F-35 Joint Strike Fighter: Program Has Improved in Some Areas, but Affordability Challenges and Other Risks Remain
Published: 2013-04-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The F-35 Lightning II, the Joint Strike Fighter, is DOD's most costly and ambitious aircraft acquisition. The program is developing and fielding three aircraft variants for the Air Force, Navy, Marine Corps, and eight international partners. The F-35 is critical to long-term recapitalization plans as it is intended to replace hundreds of existing aircraft. This will require a long-term sustained funding commitment. Total U.S. investment is nearing $400 billion to develop and procure 2,457 aircraft through 2037. Fifty-two aircraft have been delivered through 2012. The F-35 program has been extensively restructured over the last 3 years to address prior cost, schedule, and performance problems. DOD approved a new acquisition program baseline in March 2012. GAO's prior reviews of the F-35 made numerous recommendations to improve outcomes, such as increasing test resources and reducing annual procurement quantities.
This testimony is largely based on GAO's recently released report, GAO-13-309 . This testimony discusses (1) progress the F-35 program made in 2012, and (2) major risks that program faces going forward. GAO's work included analyses of a wide range of program documents and interviews with defense and contractor officials.
section_title: What GAO Found
paragraphs: The new F-35 acquisition baseline reflects positive restructuring actions taken by the Department of Defense (DOD) since 2010, including more time and funding for development and deferred procurement of more than 400 aircraft to future years. Overall, the program progressed on several fronts during 2012 to further improve the current outlook. The program achieved 7 of 10 key management objectives and made substantial progress on one other. Two objectives on aircraft deliveries and a corrective management plan were not met. The F-35 development test program substantially met expectations with some revisions to flight test plans and made considerable progress addressing key technical risks. Software management practices and some output measures improved, although deliveries to test continued to lag behind plans. Manufacturing and supply processes also improved--indicators such as factory throughput, labor efficiency, and quality measures were positive. While initial F-35 production overran target costs and delivered aircraft late, the latest data shows labor hours decreasing and deliveries accelerating.
The F-35 program still faces considerable challenges and risks. Ensuring that the F-35 is affordable and can be bought in the quantities and time required by the warfighter will be a paramount concern to the Congress, DOD, and international partners. With more austere budgets looming, F-35 acquisition funding requirements average $12.6 billion annually through 2037. Once fielded, the projected costs of sustaining the F-35 fleet have been deemed unaffordable by DOD officials; efforts to reduce these costs are underway. Software integration and test will be challenging as many complex tasks remain to enable full warfighting capability. The program is also incurring substantial costs for rework-currently projected at $1.7 billion over 10 years of production-to fix problems discovered during testing. With two-thirds of development testing still to go, additional changes to design and manufacturing are likely. The program continues to incur financial risk from its plan to procure 289 aircraft for $57.8 billion before completing development flight testing.
section_title: What GAO Recommends
paragraphs: GAO has made prior recommendations to help reduce risk and improve outcomes, which DOD has implemented to varying degrees.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss our work on the F-35 Lightning II,  also known as the Joint Strike Fighter (JSF). At a cost approaching $400  billion, the F-35 is the Department of Defense’s (DOD) most costly and  ambitious acquisition program. The program is developing and fielding  three aircraft variants for the Air Force, Navy, and Marine Corps and eight  international partners. The F-35 is the linchpin of U.S. and partner plans  to replace existing fighters and support future combat operations. In a  time of austere federal budgets, DOD continues to project significant  long-term sustained funding requirements for the F-35 while, at the same  time, pursuing several other expensive systems. Over the past 3 years,  DOD has extensively restructured the F-35 program to address poor cost,  schedule, and performance outcomes. Most recently, in March 2012,  DOD established a new, more realistic, F-35 acquisition program baseline  that reflects increased costs, longer schedule times, and deferred  procurement of 410 aircraft to the future. Appendix I tracks program  baseline changes since the start of system development in 2001.
