributions of the partners. In contrast, 

the JSF MOU provides that, to achieve “best value for money,” DOD will 

require contractors to select subcontractors on a competitive basis to the 

maximum practical extent. To support this approach, Lockheed Martin has 

taken the following steps to manage partner return-on-investment 

expectations, identify opportunities for qualified bidders to compete for 

JSF contracts, and provide visibility into the subcontracting process for 

the program: 

• To manage partner return-on-investment expectations, Lockheed 

Martin sent teams of engineers and business development personnel to 

partner countries and assessed suppliers’ ability to compete for JSF 

 18 Most partners have a clause in their supplement MOUs that allows for withdrawal from 

this phase of the program if industrial participation is not satisfactory. 

Management of Partner 

Expectations Is Critical for 

Program Success 
Page 22 GAO-03-775 Joint Strike Fighter Acquisition 

contracts. In some cases, Lockheed Martin signed agreements with 

partner governments and suppliers to document the opportunities they 

would have to bid for JSF contracts, as well as the potential value of 

those contracts. DOD and program office officials told us that these 

agreements were necessary to secure political support in certain 

countries because the U.S. government does not guarantee that the 

partners will recoup their investment in the program through contracts 

with their industry. In at least one case, Lockheed Martin has promised 

an international contractor predetermined work that satisfies a major 

portion of that country’s expected return-on-investment. While 

disavowing knowledge of the specific contents of these agreements, 

DOD was supportive of their use during partner negotiations. DOD 

officials conceded that the agreements contained in these documents 

departed from the competitive approach, but expressed the hope that 

the use of these agreements would not be widespread. 

• In response to partner concerns about the slow pace of contract 

awards, Lockheed Martin has stated that the bulk of the remaining 

subcontracting with partner industry will come later in the current 

phase or during the production phase, especially in countries where the 

aerospace industry is less developed and contracts are more likely to 

be awarded for build-to-print or second-source manufacturing. 

• To provide visibility into the subcontracting process, Lockheed Martin, 

the JSF program manager, DOD, or a combination of the three have 

provided explanations of how sourcing decisions were made after 

partner governments raised concerns on behalf of suppliers about the 

results of competitions. These governments were told that suppliers 

submitted bids far above the competitive range and thus were not 

selected. In addition, DOD, JSF Program Office, and Lockheed Martin 

personnel provided feedback to the partners concerning how to 

approach future competitions. 

• The award fee structure of Lockheed Martin’s contract permits the 

JSF Program Office to establish focus criteria applicable to specific 

evaluation periods. To help ensure partner industries are provided 

opportunities to compete for JSF subcontracts, the program office 

established focus criteria concerning subcontract competition for the 

evaluation period between November 1, 2002, and April 30, 2003. 

Lockheed Martin was judged on its ability to (1) provide partners 

regular insight into subcontracting opportunities, (2) encourage its 

major suppliers to consider partner suppliers on a competitive basis, 

and (3) acquire needed export authorizations in a timely manner to 

support competitions. In response, Lockheed Martin has developed a 
Page 23 GAO-03-775 Joint Strike Fighter Acquisition 

database to track contract opportunities, especially for international 

suppliers and U.S. small businesses, and provides monthly summaries 

of industrial participation to partner personnel in the program office. 

These summaries include the names of suppliers, contracts for which 

they will be eligible to bid, bid and proposal dates, status of contracts 

awarded, and the status of supplier export authorizations. This 

database will assist DOD in meeting MOU requirements to provide 

visibility into JSF subcontracting efforts. 

Further, some partners have concerns about some aspects of the 

competition, including delays in getting U.S. export licenses and 

reluctance by a major supplier to provide opportunities to industry in a 

partner country. If competition for contracts is not implemented in a 

manner consistent with partner expectations, partners’ continued support 

for the program could be jeopardized. 

