Tactical Aircraft: Air Force Still Needs Business Case to Support F/A-22 Quantities and Increased Capabilities
Published: 2005-03-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Air Force is preparing a modernization plan that expands the capabilities of the F/A-22, which was first designed to serve as an air-to-air fighter aircraft with very limited ability to strike targets on the ground. The Air Force now intends to transform it by adding robust air-to-ground capabilities to attack enemy ground threats and by adding onboard intelligence data gathering capabilities. After the recent budget cut, DOD estimates F/A-22 cost at $63.8 billion for 178 aircraft. It has been in development for more than 19 years, a decade longer than originally envisioned. In the face of significant cost and schedule overruns, Congress mandates that GAO annually assess the F/A-22 program. In this report, GAO addresses (1) the Air Force's business case for the F/A-22 modernization plan and (2) the recently completed initial operational test and evaluation.
section_title: What GAO Found
paragraphs: The Air Force has yet to produce a business case for the next-generation F/A-22. Much has changed in the years since the F/A-22 program began nearly 2 decades ago--adversarial threats against U.S. aircraft have evolved, and a plan to modernize the F/A-22 significantly different than the original aircraft is in progress. A DOD cost estimate in 2003 projected the Air Force's modernization plan to cost $11.7 billion through 2018. A December 2004 budget decision reduced procurement funding and quantities but did not cut funding for modernization. The decision to terminate procurement after fiscal year 2008 places the current modernization plan in doubt as key ground attack and intelligence-gathering enhancements had been slated for aircraft now eliminated from the program. Without a new business case for adding a more robust ground attack capability and for new intelligence missions, the Air Force may be at a disadvantage when the time comes to justify the modernization plan in the face of future budget constraints. DOD is set to conduct the 2005 Quadrennial Defense Review to weigh the merits of transformational priorities and investments to determine if the best choices are being made to meet military needs within available funding levels. This may further influence an F/A-22 business case. The F/A-22 program recently underwent initial operational testing, but testing did not include the air-to-ground missions that the Air Force envisions for the aircraft. The Air Force does not expect to conduct testing of these capabilities until after a decision is made to enter full-rate production. Although a final test report was not available for our review, Air Force officials told us that the F/A-22 was extremely effective in performing its air-to-air missions. Evaluation results of capabilities needed to sustain combat operations and maintain aircraft were not as favorable. Additional testing will be required to assess corrective actions for deficiencies identified and to evaluate new ground attack and intelligence-gathering capabilities added by the modernization program.

section_title: Letter
paragraphs: The F/A-22 aircraft program is acquiring the Air Force’s next-generation,  multi-mission fighter for about $63.8 billion. The need for the F/A-22, its  increasing costs, and the quantities required to perform its mission have  been the subject of a continuing debate within the Department of Defense  (DOD) and Congress. Supporters cite its advanced features—stealth,  supercruise speed, maneuverability, and integrated avionics—as integral  to the Air Force’s Global Strike initiative and for maintaining air  superiority over potential future adversaries for years to come. Critics,  however, argue that the Soviet threat it was originally designed to counter  no longer exists and that its large budget could better be invested in  enhancing current air assets and acquiring new and more transformational  capabilities that will allow it to meet the evolving threat. The debate  continues as a December 2004 budget decision by the Office of the  Secretary of Defense (OSD) reduced F/A-22 funding and the number of  aircraft to be acquired. Meanwhile, the upcoming 2005 Quadrennial  Defense Review is girding up for a review of force structure, mission  requirements, and modernization plans.
DOD has been pushing to transform its military operations and capabilities  to acquire revolutionary weapon systems and meet evolving post-Cold War  threats. Undertaking this transformational effort requires significant  funding and competes with other DOD and national priorities. When  DOD’s weapon systems, such as the F/A-22, require more time and money  than originally anticipated, the extra investment needed to solve problems  takes funding away from other priorities, slows DOD’s overall  modernization effort, delays capabilities for the warfighter, and forces  unplanned—and possibly unnecessary—trade-offs among DOD’s many  priorities. Our past work has shown that problems, such as cost overruns,  arise when weapon programs do not have a sound business case or  capture the knowledge needed to efficiently and effectively manage  program risks. The end result is a reduction in quantities and ultimately in  DOD’s overall buying power.
The National Defense Authorization Act for Fiscal Year 1998 requires GAO  to report annually on the F/A-22 development program and cost, schedule,  and performance issues. The act also requires us to certify whether we  had access to sufficient information to make informed judgments on the  matters contained in this report. This report addresses (1) Air Force  business case, plans, and funding for the F/A-22 modernization program  and (2) the recently completed initial operational test and evaluation  (IOT&E).