We have reported annually on F-35 issues since 2005. My testimony  today is largely based on the results of our latest review, and addresses  (1) the progress the F-35 program made in 2012 and (2) the major risks  that the program faces going forward. To conduct our work, we reviewed  program status reports and briefings, management objectives, test plans  and results, and internal DOD analyses with a focus on accomplishments  in calendar year 2012 compared to original plans for that year. We  obtained manufacturing data and cumulative outputs from the start of  production in 2007 through the end of 2012, and discussed development  and production issues and results to date, future expansion plans, and  improvement efforts with DOD, F-35 program, and contractor officials. We  toured the aircraft manufacturing plant, obtained production and supply  performance indicators, identified cumulative and projected engineering  changes, and discussed factory improvements and management controls  with members of the contractor’s work force and DOD plant  representatives. We evaluated DOD’s restructuring actions and impacts  on the program, tracked cost and schedule changes from program start to  the March 2012 baseline, and determined factors driving the changes.  We obtained current projections of acquisition funding needs through  2037 and estimated life cycle sustainment funding requirements. We  conducted this work in accordance with generally accepted government  auditing standards.
subsections: section_title: F-35 Program Performance Improved in 2012
paragraphs: The F-35 program made progress in 2012 on several fronts. The program  met or substantially met most of its key management and development  testing objectives for the year. We also found that the program made  progress in addressing key technical risks, as well as improving software  management, manufacturing, and supply processes.
subsections: section_title: Most Management and Development Testing Objectives Were Achieved
paragraphs: The F-35 program met or substantially met most of its key management  objectives established for calendar year 2012. The program office  annually establishes major management objectives that it wants to  achieve in the upcoming year. The F-35 program achieved 7 of its 10  primary objectives in 2012. Those included, among other things, the  completion of development testing on early increments of software, the  beginning of lab testing for both variations of the helmet mounted display,  the beginning of pilot training for two aircraft variants, and the completion  of negotiations on the restructured development contract. Although the  program did not complete its software block 3 critical design review as  planned in 2012, it did successfully complete its block 3 preliminary  design review in November 2012 and the critical design review in late  January 2013. The program did not meet its objectives to (1) deliver 40  production aircraft in 2012 and (2) receive approval from the Defense  Contract Management Agency of the contractor’s plan for correcting  deficiencies in its system for tracking and reporting cost and schedule  progress.
The F-35 development flight test program also substantially met 2012  expectations with some revisions to original plans. The program  exceeded its planned number of flights by 18 percent, although it fell short   flown by about 3 percent, suggesting  of its plan in terms of test pointsthat the flights flown were not as productive as expected. Test officials  had to make several adjustments to plans during the year due to  operating and performance limitations with aircraft and late releases of  software to test. As a result, none of the three variants completed all of  their planned 2012 baseline points, but the test team was able to add and  complete some test points that had been planned for future years. Testing  accomplished on each of the aircraft variants in 2012 included:
Conventional takeoff and landing variant (F-35A)—accomplished high  angle of attack testing, initial weapons separation, engine air start,  expansion of the airspeed and altitude envelopes, and evaluated  flying qualities with internal and external weapons.
Short takeoff and vertical landing variant (F-35B)—accomplished the  first weapons release, engine air start tests, fuel dump operations,  flight envelope expansion with weapons loaded, radar signature  testing, and tested re-design air inlet doors for vertical lift operations.
Carrier suitable variant (F-35C)—conducted speed and altitude range  verification and flights with external weapons, prepared for simulated  carrier landings, and conducted shore-based tests of a redesigned  arresting hook.
section_title: Progress Made in Addressing Key Technical Risks
paragraphs: In 2012, the F-35 program also made considerable progress in  addressing four areas of technical risk that could substantially degrade  the F-35’s capabilities and mission effectiveness. However, additional  work remains to fully address those risks. These risk areas and the  actions taken in 2012 are discussed below:  1.  Helmet mounted display (HMD)—DOD continued to address technical  issues with the HMD system. The original helmet mounted display,  integral to mission systems, encountered significant technical  deficiencies and did not meet warfighter requirements. The program is  pursuing a dual path by developing a second, less capable helmet  while working to fix the first helmet design. In 2012, DOD began  dedicated ground and flight testing to address these issues. Both  variations of the helmet mounted display are being evaluated and  program and contractor officials told us that they have increased  confidence that the helmet deficiencies will be fixed. DOD may make  a decision in 2013 as to which helmet to procure.  2.  Autonomic Logistics Information System (ALIS)—ALIS is an important  tool to predict and diagnose aircraft maintenance and supply issues.  ALIS systems with limited capability are in use at training and testing  locations. More capable versions of ALIS are being developed and  program and contractor officials believe that the program is on track to  fix identified shortcomings and field the fully capable system in 2015.  Limited progress was made in 2012 on developing a smaller,  transportable version needed to support unit level deployments to  operating locations.  3.  Arresting hook system—The carrier variant arresting hook system  was redesigned after the original hook was found to be deficient,  which prevented active carrier trials. The program accomplished risk  reduction testing of a redesigned hook point to inform this new design.  The preliminary design review was conducted in August 2012 and the  critical design review in February 2013. Flight testing of the  redesigned system is slated for late 2013.  4.  Structural durability—Over time, testing has discovered bulkhead and  rib cracks on the aircraft. Structural and durability testing to verify that  all three variants can achieve expected life and identify life-limited  parts was completed in 2012. The program is testing some  redesigned structures and planning other modifications. Officials plan  to retrofit and test a production aircraft already built and make  changes to the production line for subsequent aircraft. Current  projections show the aircraft and modifications remain within weight  targets.