JSF industrial relationships are solely developed between U.S. contractors 

and partner country industry. After deciding to award work to foreign and 

domestic companies based on competition, instead of the share of 

program costs contributed, DOD and the JSF Program Office have left 

implementation of this competitive approach to Lockheed Martin under 

the standard Federal Acquisition Regulation clause related to competition 

in subcontracting.19 Lockheed Martin officials told us their approach for 

supplier selection is based on factors such as a supplier’s ability to 

incorporate a management approach that is responsive to maintaining 

JSF schedules, reducing design and production cost within acceptable 

risk levels, developing a solid technical approach with opportunities 

for technology improvements, reducing aircraft size and weight, and 

increasing aircraft performance. They further told us that this approach is 

being implemented without regard to a supplier’s country of origin, with 

U.S. and international suppliers competing equally.20 Lockheed Martin 

concluded that awarding subcontracts in this manner would help 

achieve program affordability goals and avoid pressure from partners to 

guarantee contract awards consistent with their monetary contributions to 

the program. 

 19 Federal Acquisition Regulation 52.244-5, Competition in Subcontracting. This clause 

requires contractors to select subcontractors on a competitive basis to the maximum 

practical extent consistent with the objectives and requirements of the contract. 

20 Lockheed Martin officials told us that in some cases competitions would be waived for 

“heritage” suppliers—suppliers with whom Lockheed Martin has had a long-standing 

industrial relationship. 
Page 24 GAO-03-775 Joint Strike Fighter Acquisition 

Program officials told us that since the award fee emphasizes overall 

affordability, program management, technical progress, and development 

cost control, it should incentivize Lockheed Martin to perform 

subcontracting activities on a competitive basis. If, during its regular 

monitoring of contract execution, the program office identifies the need 

for more emphasis in a certain area—such as reducing aircraft weight or 

providing opportunities to international suppliers—it can address this 

concern through the contract’s award fee process.21 While the program 

office has used an award fee focus letter to encourage Lockheed Martin to 

provide a competitive environment, it has not evaluated whether 

competitive results have been achieved. 

The JSF program is not immune to unpredictable cost growth, schedule 

delays, and other management challenges that have historically plagued 

DOD’s systems acquisition programs. International participation in the 

program, while providing benefits, makes managing these challenges more 

difficult and places additional risk on DOD and the prime contractor. 

While DOD expects international cooperation in systems acquisition to 

benefit future military coalition engagements, this may come at the 

expense of U.S. technological and industrial advantages or the overall 

affordability of the JSF aircraft. Over the next 2 years, DOD will make 

decisions that will critically affect the cost, schedule, and performance of 

the program. Because Lockheed Martin bears the responsibility for 

managing partner industrial expectations, it will be forced to balance its 

ability to meet program milestones and collect program award fees against 

meeting these expectations, which could be the key in securing future 

sales of the JSF for the company. In turn, DOD must be prepared to assess 

and mitigate any risks resulting from these contractor decisions as it 

fulfills national obligations set forth in agreements with partner 

governments. While steps have been taken to position the program for 

success, given the size and importance of the program, additional attention 

on the part of DOD and the program office would help minimize the risks 

associated with implementing the international program. Toward this end, 

DOD and the JSF Program Office need to maintain a significant knowledge 

base to enable adequate oversight and control over an acquisition strategy 

 21 Lockheed Martin’s contract for the current JSF phase provides no base fee; instead, it 

calls for a potential award fee of almost $2.5 billion, or 15 percent of the total contract 

value. The exact amount of the fee is determined by the program office, based on 

subjective criteria related to Lockheed Martin’s ability to achieve development and unit 

cost control, program management, and technical development goals and milestones. 

Conclusions 
Page 25 GAO-03-775 Joint Strike Fighter Acquisition 

that effectively designs, develops, and produces the aircraft while ensuring 

that the strategy is carried out to the satisfaction of the U.S. services and 

the international partners. Tools are in place to provide this oversight and 

management, but they must be fully utilized to achieve program goals. 