We performed our work from November 2004 to February 2005 in  accordance with generally accepted government auditing standards. We  analyzed modernization plans, funding, and impacts from recent budget  changes. Our observations on operational testing are limited and largely  based on summary comments and briefing materials provided by testing  and program officials. We did not review Air Force and OSD reports on  operational test results because the reports were not available to us at the  time of our review. Notwithstanding, we believe DOD officials gave us  access to sufficient information to make informed judgments on the  matters in this report. Appendix I further discusses this report’s scope and  methodology.
subsections: section_title: Background
paragraphs: The F/A-22 is the Air Force’s next-generation air superiority fighter  aircraft and incorporates a low observable (stealth) and highly  maneuverable airframe, advanced integrated avionics, and a new engine  capable of sustained supersonic flight without the use of afterburners. It  was originally designed to counter threats posed by the Soviet Union and  was intended to replace the F-15 fighter in the air-to-air combat role. Over  the years, the Air Force decided to add a more robust air-to-ground  capability not previously envisioned but now considered necessary to  increase the utility of the aircraft. In 2002, the F-22 aircraft was  redesignated the F/A-22, with the “A” representing the expanded ground  attack capabilities. Officials initiated a modernization program to develop  and integrate these new capabilities.
The F-22 acquisition program started in 1986 with an intended  development period of 9 years and an initial operational capability in  March 1996. The Air Force’s plan at that time was to procure 750 aircraft.  In the years since, the original business case has been severely weakened  as threats, missions, and requirements have changed. Further, the program  milestones have slipped, the development period lengthened to more than  19 years, development costs more than doubled, and a modernization  program was added. The initial operational capability date is now  December 2005.
Amidst concerns about escalating costs and schedule, Congress placed  cost limitations on both development and production budgets in 1997,  later removing the development cost cap. (The current production cost  cap is $37.3 billion.) Concomitantly, the planned procurement quantity has  steadily decreased due to affordability concerns and changes in missions  and combat requirements. Two major reviews of defense force structure  and acquisition plans, the 1993 Bottom-Up Review and the 1997  Quadrennial Defense Review, both significantly reduced F/A-22 quantities.  In addition, OSD’s “buy to budget” acquisition strategy, which essentially  placed a ceiling on the total program costs, has resulted in further cuts to  quantity as development cost increased. In December 2004, OSD issued  Program Budget Decision 753, which reduced F/A-22 funding by $10.5  billion and cut 96 aircraft from the planned procurement quantity. The  decision ends procurement in 2008, instead of 2011, and would reduce  total procurement quantity to 178 aircraft.
Figure 1 illustrates the downward trend in procurement quantity over the  years juxtaposed with a rise in program acquisition unit costs, which has  resulted in a significant loss in buying power. Program acquisition unit  costs have increased largely due to (1) increased development and  production costs; (2) decreased procurement quantities; and (3) increased  costs to modernize and enhance capability. The current plan supporting  the fiscal year 2006 defense budget request submitted in February 2005 is  to acquire 178 aircraft for about $63.8 billion. Appendix II illustrates other  changes in cost, quantity, and schedule experienced by the program since  its commencement.
Our March 2004 report discussed the significant changes in cost, quantity,  capabilities, and mission since F-22 development began in 1986. We  reported continued problems and delays in the development and testing  schedules. We recommended that DOD complete a new business case that  justifies the continued need for the F/A-22 and the quantities needed to  carry out the air-to-air versus air-to-ground missions. The business case  was to also consider alternatives within the constraints of future defense  spending. Later in testimony, we stated that there are competing  priorities both internal and external to DOD’s budget that require a sound  and sustainable business case for DOD’s acquisition programs based in  clear priorities, comprehensive needs assessments, and a thorough  analysis of available resources. DOD partially concurred with our report  recommendation but did not prepare a new business case, stating that it  evaluates the F/A-22 business case elements as part of the routine  acquisition and budget processes with the results reflected in the defense  budget. We did not think these kinds of activities sufficiently analyzed and  addressed the specific business case elements—analysis of need for  original and new capabilities, assessment of alternatives, justification of  needed quantities, and evidence that planned quantities were affordable.