section_title: Software Management and Output Improved
paragraphs: In 2012, the F-35 aircraft contractor and program office took steps to  improve the program’s software management and output. The program  began the process of establishing a second system integration laboratory,   adding substantial testing and development capacity. The program also  began prioritizing and focusing its resources on incremental software  development as opposed to the much riskier concurrent development  approach. In addition, the program began implementing improvement  initiatives recommended by an independent software review, and  evaluated the possible deferral of some of the aircraft’s capabilities to  later blocks or moving them outside of the current F-35 program  altogether. At the same time, program data regarding software output  showed improvement. For example, program officials reported that the  time it took to fix software defects decreased from180 days to 55 days,  and the time it took to build and release software for testing decreased  from 187 hours to 30 hours.
section_title: Manufacturing Process Metrics Improved
paragraphs: Key manufacturing metrics and discussions with defense and contracting  officials indicate that F-35 manufacturing and supply processes improved  during 2012. While initial F-35 production overran target costs and  delivered aircraft late, the latest data through the end of 2012 shows labor  hours decreasing and deliveries accelerating. The aircraft contractor’s  work force is gaining important experience and processes are maturing  as more aircraft are built. The labor hours needed to complete aircraft at  the prime contractor’s plant decreased, labor efficiency since the first  production aircraft improved, time to manufacture aircraft in the final  assembly area declined, factory throughput increased, and the amount of  traveled work declined. In addition, program data show that the reliability  and predictability of the manufacturing processes increased while at the  same time aircraft delivery rates improved considerably. Figure 1  illustrates the improvement in production aircraft delivery time frames by  comparing actual delivery dates against the dates specified in the  contracts.
section_title: F-35 Program Still Faces Risks
paragraphs: Ensuring that the F-35 is affordable and can be bought in the quantities  and time frames required by the warfighter will be of paramount concern  to the Congress, U.S. military and international partners. The acquisition  funding requirements for the United States alone are currently expected  to average $12.6 billion per year through 2037, and the projected costs of  operating and sustaining the F-35 fleet, once fielded, have been deemed  unaffordable by DOD officials. In addition, the program faces challenges  with software development and continues to incur substantial costs for  rework to fix deficiencies discovered during testing. As testing continues  additional changes to design and manufacturing processes will likely be  required, while production rates continue to increase.
subsections: section_title: Long-Term Affordability Remains a Concern
paragraphs: The March 2012 acquisition program baseline places the F-35 program  on firmer footing, but aircraft are expected to cost more and deliveries to  warfighters will take longer than previously projected. The new baseline  projects the need for a total of $316 billion in development and  procurement funding from 2013 through 2037, or an average of $12.6  billion annually over that period (see figure 2). Maintaining this level of  sustained funding will be difficult in a period of declining or flat defense  budgets and competition with other “big ticket items” such as the KC-46  tanker and a new bomber program. In addition, the funding projections  assume the financial benefits of the international partners purchasing at  least 697 aircraft. If fewer aircraft are procured in total or in smaller  annual quantities—by the international partners or the United States—unit  costs will likely rise according to analysis done by the Office of the  Secretary of Defense (OSD) Cost Assessment and Program Evaluation  (CAPE) office.