To provide greater knowledge, which anticipates decisions needed as the 

JSF program matures, we recommend that the Secretary of Defense direct 

the JSF Program Office to ensure that the Lockheed Martin international 

industrial plan 

• identifies current and potential contracts involving the transfer of 

sensitive data and technology to partner suppliers; 

• evaluates the risks that unfavorable export decisions could pose for the 

program; and 

• develops alternatives to mitigate those risks, such as using 

U.S. suppliers. 

We also recommend that the Secretary direct the JSF Program Office to 

ensure that information concerning the prime contractor’s selection and 

management of suppliers be collected, closely monitored, and used for 

program oversight. This oversight should include identifying potential 

conflicts between partner expectations and program goals, developing 

focus letters that encourage Lockheed Martin to resolve these conflicts, 

and making award fee determinations accordingly. 

DOD provided us with written comments on a draft of this report. These 

comments are reprinted in appendix III. DOD provided separate technical 

comments, which we incorporated as appropriate. 

DOD concurred with our recommendation that the Secretary of Defense 

direct the JSF Program Office to ensure that the Lockheed Martin 

international industrial plan identifies current and potential contracts 

involving the transfer of sensitive data and technology to partner 

suppliers, evaluates the risks that unfavorable export decisions could pose 

for the program, and develops alternatives to mitigate those risks. DOD 

did raise a concern about our suggestion that using U.S. suppliers was one 

way to avoid the risks that unfavorable export decisions could pose for the 

program. In particular, DOD stated it could undermine the program’s 

affordability goals. However, we believe that due to the level of advanced 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 
Page 26 GAO-03-775 Joint Strike Fighter Acquisition 

technology on the JSF program, affordability goals must be considered in 

the context of protecting some of the most sensitive U.S. technologies—

those vital to maintaining U.S. technical superiority. This means that 

technology transfer considerations must be part of the sourcing process. If 

contracts are awarded without identifying and addressing technology 

transfer issues, the protection of sensitive technology or the execution of 

those contracts could be compromised. For example, if a contract is 

awarded to a partner supplier, an export decision that subsequently 

prohibits or places conditions on the transfer of controlled data or 

technology to that company could adversely affect its ability to execute 

the contract. If mitigation options have not been identified, the likely 

outcome is pressure on the export control system to approve broader 

export authorizations in support of program goals. In other cases where 

technology transfer concerns have not been anticipated or addressed, 

JSF contractors could be forced to re-source work, which could also 

undermine not only affordability but other goals, such as meeting 

program schedule. 

The international industrial plan referenced in our recommendation can 

help alleviate these potential pressures by identifying alternatives, one 

of which would be identifying potential U.S. suppliers in cases where 

technology transfer is a concern. In its comments, DOD states that 

mitigating risk in this manner could require the dual sourcing of specific 

JSF contracts. This is not necessarily the case. Again, ideally, these 

technology transfer issues would be anticipated before a development or 

production contract is competed or awarded. With this knowledge, the 

JSF Program Office and Lockheed Martin could suggest adjustments to 

work packages or bidders’ lists if the technology or companies in question 

are likely to raise export control concerns. Regardless, the end result 

could still be the selection of a single source—one that advances 

affordability and protects sensitive U.S. technology. 

DOD also concurred with our recommendation that the Secretary of 

Defense direct the JSF Program Office to ensure that information 

concerning the prime contractors’ selection and management of suppliers 

is collected, closely monitored, and used for program oversight. In its 

comments, DOD stated that the JSF Program Office would work closely 

with Lockheed Martin to achieve effective program oversight with regard 

to partner expectations and program goals. However, DOD did not specify 

how it plans to collect and monitor this information or elaborate on other 

steps the JSF Program Office would take to identify and resolve potential 

conflicts between partner expectations and program goals. 
Page 27 GAO-03-775 Joint Strike Fighter Acquisition 

We are sending copies of this report to interested congressional 

committees; the Secretary of Defense; the Secretaries of the Navy and the 

Air Force; the Commandant of the Marine Corps; and the Director, Office 

of Management and Budget. We will also make copies available to others 

upon request. In addition, this report will be available at no charge on the 

GAO Web site at http://www.gao.gov. 