section_title: F/A-22 Modernization Program Lacks Business Case and May Not Be Executable as Planned
paragraphs: The Air Force, in the face of significant changes to the F/A-22, has not  prepared a new business case to justify the resources needed to add a  much more robust ground attack capability and to assume new missions.  The requirements for the F/A-22 have changed significantly since its  original business case and the available resources are in flux—both are  key components of a business case needed to support further investments.  A December 2004 budget decision reduced procurement funding and  quantities but did not cut funding for modernization. This has made the  current modernization plan obsolete as key ground attack and intelligence  gathering enhancements had been slated for aircraft that have now been  eliminated from the F/A-22 procurement program. While its total cost is  not clear at this time and program content is subject to change, in 2003  OSD cost analysts estimated the modernization program would cost about  $11.7 billion.
subsections: section_title: Modernization Program Makes Significant Changes to F/A-22 Requirements without a New Business Case
paragraphs: The Air Force embarked on the expensive and wide-ranging modernization  program without a new business case to support investments of billions of  dollars to develop and deliver new capabilities and missions. The  modernized F/A-22 would differ so significantly from the original aircraft  in capabilities and missions that it should have been developed in an  entirely separate acquisition program. Instead, the Air Force opted to  incorporate modernization efforts within the existing acquisition  program. A business case should match requirements with resources— proven technologies, sufficient engineering capabilities, time, and  funding—when undertaking a new product development. First, the user’s  needs must be accurately defined, alternative approaches to satisfying  these needs properly analyzed, and quantities needed for the chosen  system must be well understood. The developed product must be  producible at a cost that matches the users’ expectations and budgetary  resources. Finally, the developer must have the resources to design and  deliver the product with the features that the customer wants and to  deliver it when it is needed. If the financial, material, and intellectual  resources to develop the product are not available, a program incurs  substantial risk in moving forward.
The original business case for the F/A-22 was made in 1986 to support  acquiring large quantities of air superiority fighters to engage in  conventional warfare and counter Cold War-era threats. These threats  never materialized as expected. Because the program was in development  for over 19 years, tactical fighter requirements, projected threats, and  operational war plans changed. To enhance the utility of the F/A-22 for  today and the future, the Air Force now plans to develop a robust air-to- ground attack capability to allow the aircraft to engage a greater variety of  ground targets, such as surface-to-air missiles systems, that pose a  significant threat to U.S. aircraft. It also plans to equip most of the F/A-22  fleet with improved capabilities to satisfy expanded warfighter  requirements and to take on new missions, including intelligence data  gathering and the suppression of enemy air defenses and interdiction.
The Air Force established a time-phased modernization program to  develop and insert new capabilities required to implement the Air Force’s  Global Strike concept of operations. Table 1 shows how the Air Force  intended to integrate new capabilities incrementally before the December  2004 budget decision reduced quantities by 96 aircraft. At the time of our  review, officials were still determining the impacts of the budget decision  on the modernization program content and quantities.
Initial development work on modernization enhancements started in 2003  and is planned to extend over a 12-year period with the first set of new  capabilities inserted into the production line in fiscal year 2007. By the end  of development in 2015, the Air Force plans to have three different  configurations (or blocks) of F/A-22s, each with distinct operational  capabilities. Based on the current modernization road map, the Global  Strike Basic configuration (block 20) will include 56 F/A-22s built  primarily to perform air-to-air missions but with limited air-to-ground  capability. The Global Strike Enhanced configuration (block 30) includes  91 aircraft that will perform the bulk of air-to-ground and electronic attack  missions using advanced radars to track targets and small diameter bombs  to destroy them. Block 40 encompasses both the Global Strike Full and  Enhanced Intelligence, Surveillance, and Reconnaissance increments. This  configuration of 128 aircraft is expected to perform such missions as  suppression of enemy air defenses and gathering up-to-date information  on potential adversaries’ locations, resources, and personnel to improve  target identification and increase kill capabilities. According to program  officials, these latter two increments are still conceptual in nature and  subject to revision.
section_title: Budget Decisions and Unstable Resources Place the F/A-22 Modernization Program in Doubt
paragraphs: The modernization program as currently planned is much in doubt  because of the recent budget cut and the likely prospects for more  changes. The instability in F/A-22 resources and upcoming DOD-wide  reviews of capabilities and requirements may result in further revisions  and cutbacks, further impacting modernization plans. Budget and  programmatic decisions also cause ripple effects on other resource plans  tied to the modernization, which may open up budgeted funds for other  uses.
In March 2003, OSD’s Cost Analysis Improvement Group (CAIG)  estimated that the Air Force would need $11.7 billion for the planned  modernization programs through fiscal year 2018. The CAIG estimate  included costs for development, procurement, and retrofit of modernized  aircraft. The Air Force’s latest estimated cost for the modernization  program is about $5.4 billion through 2011. Future modernization costs  beyond 2011 have not been definitized and are subject to change. The  modernization program manager projected annual funding of $700 million  to $750 million would be needed for the currently planned modernization  program after 2011.
