Joint Strike Fighter: Management of the Technology Transfer Process
Published: 2006-03-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Joint Strike Fighter (JSF) program is the Department of Defense's (DOD) largest international cooperative effort to develop and produce a major weapon system. Due to the breadth of international participation, the number of export authorizations needed to share information with partner governments, solicit bids from suppliers, and execute contracts is expected to far exceed past transfers of advanced military technology. In July 2003, GAO reported that managing these transfers and partner expectations while avoiding delays has been a key challenge and recommended that industrial planning tools be developed and used to anticipate time frames for national disclosure and technology transfer decisions. This report examines DOD's response to this recommendation and identifies the practices DOD is using to expedite license processing and avoid program delays.
section_title: What GAO Found
paragraphs: Agencies have taken four key actions to expedite the processing of licenses for transferring technology to partner countries and foreign suppliers. Each of these practices is intended to anticipate time frames needed for the processing of licenses or avoid delays to the JSF program schedule. In response to GAO's 2003 recommendation, the JSF Program Office instructed the prime contractor to develop an international industrial plan that identifies the type of license needed to transfer certain technologies to foreign industry. The contractor's plan provides mechanisms for anticipating "need" dates for submitting license applications and for identifying and addressing potential issues related to the releasability of classified information, technologies, or systems. In addition to the contractor's plan, DOD has developed guidance calling for industrial planning tools in all programs with significant international involvement. Agencies involved in the JSF program are expediting the processing of license applications by dedicating staff to the JSF licensing process, providing consultation to applicants on draft licenses, administering a prescreening process for the transfer of low technology and nonsensitive items, and allowing addendums to be attached to license applications. The JSF prime contractor and agency officials have used options available to them under the International Traffic in Arms Regulations, such as Global Project Authorization (GPA) and an exemption used in obtaining foreign contractor bids and proposals, to help facilitate the export control process and avoid program delays. While GPA is designed to approve exports within 5 days, its use has been limited. Due to the early involvement of international partners in the design phase of the program, decisions related to the releasability of classified information, technologies, or systems to partner countries have been addressed as they arise throughout the development of the system.

section_title: Letter
paragraphs: The Joint Strike Fighter (JSF) program is the Department of Defense’s  (DOD) largest experiment to collaboratively develop and produce a major  weapon system with international partners to date with an estimated cost  of over $250 billion for the development and production phases of the  program. It is a joint program among the Air Force, Navy, Marine Corps,  and eight international partners for developing and producing a next- generation fighter aircraft to replace aging inventories. Due to the degree  of international participation at both the government and industry levels, a  large number of export authorizations are necessary to share project  information with governments, solicit bids from partner suppliers, and  execute contracts. The transfer of technologies necessary to achieve  aircraft commonality goals in the JSF program is expected to far exceed  past transfers of advanced military technology. A key challenge for the  program has been managing the technology transfer process and partner  expectations while avoiding delays to the program.
In July 2003, we reported that due to the early involvement of international  partners in developing the system, the JSF program has had to mitigate a  particular set of challenges related to technology transfers. We  recommended that the JSF program ensure that industrial-planning tools  are developed and used to anticipate time frames for national disclosure  and technology transfer decisions. Subsequently, you asked us to examine  issues raised in our 2003 work related to technology transfer and the JSF  program and describe the status of DOD planning efforts designed to  address technology transfer and export control requirements among the  U.S. government, JSF prime contractors, foreign partners, and foreign  industry. Specifically, we identified the practices DOD is using to expedite  license processing and avoid program delays.