In addition to the costs for acquiring aircraft, significant concerns and  questions persist regarding the cost to operate and sustain the F-35 fleet  over the coming decades. The current sustainment cost projection by  CAPE for all U.S. aircraft, based on an estimated 30-year service life,  exceeds $1 trillion. Using current program assumptions of aircraft  inventory and flight hours, CAPE recently estimated annual operating and  support costs of $18.2 billion for all F-35 variants compared to $11.1  billion spent on legacy aircraft in 2010. DOD officials have declared that  operating and support costs of this magnitude are unaffordable and the  department is actively engaged in evaluating opportunities to reduce  those costs, such as basing and infrastructure reductions, competitive  sourcing, and reliability improvements.
Because of F-35 delays and uncertainties, the military services have   made investments to extend the service lives of legacy F-16 and F-18  aircraft at a cost of $5 billion (in 2013 dollars). The Navy is also buying  new F/A-18E/F Super Hornets at a cost of $3.1 billion (in then-year  dollars) to bridge the gap in F-35 deliveries and mitigate projected  shortfalls in fighter aircraft force requirements. As a result, the services  will incur additional future sustainment costs to support these new and  extended-life aircraft, and will have a difficult time establishing and  implementing retirement schedules for existing fleets.
section_title: Software Development Challenges Remain
paragraphs: Over time, F-35 software requirements have grown in size and complexity  and the contractor has taken more time and effort than expected to write  computer code, integrate it on aircraft and subsystems, conduct lab and  flight tests to verify it works, and to correct defects found in testing.  Although recent management actions to refocus software development  activities and implement improvement initiatives appear to be yielding  benefits, software continues to be a very challenging and high-risk  undertaking, especially for mission systems. While most of the aircraft’s  software code has been developed, a substantial amount of integration  and test work remain before the program can demonstrate full warfighting  capability. About 12 percent of mission systems capabilities have now  been validated, up from 4 percent about a year ago. However, progress  on mission systems was limited in 2012 by contractor delays in software  delivery, limited capability in the software when delivered, and the need to  fix problems and retest multiple software versions. Further development  and integration of the most complex elements—sensor fusion and helmet  mounted display—lie ahead.
F-35 software capabilities are being developed, tested and delivered in  three major blocks and two increments—initial and final—within each  block. The testing and delivery status of the three blocks is described  below:
Block 1.0, providing initial training capability, was largely completed in  2012, although some final development and testing will continue.  Also, the capability delivered did not fully meet expected requirements  relating to the helmet, ALIS, and instrument landing capabilities.
Block 2.0, providing initial warfighting capabilities and limited  weapons, fell behind due to integration challenges and the  reallocation of resources to fix block 1.0 defects. The initial increment,  block 2A, delivered late and was incomplete. Full release of the final  increment, block 2B, has been delayed until November 2013 and will  not be complete until late 2015.
Block 3.0 providing full warfighting capability, to include sensor fusion  and additional weapons, is the capability required by the Navy and Air  Force for declaring their respective initial operational capability dates.  Thus far, the program has made little progress on block 3.0 software.  The program intends initial block 3.0 to enter flight test in 2013. This is  rated as one of the program’s highest risks because of its complexity.
section_title: Design Changes and Rework Continue to Add Cost and Risk
paragraphs: Although F-35 manufacturing, cost, and schedule metrics have shown  improvement, the aircraft contractor continues to make major design and  tooling changes and alter manufacturing processes while development  testing continues. Engineering design changes from discoveries in  manufacturing and testing are declining in number, but are still substantial  and higher than expected from a program this far along in production.  Further, the critical work to test and verify aircraft design and operational  performance is far from complete. Cumulatively, since the start of  developmental flight testing, the program has accomplished 34 percent of  its planned flights and test points. For development testing as a whole,  the program verified 11.3 percent of the development contract  specifications through November 2012. As indicated in table 1, DOD  continues to incur financial risk from its plan to procure 289 aircraft for  $57.8 billion before completing development flight testing.