The December 2004 budget decision places much of the modernization  program in doubt, particularly the latter stages. OSD substantially reduced  the F/A-22 budget, which will require another strategy for the  modernization program. It reduced F/A-22 funding by $10.5 billion,  stopped procurement of aircraft after 2008, and reduced the quantity by 96  aircraft. This and other events will reduce the Air Force’s expected buy to  no more than 178 aircraft. While the OSD funding decision changed the  baseline F/A-22 program, it did not change the planned funding for the  modernization program to add advanced ground attack and intelligence  gathering capabilities between 2007 and 2015. However, many of these  new and advanced capabilities had been planned for aircraft that will not  be built as the budget eliminates F/A-22 aircraft that had been planned for  production after 2008. Air Force officials told us they hope to reverse  these changes, but officials acknowledge that a major restructuring is  likely if the proposed funding cuts are sustained. If the budget cut is  sustained, the modernization program as currently planned is largely  obsolete and funding for these advanced capabilities to be incorporated  after 2008 would be available for other uses. This could include up to   $1.2 billion now budgeted for the start-up of the latter modernization  increments.
The Air Force’s desire to upgrade the F/A-22’s computer architecture and  avionics processors in order to support the block 40 expanded  capabilities may also be affected by the recent budget cut. Program  officials do not expect the new architecture to be fully developed and  ready for installation in the F/A-22 until fiscal year 2010. However, early  indications show that the effort to upgrade the computer architecture— expected to cost between $400 million and $500 million—already is  experiencing schedule problems and increased risks. As a result, the 2010  insertion date may not be achievable as planned for the F/A-22.  Furthermore, DOD’s proposed termination of procurement after 2008  raises questions about the need to proceed with the planned computer  upgrade. The existing processors with some minor upgrades would  support up to 155 aircraft and most Global Strike Enhanced capabilities.
Additionally, since our March 2004 report the program office has identified  new requirements needed to implement the modernization program. The  F/A-22 program office has concluded that the F/A-22 infrastructure,  including government laboratories, such as software avionics integration  labs, flying test beds, and test ranges need to be upgraded to ensure a  successful modernization program. According to program officials, the  existing facilities have major resource/capacity limitations and are  inadequate to support needed software integration activities and system  performance and operational testing for most planned enhancements. The  program office has budgeted about $1.8 billion through fiscal year 2009 for  the infrastructure upgrades, including funds for engineering and  maintenance personnel support. According to program officials, the  current infrastructure limitations have caused some modernization efforts  to be deferred to later blocks. If modernization plans are curtailed, some  infrastructure improvements may not be needed.
Even if funding were restored to the F/A-22 program and the above- mentioned concerns were resolved, previous funding shortfalls and  schedule slippages have already resulted in planned capabilities being  deferred to later years. For example, block 20 enhancements required to  conduct autonomous search and improve target recognition have been  deferred to block 30. Similarly, funding problems have caused the Air  Force to scale back some efforts and delay development of block 30  electronic attack and small diameter bomb enhancements. In November  2004, the Defense Contract Management Agency reported that the  contractor proposes to reduce the amount of planned tasks, defer  development of software specifications, and incrementally develop a key  communication component in order to meet an April 2005 system design  review.
DOD officials stated that they believe the budget cut has some  diseconomies that may result in procuring even fewer than 178 aircraft.  They said that stopping aircraft production early affects production  economies and efficiencies that were expected from a multiyear  procurement contract and from production line efficiencies. The multiyear  contract was to begin in fiscal year 2008, the year procurement is now  curtailed by the budget decision. Now that opportunity is gone. Officials  also said that cutting production quantities from the final years of the  program eliminate projected savings in annual unit procurement costs.  Typical of many DOD acquisitions, Air Force program officials had  projected future budgets assuming that the marginal costs for buying F/A- 22s would decrease with each passing year of production as a result of  manufacturing efficiencies, productivity projects, and more economical  buying quantities. This means that aircraft bought late in the production  program usually cost less than those bought earlier in the program. For  example, the average unit flyaway cost paid for F/A-22s was $212 million  per aircraft bought in 2002 and $178 million in 2003. Before the budget  decision, officials had projected average unit flyaway costs to decrease to  $127 million, $111 million, and $108 million in fiscal years 2007, 2008 and  2009, respectively. Now that the program has been truncated after 2008,  the less expensive aircraft in 2009 and beyond will not be bought and unit  costs are now projected at $135 million in 2007 and $149 million in 2008  (increase associated with close-out of production).