In carrying out our work, we reviewed the prime contractor’s newly  developed international industrial plan and compared it to a prior GAO  recommendation. To determine the manner in which U.S. export control  processes are being applied in the JSF program, we interviewed and  gathered data from export control and JSF officials from DOD, the  Department of State, and the prime contractor. The international partners  did not discuss issues related to technology transfer with us due to the  status of current negotiations on a memorandum of understanding for the  production phase of the program. The partners generally expressed the  opinion that comments by them during negotiations would not be  appropriate. We conducted our review from March 2005 to January 2006,  in accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: The JSF program began in 1996 and is the largest DOD acquisition  program to date with an estimated cost of over $250 billion for the  development and production phase of the program. The program’s goals  are to develop and field a family of stealthy fighter aircraft for the Navy,  Air Force, Marine Corps, and U.S. allies. To achieve its mission, JSF will  incorporate low observable technologies, defensive avionics, advanced  onboard and offboard sensor fusion, internal and external weapons, and  advanced prognostic maintenance capability. The program intends to  produce three variants. The carrier suitable variant will complement the  Navy’s F/A-18 E/F. The conventional take-off and landing variant will  primarily be a replacement for the Air Force’s F-16 and A-10 aircraft and  will complement the F-22A. The short take-off and vertical landing variant  will replace the Marine Corps’ F/A-18 and AV- 8B aircraft.
In October 2001, Lockheed Martin was awarded a contract to develop the  airframe and integrate the system components. Subsequently, Lockheed  Martin awarded multi-billion-dollar subcontracts to its development  teammates—Northrop Grumman and BAE Systems—for work on the  center and aft fuselage, respectively. In addition to the Lockheed Martin  contract, DOD has contracts with both Pratt & Whitney and General  Electric to develop two interchangeable aircraft engines. The program is  currently in the fifth year of an estimated 12-year development phase. The  current estimated cost for the development phase is about $41.5 billion.
The JSF program is an international cooperative program consisting of the  U.S. and eight foreign partners: the United Kingdom, Italy, the  Netherlands, Turkey, Denmark, Norway, Canada, and Australia. 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.  Currently DOD is negotiating one MOU for all partner countries related to  the production phase of the program.
The JSF program allowed foreign countries to become partners at one of  three participation levels during the system development and  demonstration phase of the program, based on financial contribution. In  return for their contributions, partner countries receive proportionate  benefits, such as number of staff represented in the program office, access  to program data and technology, and membership on management  decision-making bodies. As shown in table 1, the foreign partners plan on  contributing over $4.5 billion, or about 11 percent, for the system  development and demonstration phase and are expected to purchase over  700 aircraft beginning in the 2012 to 2015 time frame. Israel and Singapore  are involved as security cooperation participants, a nonpartner  arrangement, which offers limited access to program information.  According to DOD, foreign military sales to these and other nonpartner  countries could include an additional 1,500 to 3,000 aircraft.
DOD has stated that 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. According to DOD and  the program office, through its cooperative agreements, the JSF program  contributes to armaments cooperation policy in four areas    economic—decreased JSF program costs from partner contributions; technical—increased access to the best technologies of foreign  partners; and    operational—improved mission capabilities through interoperability  with allied systems.
Under the Arms Export Control Act (AECA), DOD is provided the  authority to enter into cooperative programs with certain U.S. allies. In  March 1997, the Secretary of Defense directed that DOD engage allies in  discussions as early as possible to determine the potential for  collaboration to meet coalition needs and ensure interoperability among  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. Unlike other international cooperative programs,  the JSF program does 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 bid  competitively for JSF work. DOD and the JSF Program Office use the term  “best value” to describe this competitive approach.
The AECA also provides statutory authority for the control of defense  articles and services. The Department of State oversees the export of  military items and services. The Directorate of Defense Trade Controls  (DDTC) within the Department of State has been delegated the authority  to regulate arms exports and administer the arms export-licensing system.  The Defense Technology Security Administration (DTSA) represents DOD  on export control issues. DTSA provides technical and national security  reviews of and coordinates DOD’s position on export license applications  referred or reviewed by DDTC. Due to the degree of international  participation at both a governmental and an industry level in the JSF  program, a large number of export authorizations are necessary to share  project information with governments, solicit bids from partner suppliers,  and execute contracts. The transfer of technologies necessary to achieve  aircraft commonality goals for the JSF program is expected to far exceed  past transfers of advanced military technology for other systems.