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

contact me at (202) 512-4841. Key contributors to this report are listed in 

appendix IV. 

Sincerely yours, 

Katherine V. Schinasi, Director 

Acquisition and Sourcing Management 
Appendix I: Scope and Methodology 

Page 28 GAO-03-775 Joint Strike Fighter Acquisition 

Our objective was to review how the Department of Defense (DOD) is 

managing the integration of partner countries and suppliers into the Joint 

Strike Fighter (JSF) program. Specifically, we identified international 

relationships and the benefits they are expected to provide and assessed 

how DOD is managing cost sharing, technology transfer, and partner 

expectations for industrial return. To conduct our work, we reviewed 

various guidance and agreements related to the JSF program. We also 

interviewed cognizant government officials and industry experts, including 

those in several JSF partner countries. 

To determine what relationships are necessary to integrate international 

partners into the program, we identified and examined documents related 

to JSF international arrangements and agreements, including information 

from DOD; the JSF Program Office in Arlington, Virginia; and the 

Lockheed Martin Aeronautics Company in Fort Worth, Texas. Specifically, 

we obtained documents from the Office of the Under Secretary of Defense 

(Acquisition, Technology, and Logistics), the Department of State (Office 

of Defense Trade Controls), the Secretary of the Air Force (International 

Affairs), the Navy International Programs Office, and the Department of 

Commerce (Bureau of Industry and Security). We discussed the guidance 

and processes for developing and negotiating agreements for international 

participation with officials from each of these offices. We also obtained 

and reviewed signed copies of the memoranda of understanding (MOU) 

and other documents that outline the agreed upon conditions between the 

United States and each partner nation. To understand the JSF 

international program structure in the context of other DOD cooperative 

development programs, we reviewed reports and documentation on 

programs such as the F-16 Multinational Fighter Program, the Medium 

Extended Air Defense System, and the Multiple Launch Rocket System 

and discussed this information with DOD, contractor, and international 

personnel with experience on those programs. 

For specific information on cost sharing within the program, we reviewed 

MOUs and related documents and discussed this issue with the Office of 

the Under Secretary of Defense (Acquisition, Technology, and Logistics) – 

International Cooperation, JSF Program Office international directorate 

and contracts; and Lockheed Martin international program officials. 

To determine how the program is responding to technology transfer 

concerns, we reviewed documentation on U.S. National Disclosure Policy 

and related guidance. In addition, we spoke to officials in DOD, the 

Departments of State and Commerce, the JSF Program Office, and 

Lockheed Martin. Within DOD, we collected data on sensitive technology 

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

Page 29 GAO-03-775 Joint Strike Fighter Acquisition 

areas and spoke to representatives from the Defense Technology Security 

Administration, the Office of the Under Secretary of Defense (Acquisition, 

Technology, and Logistics) Directorate of Special Programs, and the Office 

of the Air Force Under Secretary for International Affairs (Foreign 

Disclosure and Technology Transfer Division) to determine the extent to 

which the JSF program considered these concerns in its approach. We 

reviewed the JSF program protection plan and spoke with Lockheed 

Martin and program office security personnel to determine how the 

program implements this plan and other mechanisms related to foreign 

disclosure and technology transfer. 

To assess the JSF approach to managing international partner 

expectations, we reviewed various sources of information on other 

U.S. cooperative development programs, including our past reports, 

to determine potential challenges for the international program and 

discussed these challenges with officials from the Office of the Secretary 

of Defense, the JSF Program Office, Lockheed Martin, and other personnel 

as necessary. We reviewed program documentation and procedures for 

addressing these challenges and spoke with key staff from the Office of 

the Secretary of Defense, the JSF Program Office International 

Directorate, and Lockheed Martin JSF International Programs on issues 

regarding implementation of their management approach. 