OSD has directed that the 2005 Quadrennial Defense Review include an  assessment of joint air dominance in future warfare and the contributions  provided by all tactical aircraft, including the F/A-22. An announced  defense goal is to redirect investment from areas of conventional warfare,  where the United States enjoys a strong combat advantage, toward more  transformational capabilities needed to counter “irregular” threats, such as  the insurgency in Iraq and ongoing war on terror. DOD is also conducting  a set of joint capability reviews to ensure acquisition decisions are based  on providing integrated capabilities rather than focused on individual  weapon systems. The study results, although still months away, could  further impact the future of the F/A-22 program including the  modernization plan. The F/A-22 will have to compete for funding, priority,  and mission assignments with operational systems, such as the F-15 and  F/A-18, and future systems, such as the Joint Strike Fighter and the Joint  Unmanned Combat Air Systems.
Air Force leadership and the Air Combat Command continue to support  the multi-mission role for the F/A-22 and do not want to reduce or  eliminate the new capabilities and missions. Therefore, if restructuring is  required, program officials are considering other options to accommodate  the program within reduced funding and fleet size. They are considering  the possibility of moving forward with blocks 20 and 30 but curtailing  block 40 because its enhancements are slated for those aircraft that have  been cut by the budget decision (refer to table 1). Officials said that some  of the enhancements planned for block 40 could be retrofitted into the  block 20 and 30 aircraft. At the time of our review, Air Force officials were  considering alternative strategies and plans for rephasing funds in order to  execute the changes in the program enumerated above. It is paramount  that these issues be settled before moving forward in the program.
section_title: Operational Testing Considered Successful by Air Force, but Ground Attack Role Has Not Yet Been Tested
paragraphs: Reports detailing the results from IOT&E were not available for our  review, but Air Force test officials told us that testing showed the F/A-22  was “overwhelmingly effective” as an air superiority fighter and that its  supporting systems were “potentially suitable.” Some deficiencies were  noted, particularly in reliability and maintainability, but Air Force officials  believe these deficiencies can be corrected in time to meet the warfighter’s  needs by the scheduled initial operational capability date in December  2005. They also believe test results support making the full-rate production  decision. Testing to demonstrate the limited air-to-ground attack capability  was not accomplished but is scheduled to be done as part of the follow-on  operational test planned to start in July 2005.
The F/A-22 initial operational test and evaluation was conducted by the Air  Force Operational Test and Evaluation Center from April through  December 2004 to support the full-rate production decision planned for  March 2005. Its operational test plan was designed to assess the F/A-22’s  combat effectiveness and suitability in an operationally representative  environment. The warfighter had established five critical operational  issues for evaluation during operational testing to demonstrate  effectiveness and suitability:    effectiveness—demonstrate operational performance to effectively  execute selected counter-air missions;  survivability—assess ability to evade and survive against air-to-air and  surface-to-air threats;    deployability—evaluate the timely transportability and set up of F/A-22  personnel and equipment into a theater of operations;  sortie generation—assess how well air crews can generate and launch  sorties, including maintenance and supply support capabilities; and    ground attack—demonstrate limited air-to-ground attack with the Joint  Direct Attack Munition.
The first two issues assess combat effectiveness in completing selected  counter air missions and in surviving against representative air and ground  threats. The second two issues assess suitability of F/A-22 to support  combat by transporting, deploying and sustaining forces and equipment.  These four critical operational issues were addressed in IOT&E. The fifth  critical operational issue—ground attack—was not addressed in IOT&E  and will be assessed during follow-on operational test and evaluation,  scheduled to start in July 2005. This follow-on testing is also planned to  include demonstrations of corrective actions for some deficiencies  identified during IOT&E and other testing needed to achieve initial  operational capability in December 2005. Additional follow-on operational  tests are planned in the future to test new, more robust attack capabilities  and other enhancements added by the modernization program.
Combat effectiveness and survivability testing included extensive flight  tests to evaluate air-to-air capabilities including (1) offensive counter-air  missions against aggressor aircraft and (2) defensive counter-air missions  to accompany and protect friendly strike and high value support aircraft  from attack by aggressor aircraft. These tests incorporated ground and air  threats resident at the Air Force’s Nevada test range. Computer  simulations and models were also used to evaluate performance against  future threats and in other scenarios that cannot be replicated in open  flight tests.