Before transfers are approved, the U.S. government must first determine if  weapons or technologies are releasable to the requesting country  according to the National Disclosure Policy. The National Disclosure  Policy establishes procedures and criteria for releasing classified or  sensitive military information to other countries. The National Disclosure  Policy Committee (NDPC) is responsible for managing the National  Disclosure Policy, making determinations whether to grant exceptions to  the policy, conducting security surveys of foreign governments including  defense industries, and determining delegated authority among the  services. In cases where a request for transfer exceeds that authority, the  service can forward the request to the NDPC for its review. For some  sensitive technologies, such as stealth, the case is also forwarded for  review to a special committee that focuses on that particular technology.
section_title: Actions Taken to Expedite License Processing and Avoid Program Delays
paragraphs: DOD and the JSF program office have taken the following four key actions  to avoid the potential negative effects on the program from delays in  obtaining licenses for transferring technology to partner countries and  foreign suppliers:  In response to our 2003 recommendation, the JSF Program Office  directed the prime contractor to develop an international industrial  plan to anticipate time frames for national disclosure and technology  transfer decisions.
Agencies involved in the JSF export-licensing process are expediting  the processing of license applications by dedicating staff to the JSF-  licensing process, providing consultation to applicants on draft  licenses, administering a prescreening process for the transfer of low  technology and nonsensitive items, and by allowing addendums to be  attached to license applications.
The JSF prime contractor and agency officials have used options  available to them under the International Traffic in Arms Regulations  (ITAR), such as Global Project Authorization (GPA) and an exemption  used in obtaining foreign contractor bids and proposals, to help  facilitate the export control process and avoid program delays. The  GPA was intended to allow for technology transfer decisions regarding  certain technologies to be made in 5 days or less; however, its use has  been limited. Use of the bid and proposal exemptions is intended to  avoid program delays by providing foreign contractors with  information needed to compete for contracts without first obtaining an  export license.
Issues related to the releasability of classified information, technology,  or systems to foreign partners are addressed as they arise in the JSF  program because of the involvement of international partners in the  early design phase of the program. According to DOD officials, they are  incorporating new practices, such as stakeholder meetings, that are  intended to facilitate a timely and collaborative decision-making  process.
subsections: section_title: Anticipating Technology Transfer Needs
paragraphs: In July 2003, we reported that due to the early involvement of international  partners in developing the system, the JSF program has had to mitigate a  particular set of challenges related to technology transfers. To address  these challenges, the prime contractor needs to anticipate time frames for  national disclosure and technology transfer decisions. The anticipation of  these needs would allow for a timely submission of license applications as  well as providing time to identify potential back-up suppliers, if necessary.  Accordingly, we recommended that the JSF Program Office direct the  prime contractor to complete an international industrial plan that  identified current and potential contracts involving the transfer of  sensitive data and technology to partner suppliers,    evaluated the risks that unfavorable export decisions could pose for    developed alternatives to mitigate those risks, such as using U.S.  suppliers.
In response to our recommendations, in 2003 the JSF program office  instructed the prime contractor to complete an international industrial  plan. According to the prime contractor, the plan provides a roadmap that  represents potential licensing activities as a subset of the program  schedule. Specifically, the plan identifies the need for a license to transfer  certain technologies to foreign industry. It provides a mechanism for the  prime contractor to anticipate “need” dates for receiving export licenses  and provides a mechanism for identifying issues that may arise concerning  the releasability of information, technologies, or systems so that early  action can be taken to determine if an exception to the National  Disclosure Policy or an appropriate committee review should be pursued.
In addition to the creation of the JSF prime contractor’s international  industrial plan, DOD has added guidance to the Office of the Secretary of  Defense’s Acquisition Guidebook calling for the development of similar  industrial-planning tools in all programs with significant international  involvement prior to the system design and demonstration phase. The  guidance further states that the plan should project when export licenses  will be required in support of the acquisition process and when critical  milestones regarding National Disclosure Policy implementation will need  to be addressed.