To determine and assess the position of international participants in the 

program, we obtained the direct views of officials from the partner 

countries. First, we conducted structured interviews with the National 

Deputies from the partner countries represented in the JSF Program 

Office. These officials were both civilian and military personnel and 

provided information in areas related to their countries’ involvement in the 

program, including expected benefits, experience with other cooperative 

programs, presence in the JSF Program Office and contractor locations, 

industry participation in the program, cost sharing, experience with the 

U.S. export licensing process, and technology transfer. The results of 

interviews were documented and verified with each of the national 

deputies and their respective governments for accuracy. One country 

elected to provide written responses to the interview questions we 

submitted. In addition, we visited government and industry representatives 

in London and Bristol, United Kingdom; Rome, Italy; and The Hague, 

Netherlands. We discussed JSF program participation with senior defense 

officials in each of these three countries to assess their views on the 

overall progress and success of the program to date. Finally, we visited 

and discussed our review objectives with officials from BAE Systems and 
Appendix I: Scope and Methodology 

Page 30 GAO-03-775 Joint Strike Fighter Acquisition 

Rolls Royce in the United Kingdom, who are major suppliers to the JSF 

prime contractors. 

We performed our work from February 2002 to May 2003 in accordance 

with generally accepted government auditing standards. 
Appendix II: JSF International Participant 

Contributions and Benefits 

Page 31 GAO-03-775 Joint Strike Fighter Acquisition 

Value of 

contributions 

National 

deputy 

JSF Program 

Office staff Data use rights 

Benefits during 

production 

Level I partner

United Kingdom • U.S. target: 

approximately 

10 percent or 

$2.5 billion 

• Negotiated 

contribution: 

$2.056 billion 

At the director 

level reports to 

the JSF program 

manager 

Ten fully integrated 

staff, including 

the deputy director 

of the systems 

engineering 

integrated product 

team 

JSF purposes: includes 

use for the performance 

of project activities 

under SDD MOUs and 

future efforts by the 

United Kingdom 

(either collaboratively, 

nationally, or under U.S. 

foreign military sales 

arrangements) for the 

design, development, 

manufacture, operation, 

and support of any JSF 

aircraft 

• Delivery priority 

based on level of 

SDD contributions 

• Waiver of all nonrecurring research 

and development 

costs 

• Levies from sales 

to nonpartners 

based on level of 

SDD contributions 

Level II partner

Italy • U.S. target: 

approximately 

5 percent or 

$1.25 billion 

• Negotiated 

contribution: 

$1.028 billion 

Reports to the 

JSF international 

director 

Five integrated 

staff, including a 

logistics manager 

on the autonomic 

logistics integrated 

product team 

Italian Ministry of 

Defense JSF purposes: 

includes use for the 

performance of project 

activities under SDD 

MOUs and future efforts 

by the Italian Ministry of 

Defense (either 

collaboratively, 

nationally, or under U.S. 

foreign military sales 

arrangements) for the 

design, development, 

manufacture, operation, 

and support of the JSF 

CTOL and STOVL 

variants 

• Delivery priority 

based on level of 

SDD contributions 

• Waiver of all nonrecurring research 

and development 

costs 

• Levies from sales 

to nonpartners 

based on level of 

SDD contributions 

Netherlands • U.S. target: 

approximately 

5 percent or 

$1.25 billion 

• Negotiated 

contribution: 

$800 million 

Reports to the 

JSF international 

director 

Three integrated 

staff 

CTOL purposes: 

includes use for the 

performance of project 

activities under SDD 

MOUs and future efforts 

by the Netherlands 

(either collaboratively, 

nationally, or under U.S. 

foreign military sales 

arrangements) for the 

design, development, 

manufacture, operation, 

and support of the JSF 

CTOL and F-16 aircraft 

• Delivery priority 

based on level of 

SDD contributions 

• Waiver of all nonrecurring research 

and development 

costs 

• Levies from sales 

to nonpartners 

based on level of 

SDD contributions 

Appendix II: JSF International Participant 

Contributions and Benefits 
Appendix II: JSF International Participant 

Contributions and Benefits 

Page 32 GAO-03-775 Joint Strike Fighter Acquisition 

Value of 

contributions 

National 

deputy 

JSF Program 

Office staff Data use rights 

Benefits during 

production 

Level III Partner

Turkey • U.S. target: 

approximately 

1-2 percent or 

$250-500 million 

• Negotiated 

contribution: 