Test officials told us that the F/A-22 performed all the air-to-air missions  very satisfactorily, demonstrating “overwhelming effectiveness” in their  words. Officials also said that, in direct comparability tests with the F-15C,  the F/A-22 demonstrated a clear advantage often many more times the  effectiveness of the F-15C. Testing did reveal some areas needing  improvement, including avionics reliability, defensive systems, and other  corrective actions that will need to be addressed in follow-on testing.
Test officials characterized F/A-22 suitability demonstrations for the  aircraft and support systems as “potentially suitable.” The ability to  transport and deploy F/A-22 personnel and equipment was adequately  demonstrated and met the interim goal set by the warfighter regarding the  number of airlift planes needed to transport forces and support equipment  in the required amount of time.
Of the four critical operational issues assessed, sortie generation  experienced the most problems. Officials rated the sortie generation area  as unsatisfactory. Problems were noted in aircraft reliability and  maintainability, including maintenance of the aircraft’s critical low  observable characteristics. Problems were also noted in the maturity of  integrated diagnostic systems, key assets expected to greatly improve and  accelerate field maintenance activities for meeting sortie rates with  constrained personnel. Officials believe these and other deficiencies can  be corrected in time to meet the warfighter’s needs. For example, officials  said the mission capability rate demonstrated during testing has continued  to improve and is close to achieving the warfighter’s desired rate, not  required until December 2005. However, the testing and implementation of  most corrective actions will not occur until after the full-rate production  decision.
Sortie generations and support activities also required the extensive  involvement of contractor personnel for providing technical assistance,  off-aircraft maintenance, and engineering, including trouble-shooting and  use of special test equipment. Air Force officials said that extensive  contractor involvement has long been planned for the F/A-22 system,  particularly during initial fielding, and that reliance on contractor  personnel and special test equipment should somewhat lessen as Air Force  personnel gain experience.
Before full-rate production can start, the Office of the Director of  Operational Test and Evaluation must still review test results and report to  Congress and defense leadership. In addition, the F/A-22 program must  demonstrate it satisfies criteria established by the Defense Acquisition  Board in November 2004. Among other things, that criteria includes  delivering a fully-resourced plan for follow-on testing to correct  deficiencies identified in IOT&E, achieving design stability of the avionics  software, demonstrating mature manufacturing processes, and validating  technical order data.
section_title: Conclusions
paragraphs: The Air Force, in the face of significant changes to the F/A-22, has not  prepared a new business case to justify the resources needed to add a  much more robust ground attack capability and to assume new missions.  Over the 19 years that the program has been in development, the world  threat environment has changed and the capabilities the Air Force once  needed and planned for in the F-22 may not satisfy the warfighter’s future  needs. Additionally, cost growth over time and affordability concerns have  driven down planned aircraft quantities from 750 to 178 aircraft. The Air  Force is now planning a modernization program that will substantially  change the role of the F/A-22. Because of budget cuts in the program that  have eliminated F/A-22 procurement after 2008 the modernization program  as planned is obsolete. Even if aircraft are restored to the procurement  plan beyond 2008, this modernization is projected to occur over a 12-year  period. Based on the program’s current knowledge, there is significant risk  that the planned modernization would not move ahead and deliver  capability to the warfighter on schedule. The original plan to develop and  deliver an initial capability for the F-22 was 9 years—it has taken nearly 20  years. Our body of work in best practices tells us one thing for certain, and  that is that the chances of attaining successful outcomes are substantially  increased when a business case is made that matches requirements and  resources for developing a product. Right now both requirements and  resources for the F/A-22 program are in a state of flux and it lacks a  business case to move forward with billions of dollars in planned  investments.
Over the immediate horizon, planned studies present OSD with  opportunities to answer questions about need and affordability of the F/A- 22. The 2005 Quadrennial Defense Review is expected to make a strategic  assessment of available and planned tactical air capabilities to help  determine where to target resources. Likewise, an ongoing series of joint  capabilities reviews, to include the F/A-22, could help determine where the  F/A-22 now fits in the force structure. These top-level studies would  provide information needed for a specific F/A-22 business case that would  place DOD leaders in a better position to decide on remaining F/A-22  investments in concert with other tactical aircraft and DOD needs. The  F/A-22 full rate production decision is currently planned for March 2005,  before the results of these studies are available and production is already  at near full rate quantities.