These plans are intended to provide for early planning for the program’s  proposed technology releases to foreign industry. They also are intended  to provide early planning for higher level special technical reviews and  approvals in support of proposed technology releases to foreign industry.
Further, they are intended to establish a detailed export license approval- planning process for U.S.-foreign industry cooperation to meet critical  program and contract timelines. The guidance recommends the plan  include a timeline that maps key projected export licenses against the program a definition of the technologies involved in each export license; and a list of U.S. contractors (exporters) as well as foreign contractors  (end users) for each license.
section_title: Expediting the JSF Licensing Process
paragraphs: Agencies involved in the export-licensing process have employed a variety  of methods to expedite the processing of license applications. The  Directorate of Defense Trade Controls (DDTC) within the Department of  State has dedicated one staff member to the JSF program. Additionally,  the Defense Technology Security Administration (DTSA) within DOD has  dedicated staff to specifically deal with issues related to licensing,  technical aspects, and policy matters for the JSF program. These staffs  coordinate directly with JSF program office staff dedicated to the licensing  process.
According to DTSA officials, along with dedicated staff, a new strategy is  being used to accelerate processing export licenses for the JSF program.  Officials across DOD provide advice and resolve issues with license  applicants through stakeholder meetings prior to formal submission of  license applications. DTSA officials described these stakeholder meetings  as a proactive measure to ensure that the license applications are ready to  be assessed when they are received. DTSA officials stated that this process  evolved in response to the concern that licensing delays could affect the  JSF program schedule and that while stakeholder consultation could take  up to six months, it usually resulted in a shorter approval process.  According to DTSA officials, these stakeholder meetings were created  because of the JSF program and are currently unique to the program but  would likely be incorporated into future large scale international  cooperative programs.
DTSA also prescreens all license applications to expedite the processing  of licenses that do not require review by other DOD entities. Once an  application is received from DDTC, it is prescreened by DTSA officials to  determine if it meets eligibility criteria for an abbreviated review process.
DTSA officials stated that criteria for determining eligible items include  low technology, nonsensitive items; items widely available worldwide; and  items that have previously been approved through the process, among  others. According to DTSA officials, prescreening has been taking place  for 1 year to 2 years, and the typical time frame for a license in the  abbreviated review process is 2 days to 5 days.
The use of addendums to supplement license applications is another  initiative that evolved in an effort to avoid delays in the JSF program.  When additional information or clarification is needed before a license can  be approved, officials from DDTC and DTSA have agreed to allow the  applicant to attach addendums that include more specific technical  information than initially provided. The addendums provide context and  clarity to the application. Previously, the license would have been returned  with no action, requiring a resubmission and restart of the license process.
section_title: Implementing Global Project Authorization and Making Use of Bid and Proposal Exemptions
paragraphs: Another mechanism for expediting license processing is the use of a  Global Project Authorization (GPA). The GPA is a comprehensive export  authorization for international cooperative projects authorized by the  ITAR. An approved U.S. company submits an “Implementing Agreement”  request to DDTC for authorization to export to an approved foreign  company. DDTC can evaluate the request and based on compliance with  an established set of conditions may authorize the transfer without  sending the request through the formal licensing process. An  implementing agreement under the GPA is expected to be approved in  about 5 days.
The Department of State, DOD, and the prime contractor agreed to the  GPA for the JSF program based on the following conditions:    Technologies available for transfer through a GPA implementing  agreement are based on a predetermined list of unclassified, low  technology, nonsensitive items.
In using the GPA, both domestic and foreign companies must be on an  approved list. The approved list was developed by the Department of  State and DOD. There are currently 46 U.S. companies and 446 foreign  companies that have been authorized to utilize implementing  agreements under the GPA for the JSF program.
Approved companies must follow a standard agreement format and  special application process.