$175 million 

Reports to the 

JSF international 

director 

One integrated 

staff, who performs 

both national 

deputy duties and 

participates on the 

C4I IPT 

Project purposes: 

includes use for the 

performance of project 

activities under SDD 

MOUs 

• Delivery priority 

based on level of 

SDD contributions 

• Consideration for 

waiver of all nonrecurring research 

and development 

costs 

• Levies from sales 

to nonpartners 

based on level of 

SDD contributions 

Australia • U.S. target: 

approximately 

1-2 percent or 

$250-500 million 

• Negotiated 

contribution: 

$150 million 

Same as above One integrated 

staff, who performs 

both national 

deputy duties and 

participates on the 

C4I IPT 

Same as above Same as above 

Canada • U.S. target: 

approximately 

1-2 percent or 

$250-500 million 

• Negotiated 

contribution: 

$150 million 

Same as above One integrated 

staff, who performs 

both national 

deputy duties and 

participates on the 

C4I IPT 

Same as above Same as above 

Denmark • U.S. target: 

approximately 

1-2 percent or 

$250-500 million 

• Negotiated 

contribution: 

$125 million 

Same as above One integrated 

staff, who performs 

both national 

deputy duties and 

participates on the 

C4I IPT 

Same as above Same as above 

Norway • U.S. target: 

approximately 

1-2 percent or 

$250-500 million 

• Negotiated 

contribution: 

$125 million 

Same as above One integrated 

staff, who performs 

both national 

deputy duties and 

participates on the 

C4I IPT 

Same as above Same as above 
Appendix II: JSF International Participant 

Contributions and Benefits 

Page 33 GAO-03-775 Joint Strike Fighter Acquisition 

Value of 

contributions 

National 

deputy 

JSF Program 

Office staff Data use rights 

Benefits during 

production 

Security 

Cooperation 

Participant

Israel Approximately 

$50 million spread 

over two phases 

None None • Assessment of JSF’s 

ability to meet Israeli 

Ministry of Defense 

requirements 

• Studies on 

incorporation of 

unique Israeli 

systems 

• Program updates on 

the design, 

development, and 

qualification of the 

JSF aircraft 

• Opportunity to 

request purchase 

of a version of the 

JSF aircraft 

• Delivery priority 

based on level of 

SDD contributions 

Singapore Approximately 

$50 million spread 

over two phases 

None None • Assessment of JSF’s 

ability to meet the 

requirements of the 

Singapore Ministry of 

Defense 

• Studies on 

incorporation of 

unique requirements 

of the Singapore 

Ministry of Defense 

• Program updates on 

the design, 

development, and 

qualification of the 

JSF aircraft 

• Opportunity to 

request purchase 

of a version of the 

JSF aircraft 

• Delivery priority 

based on level of 

SDD contributions 

Legend 

C4I IPT = command, control, communications, computers, and intelligence integrated product team 

CTOL = conventional take-off and landing 

JSF = Joint Strike Fighter 

LOA = letter of offer and acceptance 

MOU= memorandum of understanding 

SDD = system development and demonstration 

STOVL = short take-off and vertical landing 

Source: GAO’s summary of JSF MOUs and letters of intent. 
Appendix III: Comments from the Department 

of Defense 

Page 34 GAO-03-775 Joint Strike Fighter Acquisition 

Appendix III: Comments from the 

Department of Defense 
Appendix III: Comments from the Department 

of Defense 

Page 35 GAO-03-775 Joint Strike Fighter Acquisition 
Appendix IV: Staff 

Acknowledgments 

Page 36 GAO-03-775 Joint Strike Fighter Acquisition 

Tom Denomme, Brian Mullins, Ron Schwenn, Anne Howe, Delores Cohen, 

Karen Sloan, and Robert Ackley made key contributions to this report. 

Appendix IV: Staff Acknowledgments 

Acknowledgments 

(120120) 
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