section_title: Recommendations for Executive Action
paragraphs: Because of evolving threats against the United States; pending changes in  U.S. defense plans; the lack of clarity regarding F/A-22 required  capabilities, quantities, and resources; the recent budget decision; and  upcoming reviews on joint air capabilities, we are reiterating and  expanding upon the recommendation in our March 2004 report for a new  and comprehensive business case to justify future investment in the F/A-22  program. We recommend the Secretary of Defense complete a new  business case that determines the continued need for the F/A-22 and that  specifically:  (a) justifies the F/A-22’s expanded air-to-ground capabilities based on an  assessment of alternatives to include both operational assets and  planned future weapon systems;  (b) justifies the quantity of F/A-22 aircraft needed to satisfy requirements  for air-to-air and air-to-ground missions;  (c) provides evidence that the planned quantity and capabilities are  affordable within current and projected budgets and the statutory  funding limitation;  (d) addresses impacts of the recent budget decision on the need for and  cost of future developmental activities, long-term logistical support  and basing decisions, and the ability to take advantage of cost  reduction efforts, such as multiyear contracting and productivity  improvement; and  (e) justifies the need for investments for a new computer architecture and  avionics processor, and F/A-22 infrastructure deficiencies.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, DOD concurred with our  recommendation. They identified the following actions planned that would  accomplish business case elements: (1) the 2005 Quadrennial Defense  Review will address quantity of aircraft needed for air-to-air and air-to- ground missions; (2) Defense Acquisition Board reviews of the F/A-22  program will ensure that initial modernization efforts have validated  requirements and are tested; and (3) the plan to break out the latter stages  of modernization as a separate acquisition program will require the Air  Force to develop requirements, perform an analysis to substantiate those  requirements, and justify investments in new capabilities.
DOD also stated its concern that by only reporting total program  acquisition unit cost (pp. 5 and 6 herein), the report does not provide a  balanced picture. They asked us to also present information concerning  the steady reduction in unit flyaway costs over the course of the program.  Flyaway costs do not include “sunk” costs and fixed expenses for program  start-up, development, test, construction, and support but focus on the  procurement costs of buying additional systems, costs that generally  decrease as a production program matures and manufacturing efficiency  improves. In response, we provided additional information about flyway  costs and potential diseconomies from truncating the procurement  program (see p. 12). We also incorporated other technical comments from  DOD where appropriate.
We are sending copies of this report to the Secretary of Defense; the  Secretary of the Air Force; and the Director, Office of Management and  Budget. Copies will also be made available to others on request. Please  contact me or Michael J. Hazard at (202) 512-4841 if you or your staff has  any questions concerning this report. Other contributors to this report  were Robert Ackley, Michael W. Aiken, Lily J. Chin, Bruce D. Fairbairn,  Steven M. Hunter, and Adam Vodraska.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the Air Force’s F/A-22 modernization plans and funding  requirements, we analyzed budget documents, cost reports, acquisition  plans, and project listings to identify the purpose, scope, and cost of the  modernization efforts. Officials from the Air Force and the Office of the  Secretary of Defense (OSD) briefed us on program details, specific  candidate projects, and program history. We compared current plans and  project listings with previous time periods to determine changes in  modernization projects and schedules. We also compared cost estimates  prepared by the Air Force and OSD’s cost analysts in order to identify key  differences in assumptions used, cost factors applied, and time periods  and to reconcile how these differences impacted final results.
To determine the results and implications of the initial operational test and  evaluation on the F/A-22 program, we first reviewed test plans, laws and  regulations governing operational tests, and management direction  affecting the scope and schedule of testing. We then discussed summary  results and program impacts, including schedule issues, with testing and  evaluating officials from the Air Force and OSD. We also reviewed briefing  materials used by testing officials to inform DOD management and  congressional staffs on the results of initial operational test and evaluation  (IOT&E). However, at the time of our review, the final reports on IOT&E  results from the Air Force’s Operational Test and Evaluation Center and  the OSD Director of Operational Test and Evaluation were not issued nor  were drafts made available to us. Accordingly, our analysis of actual  results and data was somewhat constrained and our reporting limited to  providing summary level observations on test scope, results, and  corrective actions identified. Notwithstanding, DOD officials gave us  access to sufficient information to make informed judgments on the  matters covered in this report.
In performing our work, we obtained information and interviewed officials  from the Office of the Secretary of Defense, Washington, D.C., including  the offices of the Under Secretary of Defense for Acquisition, Technology  and Logistics, the Director of Operational Test and Evaluation, the  Program Analysis and Evaluation, and the Cost Analysis Improvement  Group; Air Force Headquarters, Washington, D.C.; F/A-22 System Program  Office, Wright-Patterson Air Force Base, Ohio; Air Combat Command,  Langley Air Force Base, Virginia; Air Force Operational Test and  Evaluation Center, Kirkland Air Force Base, New Mexico; and the  Combined Flight Test Center, Edwards Air Force Base, California.. We  performed our work from November 2004 through February 2005 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: F/A-22 Program Cost, Quantity, and Schedule Changes
section_title: Appendix III: Comments from the Department of Defense
section_title: Related GAO Products
paragraphs: Defense Acquisitions: Assessments of Major Weapon Programs. GAO-04- 248. Washington, D.C.: March 31, 2004.