While the GPA is designed to approve transfers within 5 days, its  usefulness has been limited. Of the 46 U.S. companies eligible to use the  GPA, only 3 have exercised that option. In 2005, only two implementing  agreements were approved, and they were actually submitted in 2004. Only  one implementing agreement was submitted in 2005, and it was returned  without action. Approved companies that wish to use the GPA must meet  a special set of compliance requirements, imposed by the State  Department, related to electronic record keeping and securing data.  Officials from the JSF program office, DTSA, and the prime contractor  said that many companies have chosen to use the traditional license  process instead of the GPA to avoid the extra costs and administrative  burdens associated with these compliance requirements, such as the  investment associated with the development of electronic databases.  These issues also make the GPA especially difficult to use for smaller  companies. Further, the GPA was authorized only for the system  development and demonstration phase of the program and would need to  be reauthorized for the production phase.
Another practice used by the JSF program office to avoid program delays  and provide for competition among U.S. and foreign suppliers is the use of  an exemption under the ITAR for the purpose of obtaining bids and  proposals from foreign contractors. On March 8, 2004, DTSA issued  guidance to the military departments on how to certify the use of ITAR  exemptions. The guidance identifies five sections under the ITAR by which  the U.S. government may certify exemptions. Section 125.4(b)(1) of the  ITAR provides that technical data, including classified information, may  be disclosed pursuant to an official written request or directive from the  U.S. Department of Defense without obtaining an export license. This  exemption has been unofficially labeled the “bid and proposal exemption”  by the JSF program office, because the primary use has been in the  process of obtaining bids and proposals from foreign contractors.  According to Air Force officials, the bid and proposal exemption is only  certified for use to export unclassified technical data to a foreign  contractor if it is in the interest of the U.S. government.
Under this exemption, the JSF program allows approved U.S. contractors  to transfer technical data on proposed work to foreign contractors. The  Air Force periodically publishes an exemption certification that provides  scope and limits on the transfers, such as limiting the defense services and  technical data included in these exemptions to    build to print — a defense article can be produced from engineering  drawings without any technical assistance from a U.S. exporter—and    build/design to specification — a foreign consignee can design and  produce a defense article from requirement specifications without any  technical assistance from the U.S. exporter.
These exemptions must not include    design methodology — the underlying engineering methods and design    engineering analysis — analytical methods and tools used to design or  evaluate an article’s performance against operational requirements; and    manufacturing know-how — information that provides detailed  manufacturing processes and techniques needed to translate a detailed  design into a finished article.
The JSF Program Office must review, authorize in advance, and maintain a  record of all JSF technical data released under the authority of the  certification. So far, 350 requests from U.S. contractors to use the “bid and  proposal exemption” have been certified by the JSF program office.
section_title: Addressing Disclosure Issues Early in the Program
paragraphs: To prevent potential delays, decisions related to the releasability of  classified information, technologies, or systems to partner countries are  addressed as they arise throughout the development of the system. While  the Air Force, designated as the executive agent for disclosure for the JSF  program, has a certain level of delegated authority to disclose classified  military information to foreign governments and international  organizations, some requests exceed this authority. When a request  exceeds its delegated authority, the Air Force must submit a request to the  National Disclosure Policy Committee (NDPC) for an exception to the  National Disclosure Policy. Other committees that may approve transfers  include the Low Observable/Counter Low Observable Committee that  adjudicates requests to sell or transfer stealth technology and the  Committee on National Security Systems that adjudicates requests to sell  or transfer cryptologic information and technology.
According to DOD officials, planning for foreign disclosure issues is  challenging because there are numerous processes among multiple U.S.  government agencies and committees with delegated authority for  management of foreign disclosure and export control requirements. There  are additional difficulties in a cooperative program like the JSF program  because of the involvement of the international partners early in the  design phase. In the JSF program, the prime contractor’s international  industrial plan is used to anticipate licensing needs and identify when  discussions of releasability of classified information, technologies, and  systems are necessary. In addition, the stakeholder meetings initiated by  DTSA have provided a mechanism for disclosure issues to be discussed  prior to the formal submission of a license. As a result, these discussions  are held as the concerns arise so they do not become major obstacles to  the program schedule. These practices are intended to resolve issues  related to the releasability of classified information, technologies, and  systems and to ensure decisions are made by the proper committees in a  timely manner to avoid delays to the license process.