This highly concurrent approach to procurement and testing increases the  risk that the government will incur substantial costs to retrofit (rework)  already produced aircraft to fix deficiencies discovered in testing. In fact,  the F-35 program office projects rework costs of about $900 million to fix  the aircraft procured on the first four annual procurement contracts.  Substantial rework costs are also forecasted to continue through the 10th  annual contract (fiscal year 2016 procurement), but at decreasing  amounts annually and on each aircraft. The program office projects about  $827 million more to rework aircraft procured under the next 6 annual  contracts.
section_title: Concluding Remarks
paragraphs: Restructuring actions place the F-35 program on firmer footing, although  aircraft are expected to cost more and deliveries to warfighters will take  longer. Going forward, ensuring affordability is of paramount concern as  more austere budgets are looming. The program continues to incur  financial risk from its plan to procure 289 aircraft for $57.8 billion before  completing development flight testing. Meanwhile, the services are  making significant investments to extend the life of existing aircraft and to  buy new ones to mitigate shortfalls due to F-35 delays. Overall, the F-35  Joint Strike Fighter program is now moving in the right direction after a  long, expensive, and arduous learning process. It still has tremendous  challenges ahead. The program must fully validate design and  operational performance against warfighter requirements, while, at the  same time, making the system affordable so that the United States and  partners can acquire new capabilities in the quantity needed and can then  sustain the force over its life cycle. DOD and the contractor now need to  demonstrate that the F-35 program can effectively perform against cost  and schedule targets in the new baseline and deliver on promises. Until  then, it will continue to be difficult for the United States and international  partners to confidently plan, prioritize, and budget for the future; retire  aging aircraft; and establish basing plans with a support infrastructure.
Chairman Turner, Ranking Member Sanchez, and members of the House  Armed Services Committee, this completes my prepared statement. I  would be pleased to respond to any questions you may have.
section_title: GAO Contact and Acknowledgments
paragraphs: For further information on this statement, please contact Michael Sullivan  at (202) 512-4841 or sullivanm@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this statement  are Bruce Fairbairn, Travis Masters, Marvin Bonner, W. Kendal Roberts,  Megan Porter, and Erin Stockdale.
section_title: Appendix I: Changes in Reported F-35 Program Quantity, Cost, and Deliveries, 2001- 2012
paragraphs: October 2001  (system  development start)
December 2003  (approved  baseline)
March 2007  (approved  baseline)
McCurdy)
March 2012  (approved  baseline) .
section_title: Related GAO Products
paragraphs: Defense Acquisitions: Assessments of Selected Weapon Programs.  GAO-13-294SP. Washington, D.C.: March 28, 2013.
F-35 Joint Strike Fighter: Current Outlook Is Improved, but Long-Term  Affordability Is a Major Concern. GAO-13-309. Washington, D.C.: March  11, 2013.
Joint Strike Fighter: DOD Actions Needed to Further Enhance  Restructuring and Address Affordability Risks.  GAO-12-437.   Washington, D.C.: June 14, 2012.
Joint Strike Fighter: Restructuring Added Resources and Reduced Risk,  but Concurrency Is Still a Major Concern. GAO-12-525T. Washington,  D.C.: March 20, 2012.
Joint Strike Fighter: Implications of Program Restructuring and Other  Recent Developments on Key Aspects of DOD’s Prior Alternate Engine  Analyses. GAO-11-903R. Washington, D.C.: September 14, 2011.
Joint Strike Fighter: Restructuring Places Program on Firmer Footing, but  Progress Still Lags. GAO-11-325. Washington, D.C.: April 7, 2011.
Joint Strike Fighter: Additional Costs and Delays Risk Not Meeting  Warfighter Requirements on Time. GAO-10-382. Washington, D.C.:  March 19, 2010.
Joint Strike Fighter: Accelerating Procurement before Completing  Development Increases the Government’s Financial Risk. GAO-09-303.  Washington D.C.: March 12, 2009.
Joint Strike Fighter: Recent Decisions by DOD Add to Program Risks.  GAO-08-388. Washington, D.C.: March 11, 2008.
Joint Strike Fighter: Progress Made and Challenges Remain.   GAO-07-360. Washington, D.C.: March 15, 2007.
Joint Strike Fighter: DOD Plans to Enter Production before Testing  Demonstrates Acceptable Performance. GAO-06-356. Washington, D.C.:  March 15, 2006.
Tactical Aircraft: Opportunity to Reduce Risks in the Joint Strike Fighter  Program with Different Acquisition Strategy. GAO-05-271. Washington,  D.C.: March 15, 2005.
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