Tactical Aircraft: Status of the F/A-22 and Joint Strike Fighter  Programs. GAO-04-597T. Washington, D.C.: March 25, 2004.
Tactical Aircraft: Changing Conditions Drive Need for New F/A-22  Business Case. GAO-04-391. Washington, D.C.: March 15, 2004.
Best Practices: Better Acquisition Outcomes Are Possible If DOD Can  Apply Lessons from F/A-22 Program. GAO-03-645T. Washington, D.C.:  April 11, 2003.
Tactical Aircraft: Status of the F/A-22 Program. GAO-03-603T.  Washington, D.C.: April 2, 2003.
Tactical Aircraft: DOD Should Reconsider Decision to Increase F/A-22  Production Rates While Development Risks Continue. GAO-03-431.  Washington, D.C.: March 14, 2003.
Tactical Aircraft: F-22 Delays Indicate Initial Production Rates Should  Be Lower to Reduce Risks. GAO-02-298. Washington, D.C.: March 5, 2002.
Tactical Aircraft: Continuing Difficulty Keeping F-22 Production Costs  Within the Congressional Limitation. GAO-01-782. Washington, D.C.: July  16, 2001.
Tactical Aircraft: F-22 Development and Testing Delays Indicate Need  for Limit on Low-Rate Production. GAO-01-310. Washington, D.C.: March  15, 2001.
Defense Acquisitions: Recent F-22 Production Cost Estimates Exceeded  Congressional Limitation. GAO/NSIAD-00-178. Washington, D.C.: August  15, 2000.
Defense Acquisitions: Use of Cost Reduction Plans in Estimating F-22  Total Production Costs. GAO/T-NSIAD-00-200. Washington, D.C.: June 15,  2000.
F-22 Aircraft: Development Cost Goal Achievable If Major Problems Are  Avoided. GAO/NSIAD-00-68. Washington, D.C.: March 14, 2000.
Defense Acquisitions: Progress in Meeting F-22 Cost and Schedule Goals.  GAO/T-NSIAD-00-58. Washington, D.C.: December 7, 1999.
Fiscal Year 2000 Budget: DOD’s Production and RDT&E Programs.  GAO/NSIAD-99-233R. Washington, D.C.: September 23, 1999.
Budget Issues: Budgetary Implications of Selected GAO Work for Fiscal  Year 2000. GAO/OCG-99-26. Washington, D.C.: April 16, 1999.
Defense Acquisitions: Progress of the F-22 and F/A-18E/F Engineering  and Manufacturing Development Programs. GAO/T-NSIAD-99-113.  Washington, D.C.: March 17, 1999.
F-22 Aircraft: Issues in Achieving Engineering and Manufacturing  Development Goals. GAO/NSIAD-99-55. Washington, D.C.: March 15, 1999.
F-22 Aircraft: Progress of the Engineering and Manufacturing  Development Program. GAO/T-NSIAD-98-137. Washington, D.C.: March 25,  1998.
F-22 Aircraft: Progress in Achieving Engineering and Manufacturing  Development Goals. GAO/NSIAD-98-67. Washington, D.C.: March 10, 1998.
Tactical Aircraft: Restructuring of the Air Force F-22 Fighter Program.  GAO/NSIAD-97-156. Washington, D.C.: June 4, 1997.
Defense Aircraft Investments: Major Program Commitments Based on  Optimistic Budget Projections. GAO/T-NSIAD-97-103. Washington, D.C.:  March 5, 1997.
F-22 Restructuring. GAO/NSIAD-97-100R. Washington, D.C.: February 28,  1997.
Tactical Aircraft: Concurrency in Development and Production of F-22  Aircraft Should Be Reduced. GAO/NSIAD-95-59. Washington, D.C.: April  19, 1995.
Tactical Aircraft: F-15 Replacement Issues. GAO/T-NSIAD-94-176.  Washington, D.C.: May 5, 1994.
Tactical Aircraft: F-15 Replacement Is Premature as Currently Planned.  GAO/NSIAD-94-118. Washington, D.C.: March 25, 1994.