For example, in cases where a request for transfer exceeds the Air Force’s  delegated disclosure authority for a particular country, the Air Force can  seek an exception to the National Disclosure Policy. The National  Disclosure Policy establishes criteria and conditions for releasing  classified information, technology, or systems to other countries. The  NDPC determines if it is in the United States’ interest to allow for the  transfer of information, technologies or systems by granting an exception  to National Disclosure Policy. The NDPC is composed of members of the  State Department, DOD (Joint Staff, Army, Navy, and Air Force) and  special members such as Department of Energy and the Central  Intelligence Agency, among others. In order for a disclosure exception to  be granted, it must be    consistent with U.S. foreign policy,    consistent with U.S. military and security objectives,    provided the same degree of security protection by the recipient,    beneficial to the U.S., and  limited to information necessary for the purpose.
Although the NDPC seeks consensus within 10 days of a request, if any  member votes against approval of a request, there is a negotiation period  for no more than 20 days. If agreement still cannot be reached, the NDPC  chairman can make a decision. That decision can also be appealed to the  Deputy Secretary or Secretary of Defense. As of January 2006, the NDPC  has granted six exceptions, as amended, to the National Disclosure Policy  for the JSF program.
section_title: Agency Comments
paragraphs: A draft of this report was reviewed by the Department of Defense and the  Department of State. The agencies did not provide written comments on  the report. We received separate technical comments from the Department  of Defense and incorporated them as appropriate.
We are sending copies of this report to interested congressional  committees; the Secretary of State; the Secretary of Defense; the  Secretaries of the Navy and the Air Force; and the Commandant of the  Marine Corps.  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 I.
section_title: Appendix I: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Tom Denomme, Matthew Ebert,  Kevin Heinz, Karen Sloan, and Adam Vodraska made key contributions to  this report.
section_title: Related GAO Products
paragraphs: Tactical Aircraft: Status of the F/A-22 and JSF Acquisition Programs  and Implications for Tactical Aircraft Modernization. GAO-05-390T.  March 2005.
Tactical Aircraft: Opportunity to Reduce Risks in the Joint Strike  Fighter with Different Acquisition Strategy. GAO-05-271. March 2005.
Defense Trade: Arms Export Control System in the Post-9/11  Environment. GAO-05-234. February 2005.
Joint Strike Fighter Acquisition: Observations on the Supplier Base.  GAO-04-554. May 2004.
Defense Acquisitions: DOD Needs to Better Support Program Managers’  Implementation of Anti-Tamper Protection. GAO-04-302. March 2004.
Joint Strike Fighter Acquisition: Managing Competing Pressures Is  Critical to Achieving Program Goals. GAO-03-1012T. July 2003.
Joint Strike Fighter Acquisition: Cooperative Program Needs Greater  Oversight to Ensure Goals Are Met. GAO-03-775. July 2003.
Defense Trade: Better Information Needed to Support Decisions  Affecting Proposed Weapons Transfers. GAO-03-694. July 2003.
Export Controls: Processes for Determining Proper Control of Defense- Related Items Need Improvement. GAO-02-996. September 2002.
Joint Strike Fighter Acquisition: Mature Critical Technologies Needed to  Reduce Risks. GAO-02-39. October 2001.
Defense Acquisitions: Decisions on the JSF Will Be Critical for  Acquisition Reform. GAO/T-NSIAD-00-173. May 2000.
Joint Strike Fighter Acquisition: Development of Schedule Should Be  Changed to Reduce Risks. GAO/NSIAD-00-74. May 2000.